On Oct. 20, the FTC followed through on its dealer-specific bait-and-switch regulations beginning with rules to attack what it called “unwanted fee shock” in multiple industries.
“It’s beyond frustrating to end up spending more than you planned because of random and arbitrary charges,” FTC Chair Lina Khan said in a statement at the time. “No one ever thought a ‘convenience fee’ was practical. Companies should compete to provide the best quality at the best price, not to see who can charge consumers the most extra expense.”
On Oct. 26, President Joe Biden highlighted the FTC’s new proposal and the work of other federal agencies to address what he called billions of dollars in “junk fees” in the marketplace.
“I have directed my administration to reduce or eliminate them,” Biden said, according to a White House transcript. The FTC, which has used the term “junk fees” in reviewing its dealer regulations, defined them in the new regulations as “unfair or misleading fees that are charged for goods or services that do not have little or no added value to the consumer, including goods or services that consumers would reasonably expect to be included in the overall advertised price.”
He said these charges include “hidden charges”, which are “misleading or unfair, particularly because they are not disclosed until later in the consumer’s purchase process or not at all, whether the charges are or not described as goods or services. that have independent value to the consumer.”
A 2018 Consumer Reports poll cited by the FTC found that 85% of people had paid hidden fees in the past two years, and 96% found them annoying. Thirty-four percent had faced unexpected costs when making car purchases or loans.
The FTC said it has the power to attack some charges, but a new rule would better deter businesses by allowing civil penalties and easier reimbursement and damages for consumers.
The FTC has listed eight practices it could target with new rules for industries, and similarities exist with what the agency has planned to enact specifically for car dealerships. The agency said Oct. 20 that it proposed to tackle:
1. Misrepresent or fail to “clearly and conspicuously” disclose “the full cost of any goods or services for sale” in advertisements or marketing.
2. Misrepresent or fail to disclose “the existence of any fees, interest, charges or other costs that are not reasonably avoidable for any good or service” in advertisements or marketing.
3. Misrepresent or fail to disclose whether “fees, interest, charges, products or services are optional or required”.
4. Misrepresent or withhold “any material restriction, limitation, or condition regarding any good or service that may result in mandatory charges…or that may diminish the consumer’s use of the good or service, including the amount the consumer receives” .
5. Misrepresentation that a customer owes for “any product or service that the consumer has not agreed to purchase”.
6. Charging for anything “without express and informed consent”.
seven. Charge “any fee, interest, good, service or program that has little or no added value to the consumer or that consumers would reasonably expect to be included in the overall advertised price.”
8. Misrepresent or fail to disclose “the nature or purpose of any fees, interest, charges or other costs”.
The plan put forward in October was at a more preliminary stage than the car dealer’s proposal in June. The new initiative did not contain a draft regulatory text, just the ideas above.