FTC Considers Rules Banning “Garbage Fees” And Add-Ons From Dealers

With new and used car prices at all-time highs, the Federal Trade Commission is investigating deceptive dealership practices that could result in excessive or outright fraudulent fees. A new rule was proposed that would crack down on such fees and cryptic advertising, while also making the car buying process more transparent.

The essence of the rule would be to eliminate the so-called junk fees that are sometimes added to the sticker price. The FTC defines this as a fee for goods or services that offer no benefit to the buyer, with the well-known nitrogen filled tires costs are listed as examples. In addition, any surprise costs that may arise in the purchasing process will also be dealt with. In such cases, the costs will be outright barred, or clearly explained in advance as opposed to a nervous buyer at the end of the process.

Thus, transparency and full disclosure in advance are also part of the proposed rules. Instead of just blabbering about fees, dealers need to clearly explain what the fees are and whether they’re optional. Key financing information will also be explained, and regulations force dealers to clearly state the full offer price of the vehicle with everything included, except taxes and government fees. And it will all happen before the buying process begins, not halfway or at the end.

The proposed rules also apply after bait-and-switch tactics sometimes used in advertising, such as exorbitantly low vehicle prices for something that isn’t readily available or sold out from automakers. Claims for financing, availability of discounts, and additional fees will also be covered by the FTC.

“As car prices soared, the Commission took comprehensive action to ban junk fees, bait-and-switch advertising, and other practices that hit consumers’ wallets,” said Samuel Levine, director of the Bureau of Consumer Protection at the FTC. “Our proposed rules will save consumers time and money and help ensure a level playing field for honest dealers.”

The proposed rules come at a time when automakers are also taking a stronger stance against dealers, particularly with regard to excessive markups on prices or fees related to rental vehicles that were not part of the original contract.