I’ll never forget my first F&I Conference. After a long list of warnings from the attorneys and experts on our compliance panel, one brave attendee stood up and said, “I’m afraid to go back to my dealership.” That was November 2006, but I get the feeling many of you are feeling like that guy right now — especially after what federal regulators have been up to lately.
That scene came to mind as I read a recent e-mail from a loyal reader. She asked if I was aware of any examples of the Federal Trade Commission (FTC) going after dealers for payment packing. Apparently, her comptroller wanted to know.
At first, I wondered whether she was payment packing, or had just discovered that rogue employees were quoting payments without disclosing the inclusions of F&I products in those quotes. But since she’s a reader of F&I and Showroom magazine, I’m going to assume the e-mailer was looking to beef up her store’s compliance manuals or was ready to tip off regulators about a noncompliant competitor.
My second thought was to tell the reader that she and her comptroller should be more concerned about their state attorney general than the FTC. But I understood why she was asking. The agency has been active as of late. In fact, last year, the FTC began requesting from dealers information about their spot delivery procedures. In April, the FTC went after five dealers for deceptive advertising. It is believed those investigations were the result of those compliance sweeps.
Of course, the FTC would neither confirm nor deny its actions. What you have to remember is that the agency is in information-gathering mode after assuming its new rulemaking powers last July under the Dodd-Frank Act. They’ve been studying our industry to look for holes in existing consumer protections. So, yes, it’s been busy, but there’s a reason. What I’m saying is, don’t expect to find FTC reps hiding in the bushes waiting for you to do something wrong.
“We are different than agencies such as the banking regulators that have auditors or examiners in the field with regulated entities,” said Mark Eichorn, assistant director in the FTC’s Bureau of Consumer Protection’s Division of Privacy and Identity Protection, in an e-mail exchange.
Now, don’t take that comment to mean the FTC isn’t watching. See, I had the pleasure of picking the brain of an FTC rep back in 2010. His name is Manas Mohapatra, and I had invited him to speak at our conference that year. I wanted to know how actively the agency was investigating dealers. He told me then that the FTC only springs into action if it received a number of complaints filed by consumers about a business or service.
Mohapatra also hinted that the agency pays close attention to newspaper reports, which is what the Consumer Financial Protection Bureau is doing — at least according to Frank Salinger. The industry attorney said as much at the annual Vehicle Finance Conference this past February, where he advised finance sources to have someone in their shop watching for press clips. “Their policies might center around what’s in the press,” he warned.
In fact, he’s the one who told me that the first three or four people the CFPB hired were media people.
So far, Salinger has been right on. Last November, the CFPB caught the scent of buy-here, pay-here dealers after a series of articles published in the Los Angeles Times painted the segment in a not-so favorable light. And in January, the bureau announced it would keep a close eye on the BHPH industry, which does fall under its jurisdiction.
With all that said, the newsmaker you really need to pay attention to is your state’s attorney general. Reporters like Ken Bensinger, who penned the article on BHPH dealers, love AGs, and the feeling is mutual. And if you weren’t aware, one goal of the Dodd-Frank Act was to ensure that states would play a role in ridding the credit markets of wrongdoers. And it did that by allowing attorneys general to enforce the act’s prohibition against unfair and deceptive acts or practices (UDAP), as well as consumer protection laws such as the Truth in Lending Act and the Fair Credit Reporting Act.
Yes, the reader’s e-mail did get the wheels in my head turning, but it was a call I received from my friend Bob Harkins, a compliance expert who heads up RAH Consulting, that convinced me to address compliance this month. Like me, Harkins believes attorneys general are the real menace, and he passed along an acronym he tabs as the recipe for staying clear of UDAP claims: “C.E.I.T.” It stands for character, ethics, integrity and transparency. Yeah, it’s that simple.