Tag: dealership compliance

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Compliance

Knock, Knock…Auditor Calling

It’s the letter, email, phone call or physical visit that no one wants. An auditor from the Federal Trade Commission (FTC) is visiting your dealership to conduct a formal audit. Whether responding to a specific complaint or conducting an area-wide investigation, auditors mean business. Ignoring the notification – or downplaying the occurrence – is not an option.

But what got their attention in the first place? Most audits stem from unaddressed consumer complaints. For example, the Consumer Financial Protection Bureau (CFPB) states that it has increased its focus on regulations and enforcement actions in large part due to the increase in consumer complaints. Consumers submitted almost 500k complaints to the CFPB in 2021, 800k in 2022, and over 1 million in 2023.

While not every consumer complaint is the result of a compliance failure, agencies such as the FTC and CFPB do analyze the complaint data as an early warning system for potential regulatory issues. A large volume of specific complaints can influence policy decisions.

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Compliance

Words Matter

We’re all guilty of using the latest catchphrase or slang to grab our listener’s attention. These catchphrases serve several purposes. We use them to convey complex ideas, create brand identity or reflect cultural associations with specific demographic groups. When it comes to retail automotive sales, using the wrong catchphrase can land the team member – and the dealership – in compliance hot water.

Let’s consider the catchphrase “bumper-to-bumper.” Retail salespeople and F&I staff have used this term since the 80s to describe the concept that a warranty or protection product covers the entire vehicle. In fact, during a recent visit to a used car dealership in my area, the salesperson went to great lengths telling me about the total coverage warranty that made this particular vehicle such a great deal.

When I explained that “bumpers” were actually covered by insurance policies – not vehicle warranties – the salesperson tried to casually dismiss the distinction. While I’m a knowledgeable buyer, many car buyers are not. Creating the perception that a vehicle warranty truly covers an entire vehicle end-to-end is not only misleading, it could be an accidental violation of Section 5 of the Federal Trade Commission Act: Unfair or Deceptive Acts or Practices. When used to intentionally mislead a certain set of consumers, it may also violate other federal or state laws. Using this catchphrase is not only incorrect, but its use can also be unlawful and result in a costly fine of $51,744 per violation.

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Compliance

New CARS Rule Lesson: Go Back to F&I Training

Does it ever feel like once a year, compliance rears back up to take over the headlines, only to die down again? Well compliance is back and it is making waves.

At the end of 2023, the Federal Trade Commission (FTC) announced the Combating Auto Retail Scams (CARS) Rule, targeting unwanted products, services and so-called ‘junk fees’ added on to a car purchase.

The CARS Rule specifically provides protection for military and active-duty service members who, according to the FTC, are frequently targets for vehicle scams. The FTC states that service members have an average of twice as much auto debt as civilians.

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