The Federal Trade Commission (FTC) has finalized a new rule aimed at addressing two prevalent illegal tactics that consumers often face when buying a car: bait-and-switch tactics and hidden junk fees. These deceptive practices cost consumers both time and money. The new rule, named the Combating Auto Retail Scams (CARS) Rule, is expected to save American consumers over $3.4 billion annually and reduce the time spent on car shopping by about 72 million hours each year. The rule promises to provide greater transparency and protection for consumers during the car-buying process.
A key feature of the CARS Rule is the added protection for military members and their families. Military personnel often fall victim to deceptive tactics such as misleading claims about dealer affiliations with the military, or false information regarding vehicle availability, financing, and hidden fees. The new rule targets these specific issues and aims to prevent deceptive practices that disproportionately affect servicemembers, who already face financial challenges, including high levels of auto debt.
Prohibition of Bait-and-Switch Tactics and Hidden Fees
Under the CARS Rule, car dealers are prohibited from engaging in bait-and-switch advertising, including misleading claims about vehicle prices, financing terms, and availability. The rule also addresses hidden junk fees, which are charges buried in lengthy contracts that consumers may not be aware of or agree to pay. Many of these fees are for services or products that provide no real benefit to consumers, further exacerbating the financial burden on car buyers.
The CARS Rule requires dealers to be transparent about several key aspects of the car-buying process. Dealers must provide the actual price of the vehicle, make clear which add-ons are optional, and ensure consumers understand the total cost of the vehicle, including monthly payments. Additionally, dealers are prohibited from charging for unnecessary add-ons, such as warranty programs that duplicate existing coverage, or services that don’t provide value, such as oil change contracts for electric vehicles. The rule also mandates that consumers give informed consent before any charges are applied to their purchase.
Impact on Military Personnel
For servicemembers, the CARS Rule addresses challenges unique to their circumstances. Military personnel are often required to move frequently, which creates additional financial difficulties when purchasing vehicles. The rule prohibits dealers from misrepresenting crucial details about financing, vehicle availability, and whether the dealer is affiliated with the military. It also safeguards servicemembers from deceptive claims about vehicle repossession, as many servicemembers are protected by laws that prevent repossession under certain conditions.
The CARS Rule will come into effect on July 30, 2024, providing consumers and dealers ample time to adjust to the new regulations. To assist consumers, the FTC has developed guidance on how to understand their rights under the new rule. Similarly, auto dealers will receive resources, including a dedicated website with frequently asked questions and other useful information. The rule was approved by a unanimous vote of 3-0 by the FTC commissioners, and the final text will be published in the Federal Register shortly. The FTC will continue its efforts to promote consumer protection and competition in the marketplace.