FTC Advances Its Fight Against Bait-and-Switch Dealership Pricing

Hopefully useless, valueless “junk fees” like convenience fees and paperwork fees are a thing of the past.

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FTC Advances Its Fight Against Bait-and-Switch Dealership Pricing © FTC Advances Its Fight Against Bait-and-Switch Dealership Pricing

Almost everyone has at least some experience with car dealerships adding arbitrary, useless fees to the price of their cars. Things like paperwork fees and convenience fees are some of the most frustrating and insulting add-on costs customers can experience. It seems, though, that such fees could soon be a thing of the past. Automotive News recently reported that the Federal Trade Commission (FTC) followed up with its proposal to curb all bait-and-switch fees for valueless items.

According to FTC Chairwoman Lina Khan, convenience fees don't exactly feel "convenient" and that companies should be competing for the best service, instead of trying to sneak hidden fees into customers' final price.

Back in June, the FTC released its auto retail plan, which was meant to curtail such fees, prevent dealerships from working their own advertising costs into a car's price, and stopping them from selling secondary warranties that only duplicate the car's factory warranty. "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 FTC Bureau of Consumer Protection Director Samuel Levine, in a statement on June 27.

On October 20, the FTC followed up on that plan and the Biden Administration is cracking down on what it calls "junk fees" across all industries. Valueless dealership fees are among them. "One of the key things I’ve asked the council to take on was the unfair hidden fees known as “junk fees” that are taking real money—real money out of your pockets—real money out of the pockets of American families." said President Biden.

The problem doesn't lie with just the fees themselves but the deception that follows them. Often times, customers will agree on a price with a salesperson, they're told their total cost and monthly payment, but then when it comes time to sign, there are all sorts of fees added to the bottom line. Sometimes, the dealership doesn't even point them out, allowing the customer to potentially miss them before signing. According to a 2018 Consumer Reports poll, 85 percent of customers have paid hidden fees in the past two years.

There are three types of junk fees that the FTC is targeting:

  • Unnecessary charges for worthless, free, or fake products or services
  • Unavoidable charges imposed on captive consumers
  • Surprise charges that secretly push up the purchase price

This doesn't mean all unnecessary fees will be curtailed, such as adjusted dealer markup (ADM), which is usually added to high-demand, low-allocation cars. Unfortunately, it doesn't seem like ADM is going anywhere soon. However, I don't think anyone is going to complain about the FTC cracking down on dealerships charging bate-and-switch feels for useless, non-existent items.

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