The FTC is Cracking Down on Shady Car Dealers

June 29, 2022

Update: The public comment period is NOW OPEN. The deadline is September 12, 2022! Here’s how you can submit a comment. Share with your friends and family!

On June 27th, The Federal Trade Commission proposed a new set of rules that would make many commonplace car dealer sales tactics illegal. Let’s break down the proposal and discuss what tactics dealers use to take advantage of customers.

FTC Bureau of Consumer Protection Director Samuel Levine explained the reasoning behind the proposed rules. “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. Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

From time to time, consumer’s voices are actually heard by those who have the power to make a change. The FTC explained the role of consumer complaints in the drafting of this proposal.

“Consumer complaints suggest that some dealers have added thousands of dollars in unauthorized charges, including for add-ons that consumers had already rejected. These issues are exacerbated when pre-printed consumer contracts automatically include charges for optional add-ons, when consumers are rushed through stacks of paperwork, or when they are asked to sign blank documents.”

Perhaps you’ve experienced this firsthand. We help CarEdge members cancel unwanted products all the time. It’s just another unnecessary obstacle to buying a car in 2022.

Without further ado, these are the four anti-consumer dealer practices targeted by the FTC’s proposed rules.

Selling Products with No Benefit to the Customer

The new FTC rule would ban all add-ons that do not add any benefit to the product. Examples of included products are nitrogen-filled tires that contain no more nitrogen than is normally found in the air, duplicate warranty coverage and unnecessary GAP insurance, a product that not every car buyer will benefit from.

Advertising the Real Price of the Car Online

How many times have you inquired about a specific car that was advertised, only to learn of a ‘market adjustment’ or slew of dealer add-ons? Transparent pricing is a novelty in today’s auto sales, however the FTC’s proposed rule would require that dealers advertise the true price of the car online.

Non-Discriminatory Practices for Cash Buyers

Why should any car buyer be penalized for paying cash? The new FTC rule would require auto dealers to advertise the cash price of the vehicle without add-ons. The customer would have to be told the price of the car, with and without financing. Notably, this mandatory price disclosure would have to be without optional add-ons from the get-go. No more teasing it out of the salesperson.

If the customer agrees to pay something different, both they and a dealership manager must sign a document saying so.

How to Challenge Forced Front-End Add-Ons At a Dealership

Enhanced Consent for F&I Products

“Express, informed consent” would be required for add-ons commonly pushed on buyers in the financing and insurance (F&I) office when buying a car. What would be different? Disclosures and consent options must go beyond “a signed or initialed document, by itself” or “prechecked boxes,” the FTC said. I’m wondering, why wasn’t it always like this?

Here’s 5 things you need to know before stepping into the dealership F&I office.

Opposition to the FTC Proposal

As this is breaking news, it’s too soon to know what dealership lobbies like the National Automobile Dealers Association think of it. I think we can all assume they won’t be fans of the proposal. The NADA spends $3 million a YEAR on lobbying efforts in Washington, and their influence is strong at the state level, too.

How did car dealerships become so powerful in America? It’s a story of power, money and influence.

Opposition to the new FTC proposal came from one of the panel’s own members. FTC Commissioner Christine Wilson felt “unlawful practices persist” within the auto retail industry, but said the proposal courted “unintended but negative consequences.” Commissioner Wilson cited prior regulations which had hurt competition and proved difficult to keep current. Interestingly, she also cited the rise of direct-to-consumer sales and Carvana’s online sales model as reasons for opposing the rule.

One state where the auto dealer lobby has enormous power is Florida. Over 1,000 car dealers belong to the Florida Automobile Dealers Association. Dissenting FTC Commissioner Wilson happens to be from Florida. Coincidence? Maybe.

Ironically, the FTC Could Be Doing Dealers a Favor

2023 F150 Lightning
The new Ford F-150 Lightning will soon be sold online with no-haggle pricing via Ford Model e. Can dealers compete with direct-to-consumer sales?

Can the dealership model save itself from the rise of direct-to-consumer sales? Transparent pricing would be a step in the right direction. With the dealer markups and bait-and-switch tactics all too common in today’s car buying experience, wouldn’t you opt for honest pricing given the chance?

Leave your comment in support of this proposal! We hope you’ll share this important opportunity with your friends and family.

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1 Comment

  1. Jerry Bowen

    I had add on after I sign my paper work is this fair or a law suit. Cost me over 1500.00 dollars more

    Reply

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