The Industry's Leading Source For F&I, Sales And Technology


Defining the Dark Side

There’s one way to keep federal regulators, plaintiffs’ attorneys, attorneys general and the media at bay. Read on to find out what it is.

December 2016, F&I and Showroom - Feature

by Gil Van Over - Also by this author

In my articles and presentations, I jokingly use the dark side “Star Wars” reference to describe the forces that attack dealers. They include entities that pursue dealers with an overabundance of regulations, exposure, litigation, and oversight to further their own agendas. This month, I’d like to focus on four members of the dark side and offer a way to keep your operations out of their crosshairs.

1. The Federales: They are, by far, the most active members of the dark side. They include the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Department of Justice, the Internal Revenue Service, banking regulators, and state divisions of motor vehicles, among others.

The CFPB was created as the primary consumer watchdog by the Dodd-Frank Act five years ago. The National Automobile Dealers Association led a successful effort to get dealers exempted from the bureau’s regulatory oversight. However, the rule of unintended consequences prevailed, with Dodd-Frank granting the FTC expanded authority with respect to motor vehicle dealers.

We’ve already seen dealers reach settlements with the FTC over such charges as deceptive advertising and failure to adequately safeguard consumers’ nonpublic personal information. Then there was the nine-store, Los Angeles-based Sage Auto Group, which the FTC charged with payment packing and yo-yo financing, among other things. It was the first time the FTC took action against a dealer for yo-yo financing. There are also other dealers actively fighting charges of credit application fraud.

2. Plaintiffs’ Attorneys: Pop open the yellow pages of your phonebook. There you’ll find more pages devoted to attorneys than dealers. Bottom line: you are outnumbered.

The plaintiffs’ bar remains as active as ever. Recent successful litigation against auto dealers involved Truth in Lending violations due to contracts not printing out properly and because contract dates didn’t match the dates customers signed. We’ve also seen litigation related to dealers not properly disclosing negative equity, as well as dealers not having permission to pull a credit report.

3. Attorneys General: You should know that “AG” really stands for “aspiring governor.” These people need votes to continue their political careers, and the attorney general’s office is usually just a stepping stone to the governor’s mansion. Most see the best way to garner votes is to aggressively pursue bad businesses that take advantage of consumers.

The consumer is all for that. Go after the scam artists who are trying to steal money from senior citizens, or the traveling band of roofers who leave leaking tops on houses. Just leave the honest auto dealers alone.

4. Local Media: During sweeps month, some dealer is going to get lambasted with a highly emotional exposé alleging that the dealer unfairly dealt with a consumer (or five). You can expect to see word bites from sympathetic “victims,” files containing hundreds of pages of paper thrown on the desk, and a look at a “secret” internal document alleging that the dealer screwed the consumer(s).

Primarily because of Privacy Rule concerns, the dealer never has an opportunity to make his or her case in the court of public opinion. The dealer can only say, “If it happened, we will take appropriate action,” and hope the adverse public opinion does not drive away business.

Preventative Medicine: So, what’s a dealer to do to defend his or her organization against the dark side? While there is nothing anyone can do to prevent being sued, there are steps a dealer can take to limit the likelihood of a dark side attack. The best way to protect your dealership and yourself from the dark side is to have an effective compliance management system in place. Here’s what you do:

  • Appoint a compliance officer to oversee and manage the overall program. Make sure everyone knows who this individual is and the authority he or she has.
  • Conduct a risk assessment of your processes using federal and state requirements or best practices as your benchmark.
  • Develop and implement a policy and procedure manual to outline how your employees are expected to execute each part of the process.
  • Train your employees on your policy and procedure manual. Train them again in six to nine months. Then update your policy and procedure manual and train them again. Repeat.
  • Regularly audit the output of the process to confirm that it is in compliance with your policy and procedure manual.

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  


So Here's the Deal

Ronald J. Reahard
Addressing F&I’s Internet Problem

By Ronald J. Reahard
A frustrated F&I manager poses an increasingly common question: How do you sell protection products to customers who demand the final price by phone and then show up with a bank check?

(Video) Selling Eight Products Without Losing the Customer

By Ronald J. Reahard
Is offering eight products a bad idea? The magazine’s resident F&I pro says it depends on the producer and the presentation.

He Had a Goal: Remembering David Ressler

By Ronald J. Reahard

[Video] Selling to Short-Term Owners

By Ronald J. Reahard

Done Deal

Gregory Arroyo
Change Is Happening

By Gregory Arroyo
Saddened by the potential loss of another piece of his childhood, the editor tries to put the pieces together when he realizes there’s a good lesson to be learned in a toy retailer’s likely demise.

Who Will Take Up the CFPB's Torch?

By Gregory Arroyo
The CFPB’s acting director tells state regulators there will no longer be ‘regulation by enforcement,” but the editor believes there’s a long list of regulators waiting to take up the torch.

Military Lending Act Guidance: The Gift That Keeps On Giving

By Gregory Arroyo

Resolution Needed

By Gregory Arroyo

Mad Marv

Marv Eleazer
Overcome Your F&I Weaknesses

By Marv Eleazer
His Madness issues a challenge to every F&I professional: Eradicate your bad work habits, diversify your lender spread, and check your God complex at the door.

Proper Deal Structure Moves Mountains

By Marv Eleazer
His Madness has a simple but powerful piece of advice for newbie F&I managers and those struggling to adapt to the way finance sources are rating credit-challenged car buyers.

Show Us Some Love

By Marv Eleazer

Chargeback Prevention

By Marv Eleazer

On the Point

Jim Ziegler
Sharpen Your Survival Skills

By Jim Ziegler
‘Da Man’ has a plan you can use to survive the collapse of the car business and remain profitable through the dealer apocalypse.

Sales Rock Stars Still Exist

By Jim Ziegler
Da Man says $40,000-a-month sales rock stars still exist. He says you’ll find them on YouTube and Facebook Live.

The New Stooges

By Jim Ziegler

Is Your Quick Lube Driving Away Business?

By Jim Ziegler