Senator Warren and Representative Porter Applaud FTC’s New Proposed Rule Cracking Down on Car Dealers’ Deceptive Tactics
“The long list of auto dealers’ tactics used to rip off consumers violates the standards of a fair market, and the FTC should exercise its power under the Dodd-Frank Act and the FTC Act to put a strong rule in place to protect consumers”
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) and Representative Katie Porter (D-Calif.) sent a letter to Federal Trade Commission (FTC) Chair Lina Khan in support of the FTC’s proposal to protect consumers from deceptive tactics by auto dealers and throughout the car-buying experience. This follows up on Senator Warren’s earlier letter to the FTC raising concerns about unchecked deceptive advertising practices and consumer fraud by automobile dealerships.
Deceptive practices and consumer fraud in the automobile industry have jacked up car costs, even as increased prices for new and used cars continue to be a major driver of inflation. Dealers employ high-pressure sales tactics, hidden fees, confusing offers for their used cars, and pressure to accept financing proposals that put consumers at risk of scams. Widespread deceptive practices in the automobile industry include dealers’ refusal to honor online or previously agreed-upon prices, surprise fees, and “add-on” products used to deceive consumers into paying higher prices.
“Throughout the COVID-19 pandemic, car dealerships have continued raking in massive profits by deceiving and defrauding their customers,” said Senator Warren. “I’m glad that the FTC is proposing this rule change to crack down on these practices and protect consumers.
"Car dealerships use every trick in the book to rip off Americans," said Representative Porter. "The FTC's proposed crack down on dealers' shady business practices will lower prices for families and bring much-needed transparency, accountability, and fairness to a complex and opaque market."
In response to the rampant fraud in the automobile industry, the FTC has proposed a rule to prohibit deceptive advertising practices and improve disclosures in the automobile buying process in the following ways:
- Preventing misrepresentations on the “costs or terms of purchasing, financing, or leasing a vehicle” both before consumers arrive at the dealership and after the purchasing process has begun;
- Requiring “informed consent” for any charges;
- Banning the sale of add-on products and services that do not materially benefit the consumer;
- Requiring car dealerships to be upfront about costs for leasing and financing vehicles;
- Preventing dealers from taking advantage of the disproportionately low-income buyers who are trapped into predatory leases and;
- Preventing dealers from advertising rebates or discounts that are not accessible to all customers
“Given the impact of automobile dealerships’ practices on individual consumers, inflation, and the larger economic recovery from the coronavirus disease 2019 (COVID-19) pandemic, we support the FTC’s proposed rule to prohibit deceptive advertising practices and improve disclosures in the automobile buying process.,” wrote the lawmakers.
As a champion for American consumers and a secure and healthy economy, Senator Warren has continued oversight of corporations for their role in misleading and defrauding consumers as Americans face record-high, economy-wide inflation:
- On March 31, 2022, Senator Warren wrote two separate letters to the White House Competition Council and Lina Khan, Chair of the Federal Trade Commission (FTC), regarding corporate profiteering in the automobile sales and rental industries.
- On March 16, 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the Department of Justice and Federal Trade Commission the teeth to reject deals in the first instance without court orders and to break up harmful mergers.
- In December 2021, Senator Warren sent a letter to Hertz Global Holdings asking about their proposed buyback program in the face of worker layoffs and a diminished fleet for consumers, and the company failed to respond adequately.
- On January 13, 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.
- At a hearing in January, 2022, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.
- In December 2021, Senator Warren called on Secretary Raimondo to use CHIPS for America Act funding to push back against industry consolidation in the semiconductor industry, address supply-chain resiliency, and bolster competitiveness in the industry. The global chip shortage has resulted in significant price increases for American families and contributed to the recent increases in inflation, as well as job losses due to auto plant shutdowns.
- In November 2021, Senator Warren called out the 11 energy companies that are inflating natural gas prices for consumers while reaping record profits
- In November 2021, Senator Warren called on the Department of Justice to investigate the poultry industry’s anticompetitive behavior as turkey and chicken prices soared.
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