The Federal Trade Commission (FTC) voted in favor of a new rule to combat two common types of illegal tactics consumers face when buying a car: price gouging and hidden charges that make buying a car vehicle is, in addition to being excessively expensive, a stressful process.
The new rule, which goes into effect July 30, 2024, is expected to save consumers nationwide more than $3.4 billion and approximately 72 million hours each year when purchasing a car.
During the conference: “Rule to combat scams in the automotive retail trade. What you need to know”, organized by Ethnic Media Servicesexperts from the Federal Trade Commission talked about this new federal regulation to combat scams when purchasing cars.
The thought of walking out with a new car from the car dealership can be stressful and exciting. But if the dealer engages in dishonest practices, the process can be as stressful as a pile-up on your way to work in the morning.
The rule to combat car scams that the FTC announced this week requires transparency in this process.
In fact, the automobile rule includes key provisions on pricing, additional products and services, and buyer consent.
Malini Mithal, deputy director of the FTC’s Financial Practices Division, said the rule focuses on two very harmful practices.
“One of them is to advertise a low price to get the customer to go to the car dealership, but once you spend hours in the lot, they discover that the car is more expensive than what was advertised, and you fall for what is advertised.” known as the bait and deception scam (false advertising).”
He specified that the second scam that the rule aims to change is junk charges.
“Contracts when purchasing a car are long and complicated, which makes it very easy to hide charges or things that the seller and the consumer never talked about, and that the buyer really doesn’t want.”
Why should we care?
Mithal said the rule will help car buyers save $3.4 billion a year and 72 million hours of shopping time.
“Therefore, with this rule sellers will not be able to lie about key information such as costs, financing terms, add-ons, refunds, etc.”
But distributors must also tell consumers the real price when bidding; and they don’t have to pay for additional items like service contracts.
“They also have to tell consumers the total they will pay, and the monthly payments; and there will also be no garbage charges for products that do not provide any benefit to the consumer, such as duplicate warranties that do not give you extra coverage, or are incompatible with your car.”
Likewise, there cannot be any more hidden charges that the customer did not agree to pay.
He stressed that they have focused on false advertising tactics in the sale of cars, because these are the most expensive purchases a consumer will make in their life.
“For many consumers, purchasing a car is the second largest purchase after a house. People depend on their cars to get to work, school, the doctor, supermarkets, and other important tasks in their daily lives; and a car has become incredibly expensive”.
He noted that the average new car sold last year was $46,000; while for the second quarter of this year, a used car cost $30,000.
“The average monthly payment for a new car is $741; and for a used one it is $533. Both are record prices. In fact, for many consumers, cars are the largest expense along with housing, child care and food; and auto debt is the third largest in the United States.”
He said that in addition, in the past four years, the FTC has received many complaints about the car-buying process, since it can take hours or days to complete the transaction, and people need to ask for time off from work or for babysitting. children.
hook price
Jamie D. Brooks of the FTC’s Financial Practices Division said the practice of deception is when a price is advertised, and once you’ve spent hours at the car dealership, you’re told the cost is much more.
“The FTC has taken many actions against auto dealers who engage in deceptive advertising, including price baiting. For example, the FTC has charged dealers for misrepresenting a vehicle’s price, monthly payment, and affiliation with government programs.
He cited as an example casino car sales, which advertise a low price of $18,000, but in the end in very small print, it says that you have to pay $5,000 down payment.
“That is a deception, which specifically targets Spanish-speaking consumers. It is very common for them to advertise the sale of a car with zero down payment and monthly payments for $99, but the fine print says that this is only the first three months, because then you have to pay $500 each month, plus interest above 9% , in addition to the administrative fee.”
He stressed that the new rule prohibits lying about key information, modifying the price of the advertisement; and if they negotiate in Spanish, the contract must be in Spanish.
Junk charges
Sanya Shahrasbi, an attorney with the FTC’s Financial Practices Division, said that when we talk about junk charges, they refer to additional services included that do not provide benefits or that the consumer did not know about.
“An example of this are extended warranties, protections that cost the consumer thousands of dollars and considerably increase the cost of the transaction.”
To report consumer fraud, call 877-382-4357, or visit: https://reportfraud.ftc.gov