Auto dealer documentation fee and junk fee compliance

Auto dealerships have been a perennial focus of state attorneys general and class-action plaintiffs. Common patterns flagged as deceptive:

• Documentation fees and "dealer prep" charges added at signing that were not in the advertised price.
• "Market adjustment" markups disclosed only verbally or in fine print.
• VIN etching, paint sealants, fabric protection, theft-prevention, and similar add-ons charged without informed consent.
• Mandatory "package" pricing that bundles unwanted add-ons into the price.
• Online listings showing pricing that excludes documentation fees, certificate-of-title fees, or compliance fees.

The FTC's Combating Auto Retail Scams (CARS) Rule was finalized in December 2023 and would have prohibited specific misrepresentations and required express informed consent for add-ons. The rule was vacated by the U.S. Court of Appeals for the Fifth Circuit, which held that the FTC failed to follow proper rulemaking procedures. As a result, the CARS Rule is not currently in effect.

However, the underlying conduct the rule targeted — material misrepresentations and add-ons charged without informed consent — remains actionable under Section 5 of the FTC Act and under state consumer-protection statutes. Dealers should not treat the vacatur as license to revive practices the rule was designed to prohibit.

Many states cap or otherwise regulate documentation fees by statute or regulation, require their disclosure in advertising, and prohibit advertised prices that omit mandatory dealer-imposed charges. State-level enforcement against deceptive dealer fees has historically been pursued by state attorneys general under each state's deceptive-trade-practices statute.

California SB 478 applies to auto dealers selling to California consumers. Mandatory charges that the dealer imposes — other than government-imposed taxes and fees — must be reflected in the first displayed price under Cal. Civ. Code § 1770(a)(29).

• Advertise the cash price including documentation fee, dealer prep, and any other mandatory dealer charge.
• Disclose the documentation fee amount and methodology in any advertisement that contains a price.
• Obtain express, informed consent in writing for every add-on product or service — and do not present opt-in add-ons as if they are mandatory.
• Avoid bundling unwanted add-ons; offer line-item pricing.
• Train sales staff to disclose all mandatory charges before signing — verbal misrepresentations are actionable under FTC Section 5 and state statutes regardless of the CARS rule's status.