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U.S. Court Dumps FTC Rules To Ban Car Dealer Junk Fees, Bait-And-Switch Tactics

New Federal Trade Commission (FTC) car dealer rules designed to protect vehicle buyers from shady practices such as bait-and-switch and “junk fees” – extra fees added on to a car purchase that are not actually necessary for the transaction – have been axed by the 5th Circuit Court of Appeals.

The new FTC car dealer regulation – known as Combating Auto Retail Scams, or CARS, rule – was finalized approximately one year ago, but was immediately targeted by a lawsuit from the National Automobile Dealers Association or NADA, Reuters reports.

GMC Sierra pickups lines up at a car dealer.

The 5th Circuit quashed the FTC car dealer rule based on procedural arguments rather than the content of the regulation itself. The court said the Trade Commission had not given enough advance warning of the rule before writing it to meet the requirements of standard procedure for such regulations.

Two judges voted to eliminate the rule and one, Judge Stephen Higginson, dissented. Higginson pointed out that the attempt by the FTC to reign in dubious car dealer practices came after “a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices” and was likely to “spur billions of dollars in economic benefit for U.S. consumers.”

Exterior view of a Chevy car dealer building.

The FTC rule, first proposed in June 2022, sought to ban sketchy advertising practices, including hidden fees as well as add-ons of no value to the customer such as the notorious “nitrogen-filled” tires, which actually lose pressure at a rate only slightly slower than air-filled tires. The Commission offered an extended comment period for the ruling.

Late in 2023 a Congressional panel launched an inquiry into the proposed FTC rule. James Comer (R-KY), head of the panel, claimed that the rule against hidden fees and add-ons would make “car purchases more difficult” and, somehow, “[inhibit] innovation in the industry.” The CARS rule was subsequently put on indefinite hold while the NADA complaint was investigated by the 5th Circuit.

A car dealer display using a Chevy Suburban.

Now, Mike Stanton, president of NADA, hails the 5th Circuit strike-down of the FTC consumer protection rule as “victory for the rule of law and a great outcome for consumers.”

He further claimed that the CARS car dealer rule was going to add “massive amounts of time, complexity, paperwork and cost to the car-buying and car-shopping experience for virtually every customer.”

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Comments

  1. The entire dealer system needs reset. What should be one of the happiest buying experiences in your life just feels gross and is a huge PITA that a lot of people just put off and try to avoid as long as possible now.

    Reply
    1. One feels like a piece of meat being thrown into the lion’s den at a dealership. The lions all have their cubicles or desks by the front door and eye you up and down when you walk in, ready to pounce. Slick hair, clothes, shoes, pretty boys and girls ready to make a sale. As you said it’s gross and the final number is NEVER what they say it’s going to be.

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      1. I dont understand – If I take a $1 candy from Walmart, I go to jail. Car dealers take thousands from consumers and nothing happens.

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        1. So the car dealers held a gun to your head in the past and forced you to sign documents saying you’d pay something? Not likely. If consumers would pause their habits for just a little bit, you’d see a change. But, consumers have proven time and time again they are unwilling to do that.

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      2. I’ve purchase 14 new vehicles over the years without a problem. If you educate yourself before walking into a dealership, you have the upper hand. If you walk in like some clueless trusting idiot, they will most likely take advantage of you. Don’t blame them, blame yourself !

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    2. John,
      I agree with you. Vehicles are very expensive. And for most people it is the second most expensive purchase they will make after their house. The experience should be pleasurable, filled with anticipation and excitement. Instead most people would rate going to a dealer to purchase a new vehicle about as enjoyable as getting a root canal.
      Remember Saturn. No haggle pricing. You paid the price posted on the vehicle. GM was supposed to bring that format to the rest of the dealerships throughout the corporation. That never happened. I don’t know why.
      Back to the root canal. Maybe the dealership could supply some nitrous oxide for you while you are making a purchase. That way you would at least feel good when you left.

      Reply
  2. Stop purchasing at these shady dealerships! I traveled almost 3 hours for my 2018 Denali, because I wasn’t happy with the dealerships around my area. I also traveled 12 hours to pick up my boat for the same reason. Best buying experience I ever had. Dropped off check and signed papers. Salesman went over entire boat with the wife and I, and we were done in an hour.
    NO ONE is forcing you to buy at these places that charge these ridiculous fees! There are still good ones out there. Few and far between, but some!

    Reply
    1. They really are hard to find, if you can find a good one, stick with them. I haven’t bought from a local dealer in about 15 years.

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    2. Agreed. I walked out on a dealer who tried to say my trade-in had a recall I knew had been taken care of. The salesman even chased me into the parking lot with another price. The next dealership cut me a deal I could live with.

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    3. Agreed but how does one know what the experinece is going to be at a dealership until you’ve “experienced it”? They’re all pretty slick up front until you get handed off to close the deal, at that point most people are already dreaming about their new car and too chicken s–t to back out of the deal. Plus, buying a car takes a couple of hours, who wants to start over ?

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      1. See we have this thing called google reviews in modern times. I can google a place, sort the reviews by timeframe, and most of the time you’ll see the same names people recommend you do business with – and a lot of them even include pictures.

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    4. The point of the rule is people shouldn’t have to do all that. Not everyone has the time to travel htree hours. I had to drive from Detroit to Chicago to not get scammed 4k on a Chevy Spark a few years ago. Why should people have to travel for the time it takes to go to another country, passing several shady dealerships? Its said that if someone does not have a car, they will have to get a car to travel far away in order to get one.

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    5. i live near shreveport, louisiana and i have gone out of state for my last six vehicles and my last two boats due to the local dealerships business’s attitudes.

