COLUMBIA, S.C. – The Federal Trade Commission (FTC) requested comments on a proposed rule that would “eliminate the tricks and traps” that make it hard for consumers to comparison shop and add on thousands of dollars of unwanted junk charges. The South Carolina Department of Consumer Affairs (SCDCA) submitted comments on September 12, 2022, on how junk fees impact peoples’ lives as the department is intimately aware of the issues in the South Carolina marketplace. Highlights of SCDCA’s comments include:
- Dealer Charges for Add-Ons
Consumers are sometimes sold “optional” add-ons that hold little to no value at a huge price markup. Some of these products and/or services include paint sealant, rustproofing, VIN etching and more. SCDCA recommends a clear disclosure when it comes to low value, high-cost add-ons stating that they may be available at a better price elsewhere.
On the other hand, while providing details about optional add-ons should be required, SCDCA thinks it’s unnecessary for dealers to have to list add-ons the prior owner added to the car. The price of the vehicle should already include the value that previous add-ons hold. So, SCDCA recommends amending the definition of “Add-on Products or Services” to exclude this information.
- Yo-yo/Spot Delivery Sales
Yo-yo/spot delivery sales are when a consumer is allowed to drive a car off the lot before receiving final credit approval, only to get a call from the dealer a few days later saying the deal “fell through.” This usually leads to a higher interest rate or the consumer having to choose a more expensive option.
SCDCA takes a strong stance that yo-yo/spot delivery sales should NOT be allowed. Financing should always be confirmed, either with a third-party financing company— like a bank or credit union or the dealer—BEFORE the consumer takes the car home. Dealers now have 24-hour access to consumers’ credit reports through computers and the internet and detailed guidelines from creditors as to which consumers qualify for financing and at what terms. These days, there should be very few times where a dealer cannot finalize a deal on the spot. If the FTC is unwilling to restrict the practice entirely, then SCDCA suggests a limited grace period to get financing or unwind it. In that case, the terms and customer’s rights need to be clearly disclosed.
When trading in a car, it’s totally normal for a consumer to expect that their debt would be paid off when they give over the vehicle and get a new one. Some consumers have expressed that this does not always happen, leaving them with two car payments. To make sure the consumer and dealer are on the same page, SCDCA suggests the dealer be required to clearly disclose if they are not paying the trade-in off as a part of the deal.
SCDCA suggests that the FTC should create a template form for all dealers to use for disclosure of add-ons. This would help consumers better compare vehicles while taking the guessing game out of proper compliance for dealers. Additionally, the FTC lists what does NOT meet express, informed consent when it comes to add-ons. SCDCA suggests showing examples of what compliance does looks like. One possibility is creating an individual list of each separate add-on product or service, showing what the product is, including a simple explanation of how it works, what it costs and check boxes next to each item that the consumer can mark to accept or reject add-ons.
In summary, transparency and clear disclosures are key to a healthy marketplace. Not disclosing all required fees—outside of standard official fees—means the consumer cannot make an informed decision when shopping for a product/service. The lack of transparency makes it hard for businesses to compete because they are unaware of the bottom line set by their competitors. SCDCA believes any fees or charges should be disclosed in a clear and consistent way, creating an informed buyer and a fair marketplace for honest dealers.
Back in February 2022, SCDCA sent a memo to all dealers in the state identifying fees, charges and other misleading and deceptive practices seen in the sale of motor vehicles and encouraged consumers to beware of the same. Consumer complaints are one of the top ways SCDCA becomes aware of violations.
In 2021, SCDCA fielded 622 vehicle-related complaints, a 10.7% increase from the year prior. With the importance vehicles play in the everyday lives of consumers, it’s no surprise that for the fifth year in a row vehicle complaints have been number one on the list. To file a complaint about your car shopping experience or other issues, visit consumer.sc.gov and click FILE A COMPLAINT or call toll-free, 1 (800) 922-1594.