The Federal Trade Commission (FTC) is making a three-pronged attack to strengthen consumer protections, with one finalized rule and two proposals aimed at safeguarding consumer wallets and online privacy. Here’s what’s happening and how it could reshape the consumer landscape:
Proposed Junk Fee Rule
The FTC has proposed a rule to prohibit so-called “junk fees,” specifically hidden fees that are not revealed until the customer is well into a transaction. The rule would prohibit businesses from advertising prices that omit mandatory fees, including those related to goods or services provided by a third party. The rule could eliminate automatic gratuity fees added to a restaurant bill for large parties. It could also require ticket outlets and hotels to display the total booking price in the upfront cost – no more surprise cleaning, report, or service fees.
Proposed Changes To COPPA Rule
The FTC proposed changes to the Children’s Online Privacy Protection (COPPA) Rule to further restrict companies’ ability to collect, use, and monetize children’s personal data. The rule applies to certain websites and online services that knowingly collect information from children under 13. The changes would require parental opt-in consent for targeted ads, put limits on nudges that encourage children to use an online service, restrict the commercial use of student data, limit data retention, and strengthen data security requirements.
New Rule Targeting Vehicle Shopping Scams
The FTC finalized its Combating Auto Retail Scams (CARS) rule to prohibit bait-and-switch tactics and junk fees by auto dealers. According to an FTC announcement, the rule aims to save car buyers nationwide over $3.4 billion per year. It also includes specific protections for military service members.
The CARS rule prohibits dealers from using misinformation to lure vehicle buyers to the lot, including misleading information about the cost of a car or financing terms, the availability of any discounts or rebates, and the actual availability of the vehicles being advertised. It also tackles hidden junk fees – charges buried in lengthy contracts that consumers never agreed to pay.
In addition, the rule:
- Prohibits misrepresentations about price and financing.
- Requires dealers to be upfront in advertising about the actual price a consumer can pay and inform consumers when add-ons are optional.
- Prohibits the dealer from charging for add-ons that provide no benefit to the consumer.
- Requires dealers to get a consumer’s “express informed consent” for any charges.
The rule doesn’t just offer general consumer protection; it specifically safeguards service members from predatory practices when buying or leasing a car. According to the FTC, service members have an average of twice as much auto debt as civilians. In addition to the protections above, the CARS rule:
- Prohibits dealers from making false claims of military or government affiliation.
- Strengthens existing laws against repossession of a vehicle while the owner is on active duty.
- Requires dealers to be upfront about any restrictions on moving a car out of state, including financing or warranty limitations.
The rule takes effect on July 30, 2024. However, two trade groups have filed challenges in court. The National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA) have asked the U.S. 5th Circuit Court of Appeals to vacate or modify the rule or stay its enforcement. The petitioners characterize the rule as “arbitrary, capricious” and “an abuse of discretion.” In a press release, the NADA said the rule will “needlessly lengthen the car sales process by forcing new layers of disclosures and complexity into the transaction.” They assert the rule is duplicative and in some cases conflicts with existing state and federal laws. They also argue the new recordkeeping requirements would be burdensome for small businesses.
If your business has questions about how these changes could affect you, reach out to our experienced business attorneys at Mahdavi, Bacon, Halfhill & Young, PLLC today.