The Federal Trade Commission (FTC) last summer moved to block confusing fees and sales tactics some auto dealerships use that leave buyers feeling burned. The proposal has moved at the speed of bureaucracy. Seventeen months later, it’s still a proposal. Now, members of Congress may slow it down.
Reuters reports, “A U.S. House committee is investigating the Federal Trade Commission’s planned rules to require new consumer protections for car buyers that are sharply opposed by auto dealers.”
FTC Wants to Ban Bait-and-Switch Ads, Surprise Fees
Last June, the FTC proposed a new rule that would regulate how car dealers advertise and attach fees to new vehicle sales.
Proposed rules go through a lengthy public comment period, often several times, before becoming final. The FTC’s proposal has not progressed beyond that stage. Even if it does, it will be subject to review by Congress.
The rule would specifically include:
A Ban on Bait-and Switch-Marketing: The commission would ban “deceptive advertising that draws consumers to a dealership in pursuit of an advertised deal, only to find out at some point later in the process (if at all) that the advertised deal is not actually available to them.”
The proposed rule notes these practices often waste buyers’ time. They work because some buyers have limited time to buy a car. “Restarting the hours-long process at another dealership might mean having to take an additional day off work,” the commission explains, or paying more for transportation to another dealership.
A Ban on Fraudulent Fees: The rule would prohibit “add-on products and services that provide no benefit to the consumer.” The FTC specifically calls out nitrogen-filled tires “that contain no more nitrogen than normal air.”
A Ban on Surprise Fees: The FTC proposes to ban document fees and other dealer add-ons that are added at the end of the sale process, “even though they were not included in the low prices advertised or disclosed to consumers who called to confirm prices.” It would require dealers disclose any fees that are not required.
A Requirement for Full Price Disclosure: The rule would require dealers to disclose “a true offering price” for each vehicle “that would be full price a consumer would pay, excluding only taxes and government fees.”
Not all dealerships violate the proposed rule regularly.
The auto industry has objected while the National Automobile Dealers Association and the Alliance for Automotive Innovation (a trade group representing automakers) have requested changes to the proposal.
House Wants Hearings
Now, Reuters reports, “House Oversight Committee Chair James Comer, a Republican, asked FTC Chair Lina Khan to turn over documents and answer questions by Nov. 30 on the proposed rule.” Comer says the rule “threatens harm to consumers and small businesses by making car purchases more difficult and inhibiting innovation in the industry.”
He worries the FTC’s proposal “appears to rest on thin analysis and unreliable data and suffers from several procedural flaws, including violations of FTC regulations requiring advanced notice of proposed rulemaking.”
But the FTC Has A Backup Plan
Hearings could slow the FTC’s attempt to rein in rogue dealerships. But the FTC has a second plan in the works.
In October, the agency proposed a broader set of rules that would apply to all businesses, not just car dealerships. The so-called “junk fee” rules would apply to transactions for everything from rental cars to concert tickets.
A provision in that proposal says it would exempt car dealers only if the agency finalizes a separate set of rules for them. If Congress succeeds in blocking rules specific to car sales, the general junk fee rule could still see some car dealer tactics banned.
