FTC Seeking To Ban Junk Fees And Bait-And-Switch Tactics To Help Car Buyers

Trying to track down the actual price of a new vehicle can be confusing, as many automakers tack on destination freight charges and other associated dealer fees that can drive up the transaction amount. The Federal Trade Commission (FTC) is now looking to put a stop to the practice of implementing hidden fees in new vehicle transactions, this week proposing a rule change that would ban so-called “junk fees,” and other bait-and-switch style tactics.

The FTC put forth a Notice of Proposed Rulemaking this week and is seeking comment on proposed measures that would prohibit dealers from making deceptive advertising claims relating to the cost of a vehicle, financing terms, or the cost of any add-on products or services. It would also ban fraudulent add-on products and services that provide no benefit to the consumer, like “nitrogen-filled” tires, and would require dealers to disclose all costs and sale conditions upfront.

GM displays vehicle prices on its website including destination and freight charges, however this does not represent how prices may be advertised by a specific dealership. GM’s Canadian brand sites also display a $250 “dealer fee” as part of the transaction price.

This change would mean dealers would be required to include destination freight charges and dealer fees in the advertised price of a vehicle, leaving out only taxes and government fees. They would also have to disclose optional add-on fees and the fact that they are not required as a condition of purchasing or leasing the vehicle, along with disclosures related to financing terms and conditions.

“As auto prices surge, the Commission is seeking to eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted junk charges,” the FTC said in a news release. “The proposed rule would protect consumers and honest dealers by making the car-buying process more clear and competitive.”

Under the proposed rule change, the FTC would also be allowed to go after dealers that partake in fraudulent business practices and recover the customer’s money. The Commission estimates the rule would provide a net economic benefit of around $29 billion over ten years.

SOURCE: GM AUTHORITY