FTC cracking down on questionable auto sales practices

January 27, 2023

PHOENIX (3TV/CBS 5) — The Federal Trade Commission is cracking down on junk fees, false advertising, and discriminatory pricing in the auto sales industry.

In the past year, FTC attorney Mark Glassman says the agency took action against two companies: Passport Automotive Group and Napleton, a multi-state auto dealer.

In the complaint against Passport, the FTC alleges the company regularly advertised certified, reconditioned or inspected cars at specific prices. But when the customer went to buy the car, Passport charged them “extra hundreds to thousands of dollars in fees” for inspections and certifications — essentially double charging the buyer.

“One of the examples that we cited in one of the cases was of a consumer who had purchased a used car that was advertised as a certified used car,” Glassman said. “And then when he went to buy the car, he was told that he’d have to pay a fee for inspection and recertification. And those were things that were already part of the certification process.”

The complaint also alleged Passport charged Black and Latino consumers hundreds of dollars more in financing costs and fees on average than white customers. That violates the FTC Act and the Equal Credit Opportunity Act. In the settlement with the FTC Passport denied liability but agreed to pay $3.3 million, which will be used to refund customers. Passport also agreed to a change in business practices

And in the case against Napleton, the FTC lawsuit accused the company of charging junk fees for unwanted “add-ons” onto customers’ bills, as well as discriminating against Black applicants by charging them more for financing. Napleton settled the lawsuit by denying liability but agreeing to pay $10 million, which will be used to refund affected customers.

In the wake of these cases, the FTC proposed a rule to ban both junk fees and bait-and-switch advertising tactics. “What we’re out there doing is trying to make sure that businesses are conducting themselves in non-deceptive ways and in a way that accurately portrays the nature of the deal,” Glassman said.

Glassman also says to be wary if someone asks you to pay upfront in return for re-negotiating the terms of a loan. “That’s an immediate sign that they should be concerned about fraud,” he said.

There are a few things you can do to protect yourself when buying a car. Ask for a copy of every single document when discussing car payments and loans. Also, reach out to the car finance company directly if you have any questions, or if you want to make adjustments to your payments.

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