A U.S. Appeals Court Throws Out Rules to Ban Bait-and-Switch Tactics and Junk Fees for Car Buyers
A U.S. appeals court has thrown out rules adopted by the Biden administration to ban bait-and-switch tactics and prohibit auto dealers from charging for add-on costs that do not benefit new car buyers. The 5th Circuit Court of Appeals ruled that the Federal Trade Commission (FTC) had violated procedural rules by writing the regulation without giving advance notice of the planned regulation.
The rule, proposed in 2022 and finalized in January 2024, required up-front pricing in dealers’ advertising and sales discussions, and informed consent from consumers before charging for any item. The FTC had estimated that the new rules would save consumers more than $3.4 billion and 72 million hours annually shopping for vehicles.
The National Automobile Dealers Association and a Texas dealer group had challenged the rule, claiming it would “needlessly lengthen the car sales process by forcing new layers of disclosures and complexity into the transaction.” A dissenting judge, Stephen Higginson, argued that Congress had authorized the FTC to issue regulations that would require “price transparency and rules against deception, which would spur billions of dollars in economic benefit for U.S. consumers.”
Higginson noted that the rule came after a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices. The decision is a defeat for the Biden administration’s efforts to curb deceptive practices in the car-buying process.
