FTC and CFPB – Watching Add On Products in Auto Financing and Other Contexts
December 13, 2018
Authored by: Douglas Thompson
The holidays are a time for deals — rebates, discounts and special financing offers. Especially prevalent are automobile advertisements with images of big red bows atop shiny new cars and exhilarated families dashing out into the snow to unpack presents out of the back. Well, the regulators are watching those advertisements too. For the fourth time in a month, the CFPB is warning consumers, especially servicemembers, about the potential pitfalls of the car buying process and understanding exactly what they are buying and what they are financing. The FTC is joining in to help, with its own resources as well.
Add-On Products are an area of special concern and focus for the CFPB. The CFPB recommends that buyers “be prepared to say ‘No, thank you’ if [they’re] offered add-ons [they] don’t want or need.” But the CFPB also adds a warning that customers should be sure to review their contracts carefully to make sure the items declined are not included. Dealer sales practices vary on these types of products, and the CFPB appears to be suggesting not so subtly that buyer had better beware.
Value & Actual Costs/ Financing. Products and services the regulators highlight include: (a) guaranteed auto protection (GAP), (b) tire, dent, paint and fabric protection packages, (c) extended warranties, and (d) service contracts. These additional products and services can be valuable to consumers depending on how long they intend to keep the car, how they want to maintain it, and their own economic circumstances and budget cashflow. The CFPB and FTC focus signals that in marketing these products and services, institutions and their business partners must be direct and forthright about the product, its features, its limitations, and the price. High pressure sales tactics or aggressive marketing may result in customer complaints, regulatory inquiries, and litigation and reputation risk.