The FTC Cracked Down on ‘Hidden’ Car Dealer Fees. They’re Still Happening Anyway.

Despite a sweeping federal crackdown aimed at eliminating deceptive auto dealer pricing practices, “hidden” fees continue to persist across the marketplace—raising questions about enforcement effectiveness and compliance gaps within the industry.

In December 2023, the Federal Trade Commission finalized its Combating Auto Retail Scams (CARS) Rule, targeting bait-and-switch pricing tactics, junk fees, and misleading add-ons that inflate the true cost of vehicle purchases. The rule, which officially took effect in 2024 after legal challenges, requires dealers to clearly disclose the full price of a vehicle and obtain express, informed consent before charging for optional products or services.

However, recent investigations and consumer complaints suggest that many dealerships have found ways to continue layering in fees—often under different labels or through less transparent disclosures.

Persistent Fee Practices

Industry watchdogs and state regulators report that add-ons such as “dealer preparation,” “market adjustment,” “protection packages,” and document fees are still frequently appearing in transactions. While some of these charges are technically permissible when properly disclosed, critics argue that they often function as disguised profit centers rather than legitimate services.

Consumer advocacy groups note that:

• Fees are sometimes buried deep within financing agreements rather than presented upfront.

• Optional products, such as extended warranties or service contracts, are presented as mandatory.

• Digital sales platforms may obscure total pricing until late in the purchase process.

This persistence highlights a core challenge: while the FTC rule targets deceptive conduct, it does not eliminate all fees—only those that are misrepresented or imposed without consent.

Enforcement Limitations

The FTC has brought several enforcement actions against dealerships since the rule’s implementation, citing violations related to misrepresentation and unauthorized charges. Yet enforcement remains largely reactive, relying on complaints and investigations rather than proactive audits.

Moreover, jurisdictional complexity plays a role. Auto dealers are also regulated at the state level, where disclosure standards and enforcement intensity vary significantly. Some states have robust consumer protection frameworks, while others offer more limited oversight.

For compliance professionals, this creates a fragmented regulatory environment in which federal expectations may not always align cleanly with state-level practices.

Implications for Credit and Collections

The continued presence of hidden or unclear fees has downstream consequences for lenders, servicers, and debt collectors.

Inflated loan balances driven by undisclosed add-ons can:

• Increase default risk as consumers struggle with higher-than-expected monthly payments.

• Trigger disputes during collections, particularly when borrowers claim they did not knowingly agree to certain charges.

• Create potential exposure under the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) if inaccurate amounts are pursued or reported.

Debt buyers and collection agencies, in particular, face heightened due diligence expectations. Regulators have increasingly emphasized the need to validate the legitimacy and accuracy of underlying charges—not just the existence of a signed contract.

Compliance Considerations

For industry participants, the persistence of these practices underscores the need for stronger compliance controls and vendor oversight.

Key considerations include:

• Conducting detailed reviews of dealer-originated loan files to ensure fee transparency and proper authorization.

• Enhancing audit protocols for third-party originators and auto finance partners.

• Implementing clearer documentation standards to support downstream collection and dispute resolution processes.

Technology may also play a role, with some lenders deploying automated checks to flag unusual fee structures or inconsistencies in loan documentation.

Looking Ahead

The FTC has signaled that auto retail remains a priority enforcement area, and additional actions are likely as the agency continues to monitor compliance with the CARS Rule. Meanwhile, state attorneys general are expected to remain active, particularly in jurisdictions with strong consumer protection mandates.

For the credit and collection industry, the message is clear: even as regulators focus on front-end sales practices, the compliance burden extends throughout the lifecycle of the account.

Hidden fees may originate at the dealership—but their impact is felt long after the sale, especially when accounts enter delinquency and collection.

As scrutiny intensifies, firms that invest in transparency, documentation, and proactive compliance will be better positioned to navigate both regulatory expectations and consumer disputes in an increasingly complex auto finance landscape.