[VIDEO] FTC Proposes New Rule Targeting Auto Dealers Bait-and-Switch Tactics and Junk Fees


[VIDEO] FTC Proposes New Rule Targeting Auto Dealers Bait-and-Switch Tactics and Junk Fees

Photo Credit: Chevrolet

With the new 670-hp Corvette Z06 expected in dealers showrooms later this year, we’ve been horrified at some of the stories emerging from Corvette enthusiasts about how their local Chevrolet Dealers are treating their customers as ATM machines and trying to extract the maximum amount of dollars to buy the new car. While high market adjustment fees over MSRP are the most egregious in our book, dealers are also requiring add-on fees, directed donations, and other mandatory services as a requirement to purchase the new Corvette. Unfortunately, GM has been unable (or unwilling) to go after the worse offenders and so maybe a new rule from the FTC can help protect consumers.

The Federal Trade Commission has recently proposed a new rule aimed at automotive dealers and it would prohibit dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing. The FTC is now seeking comment from the public for the proposed rule which can be viewed and downloaded here.

The FTC says the proposed Rule will help to “ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience.” The FTC cites surging vehicle prices and the high number of consumer complaints regarding the automotive buying process.

Here are some of the key points in the new rule that could impact how dealers sell Corvettes include:

  • Prohibit misrepresentations concerning “the costs or terms of purchasing, financing, or leasing a vehicle.” This provision would bar deceptive practices surrounding, among other things, the total cost, price for added features, other charges, terms and finality of financing, and availability of discounts.
  • Prohibit misrepresentations concerning any “costs, limitation, benefit, or any other material aspect of an Add-on Product or Service.” Add-ons are a particularly problematic area in auto sales and financing. The cost and coverage of an add-on are likely to affect a consumer’s conduct, including the consumer’s decision to purchase the product or
  • Prohibit misrepresentations regarding “whether the terms are, or transaction is, for financing or a lease.” If a dealer advertises vehicles for low monthly payments or other terms that apply in financing offers, but the offer is actually for a lease only, that conduct misleads consumers.

Some of the points of interest to Corvette buyers in this proposed rule are the so-called “junk fees” which require consumers to purchase such add-ons as nitrogen-filled tires or window tinting packages, as well as having dealers provide a clear and concise total cost of the car that includes taxes and government docs.

For a legal analysis of this proposed new rule, we turn to consumer/automotive lawyer Steve Lehto who breaks down the rule in clear terms and discusses what dealers were doing and how the rule might curb those sales practices.


Steve Lehto / YouTube


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