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    6. And then where do you have it serviced without issues? 3hrs away!

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  3. Unless there’s more to this, not sure how it’s a “…victory for the rule of law and a great outcome for consumers.”

    Seems like it’s just the opposite.

    Reply
  4. It’s a shame this didn’t stick. The dealership is the worst part of the car-buying process. Shady salesmen, hidden fees, superfluous/forced add-ons, “market adjustments”…Dealerships were supposed to protect the consumer from automakers, but now they themselves are mega-corporations that often sacrifice fairness to make an extra buck!

    Reply
  5. That’s not a victory for consumers, that’s a victory for sleazy dealer tactics.
    Sleazy tactics is why my last new car was over 25 years ago. We’ve purchased used cars ever sense. I went out of state after buying our first EV online (used Hyundai) and CarMax was a great buying experience.

    Reply
  6. When I bought my 2023 GMC Sierra they gave me a nice discount. Then I asked what about trade in for my old truck. They said that it was included in the discount. I said no way we need to work on the numbers the salesman said that’s the best he could do. So I left the dealer went to another dealer and purchased a truck there. Later that day phone rang it was the first dealer saying they can do better on the price. To late you had your chance.

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    1. I’ve had some great Service experiences with “Serra” Dealers…

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  7. Skim the headlines and you think “what’s wrong with banning junk fees and bait & switch?” But dig deeper and you will find the rules they wanted to implement would have added a huge amount of complexity, paperwork, and time to the process for every customer in every circumstance and would be unlikely to result in a better outcome for buyers. If implemented, the next time you went to buy a car you’d spend even more time doing paperwork all through the process, having to sign off on every change to the deal; every change in vehicle, every change in trade allowance, every change in finance term. So every time you ask to change anything at all the dealer would need to print new terms, have you sign off, then they need to retain every preliminary offer in a folder. And of course like today you would just sign and not read the fine print. It really knowing what it all means. Instead of thinking you are more protected you’ll just spend much more time in the process with no more clarity.

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    1. Agree & disagree. Agree on some extra pages to sign (or on a tablet on our last couple of purchases which was weird to us being older), & I would compared it to all the pages we sign when we take out a loan at our credit union, whether for a vehicle or to do a home improvement, lots of extra crazy papers. But I find it interesting that when FTC did this rule, the lawsuit was of course from the dealer association, but also from some politicians with one of their “studies”, claiming it would hurt the consumer. Just how hard would it be, to just require ALL DEALERS (used or new) to just openly list their fees associated with any purchase?? Should be pretty simple, but unfortunately it’s not. Only thing worse than dealing with most auto dealers is waiting for the hospital bills to start arriving after a surgery.

      Reply
  8. What EXACTLY are the add ons ? What EXACTLY ARE the “junk fees” !! Dealer Prep is a JUNK FEE IMO, What are these EXTRA FEES they’re talking about ? TV commercials or ANY advertising costs money that a buyer pays for in the long run , ANYWHERE, not just car dealers !! I wanna hear about all these so called junk fees !!

    Reply
    1. Charging $100 to mail the Certificate of Origin to the BMV to get a title. One example of junk fee.

      Reply
  9. Only visit dealers when you need to test drive to make a decision on whether if it is the right vehicle for you and after the short test drive with salesman request to take it on a long test drive to make double sure.
    Request their out the door price and then walk out and request the out the door price by email from competing dealers, some may refuse so forget about those dealers.
    Then send emails to responding dealers about getting lower prices if you are not in a big hurry, takes work but you will save buck, if you show them you are not in a big hurry.

    Reply
    1. Budlar,
      One of the things I do is go to a rental agency and rent the type vehicle I intend to buy for the weekend. Weekend rentals are relatively cheap.
      You can get a better feel for a vehicle driving it for 2 days. I realize it is not possible to rent every make and model of vehicle. It has worked out well for me in the past. That is what I did before I purchased my 2019 GMC Acadia.

      Reply
  10. What I find interesting is that in my area dealers selling the same brand of car all have different doc fees which is just another way of adding cost to the purchase.

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    1. you mean, different bend over fee’s.

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  11. Dealers will claim your credit rating does not qualify for their best rates even if it is 890. I had occasion a few years back to experience this when a dealer said that GMAC said I did not qualify for a low rate. I had GMAC’s number and called while I was in front of their finance man and asked them why when I had paid off my last three vehicles early. They said dealers set rates not us. I hung up and told him I was taking my business somewhere else. He stopped me and played like he was on the phone with someone and told me there had been a mistake. The deal changed entirely.

    Reply
  12. Help
    My wife is in a deal where they changed out the car , no promised accessories and they added $3500 in extras. She signed blindly not noticing it was different to the original.
    What can she do

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    1. pay the man and learn a valuable lesson.

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      1. It is well known that some state governments and congressmen are owned by the Car Dealer Associations.

        Reply
  13. Sleazy dealerships and shifty salesman.
    I think Trump missed his true calling.

    Reply
  14. Not surprising that James Comer is in the middle of this. He came up with a big, fat, nothing burger with the “Biden crime family” investigation. He’s probably getting a kickback somewhere from the auto dealer industry. He is a bit of an embarrassment here in W. Ky. BTW, doc fees here are north of $400!

    Reply
    1. Jan,
      One of Trump’s campaign promises from his first presidency was, he was going to reopen the coal mines and put all the coal miners back to work by exporting coal overseas. How did that work out. Probably just like his promise to build a great big, best, beautiful, wall and Mexico was going to pay for it.
      That’s what happens when you believe a morally bankrupt, narcissistic, pathological liar, and don’t learn from it.

      Reply
  15. The maximum doc fee an auto dealer can charge in New York state is $175.

    Reply

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