It seems like everyone has a horror story about unethical practices at auto dealerships.
Too often, consumers feel as though there’s no recourse if they’ve been cheated. Buyers are on their own to figure out what government entity might have jurisdiction, and then must try to get that entity to help.
Too often, it is only the doggedly persistent who can get their money back.
“I was overcharged for sales tax by several hundred dollars,” said Liz, a woman California who asked not to be identified. “I had to contact the tax board to get proof of the correct tax rate, then go back to the dealer. They gave me a refund, but before doing so, they mocked me for coming back ‘for a few dollars,’ despite it being several hundred.”
Enter the FTC
The Federal Trade Commission is the nation’s consumer protection agency, charged with enforcing key laws and regulations applicable to the motor vehicle marketplace, including sales, financing, and leasing.
The FTC has a charter to protect consumers in motor vehicle transactions, but the agency’s relatively small size and limited resources are not equal to the tens of thousands of complaints they receive annually regarding dealerships. Thus, many problems persist in the face of repeated federal and state enforcement actions.
To address the issue, the FTC is seeking public comment on a notice of proposed rulemaking to govern auto dealers. The proposed rule would prohibit dealers from making certain misrepresentations (what regular people would call “lying”) in the course of selling, leasing, or arranging financing for motor vehicles. The proposed rules would allow the FTC to seek redress for harmed consumers and obtain other forms of monetary relief in cases involving FTC Act violations.
In short, if you lie to the consumer, you’ll be fined.
Specifically, the new rules would require accurate pricing disclosures in dealer advertising and sales discussions, require dealers to obtain informed consent for various charges, prohibit the sale of any add-on product or service that confers no benefit to the consumer, and require dealers to keep records of advertisements and customer transactions.
The scope of the problem
In the past 10 years, the FTC has brought only approximately 50 motor vehicle-related enforcement actions, including matters involving misleading motor vehicle advertising, financing paperwork falsification, “yo-yo” financing, deceptive and unfair add-on fees, discrimination, and privacy and data security issues.
“A dealer in the Seattle area once charged me $106 for their business & occupation tax, which is supposed to be equivalent to a corporate income tax,” a buyer from Arizona told TheDetroitBureau.com. “Eventually, the state Attorney General got wind of it and pointed out that they couldn’t do that and needed to refund peoples’ money.”
If the new rules are approved, it would mean additional fees for items such as nitrogen-filled tires, fabric protectant on the seats and carpet, and similar upcharges could be more easily reversed.
“They wanted to charge me for window etching,” another consumer from Washington told TheDetroitBureau.com. “The dealer said all their cars on the lot had it done to stop thieves from stealing the cars. There was some sort of payout if the car was recovered. But to transfer the registration into our name it would cost us $1,500. After saying no to just about everyone in the dealership, they conceded, but said they would keep the reward when the car gets stolen.”
The FTC also points out that law-abiding dealers suffer when unscrupulous dealers gain business through deceptive or unfair means. For all these reasons, the FTC believes it is appropriate to utilize its rulemaking authority to address unfair or deceptive acts and practices in the motor vehicle marketplace.
Tell ’em what you think
In addition to the proposed new enforcement rules, the FTC has conducted a qualitative study of consumer experiences and hosted public events to engage in a dialogue with consumer and dealer groups and other stakeholders, gather information, spotlight misleading practices, and raise awareness of issues that can affect consumers. The FTC has posted educational materials to advise consumers on motor vehicle market issues, and it has worked collaboratively with industry groups to do the same. Visit its website to see the available information.
Right now, the FTC is seeking consumer comment on the proposed new rules. All comments must be received on or before Sept. 12, 2022. If you want to add your two cents, write “Motor Vehicle Dealers Trade Regulation Rule—Rulemaking, No. P204800” on your comment, and file it online by following the instructions on the web-based form. If you prefer to file your comment on paper, you can mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580.