The FTC is still targeting shady sales practices that involve ‘junk fees’ but now, it’s broadening its scope. A new proposal includes more rules that would expand beyond automotive dealers alone. The move comes not long after President Biden called on his administration to reduce or remove such fees.
Back in June, the FTC said that it was planning a crackdown on automotive dealers that sold finance and insurance coverage as well as vehicle add-ons that “provide no benefit.” On October 26, President Biden said that unfair hidden fees known as junk fees were taking money out of the pockets of American families.
The FTC has further defined those “junk fees” as “unfair or deceptive fees that are charged for goods or services that have little or no added value to the consumer, including goods or services that consumers would reasonably assume to be included within the overall advertised price.”
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Under the latest proposal, dealers would have to post an out-the-door price (aside from government taxes and fees) for anyone to see. Not only would that mean no more picking a price based on what a dealer thinks a customer can afford, but it would put an end to shady “call for price” advertising. It could also drastically reduce the dealers willing to slap huge markups on their products.
According to a 2018 Consumer Reports poll, some 85 percent of people had paid hidden fees in the two years previous. Unsurprisingly, 96 percent of them found those fees to be annoying.
According to Automotive News, there are eight main practices that the FTC is targeting in its fight against junk fees. They are:
- 1. Misrepresenting or not “clearly and conspicuously” disclosing “the total cost of any good or service for sale” in ads or marketing.
- 2. Misrepresenting or not disclosing “the existence of any fees, interest, charges, or other costs that are not reasonably avoidable for any good or service” in ads or marketing.
- 3. Misrepresenting or not disclosing if “fees, interest, charges, products or services are optional or required.”
- 4. Misrepresenting or not disclosing “any material restriction, limitation or condition concerning any good or service that may result in a mandatory charge… or that may diminish the consumer’s use of the good or service, including the amount the consumer receives.”
- 5. Misrepresenting that a customer owes for “any product or service the consumer did not agree to purchase.”
- 6. Charging for anything “without express and informed consent.”
- 7. Charging for “fees, interest, goods, services or programs that have little or no added value to the consumer or that consumers would reasonably assume to be included within the overall advertised price.”
- 8. Misrepresenting or not disclosing “the nature or purpose of any fees, interest, charges or other costs.”
FTC Commissioners voted 3-1 to begin the public commenting phase of the proposal. Commissioner Christine Wilson was the only dissenting vote. She cited multiple concerns with the proposal including the fact that its industry-sweeping breadth might “duplicate, or contradict, existing laws and rules” and that’ it’s “untethered from a solid foundation of FTC enforcement; relies on flawed assumptions and vague definitions; ignores impacts on competition; and diverts scarce agency resources from important law enforcement efforts.” The formal commenting period ends on January 9, 2023. Until then, anyone can comment on the proposal.
