FTC Considering Rule Banning “Junk Fees” And Add-Ons From Dealerships

With new and used car prices at all-time highs, the Federal Trade Commission is looking into deceptive dealership practices that can result in excessive or completely bogus fees. A new rule is proposed that would crack down on such costs and sketchy advertisements, while also making the car-buying process more transparent.

The crux of the rule would eliminate so-called junk fees that are sometimes added to the sticker price. The FTC defines this as charges for items or services that offer no benefit to buyers, with the notorious nitrogen-filled tires fee listed as an example. In addition, surprise fees that might crop up in the purchase process would also be addressed. In those instances, the fees would either be banned outright, or clearly explained upfront as opposed to being sprung on antsy buyers at the end of the process.

As such, transparency and full upfront disclosure is also part of the proposed rule. Instead of just rattling off charges, dealerships would need to clearly explain what the charges are and whether they are optional. Key financing information would also be explained, and the rule forces dealerships to clearly state the full offering price of the vehicle with everything included, save for tax and government fees. And it would all take place before the purchase process begins, instead of midway through or at the end.

The proposed rule also goes after bait-and-switch tactics sometimes used in advertising, such as an ultra-low vehicle price for something that isn’t in stock or sold out from the automaker. Financing claims, availability of discounts, and costs of add-ons would also fall into the FTC’s scope.

“As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Bureau of Consumer Protection director at the FTC. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

The proposed rule comes at a time when automakers are also taking a stronger stance against dealerships, notably with regards to excessive markups on prices or fees regarding leased vehicles that weren’t part of the original contract.

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