Tag: FTC

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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

Flex Those Compliance Muscles

The Consumer Financial Protection Bureau (CFPB) has been busy this year bringing lawsuits against auto lenders and servicers. Just this month, the agency sued the servicing arm of U.S. Auto Sales, alleging USASF Servicing cost consumers more than $10.1 million by mishandling customer refunds, double billing for collateral protection insurance and failing to apply excess customer payments to interest. The suit also alleges that USASF Servicing wrongfully repossessed vehicles at least 82 times, erroneously triggered vehicle starter interrupter “kill switches” at least 7,500 times, and incorrectly activated a 10-second series of tones meant to signal late payments 71,000 times. Imagine the consumer’s surprise when their car won’t start or begins beeping – especially if their loan was in good standing or they weren’t informed of these archaic little features when they purchased the vehicle!

Speaking of annoying entanglements, I’m sure your dealership has been busy implementing policies and procedures designed to support the Federal Trade Commission (FTC) Safeguards Rule. While these added requirements may seem burdensome, here’s an interesting way to think about those guardrails surrounding the customer’s data.  So far this year, the FTC has received 5.7 million total fraud and identity theft reports, 1.4 million of which were identity theft cases accounting for $10.2 billion in losses. According to the National Council on Identity Theft Protection, there is an identity theft case every 22 seconds in the U.S. and 33 percent of all Americans have faced some kind of attempt in their lives, with experts predicting this number could increase significantly this year.

While the CFPB and FTC are focused on lender lawsuits and other fronts, there is an opportunity for retail automotive to take advantage of the lull. Now is a great time for your dealership to flex its compliance muscles.

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