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A Wolf In Sheep’s Clothing

The magazine’s legal wiz reminds dealers and F&I pros why it’s wise to assume every customer knows the bad compliance practices you should have outlawed years ago.

July 2017, F&I and Showroom - Feature

by Thomas B. Hudson, Esq. - Also by this author

Newsflash for all of you who sell cars and work in F&I: Not every person who visits your dealership is a sheep waiting to be sheared. Some of them may know a lot more about the scams you try to pull than you do. Here’s a cautionary tale for dealers who engage in sharp practices.

A friend trains dealers in F&I compliance. The friend’s daughter (we’ll call her Prudence) works for my friend, her mom. Yep, Prudence is an F&I trainer. She has earned compliance certifications and teaches dealers how to navigate federal and state laws.

"Prudence’s mom knew a dealer with the exact truck Romeo wanted. Mom had done some consulting work for the dealer and emailed him and his assistant. Turned out the owner was out of town and didn’t see Mom’s email, but his assistant knew her and they were ready for the kids. And were they ever."

Well, Prudence recently had an accident in her Jeep Cherokee — a fellow rear-ended her on a rural road doing around 50. The insurance company totaled her car and paid her $1,600 more than she paid for it. That left her with a check and a rental car for a week, but she needed a car. Her fiancé (we’ll call him Romeo) was driving a late-model truck with a big payment, so Prudence and Romeo decided to trade in his truck for an older diesel truck to put him in a smaller payment and get her something newer with a payment.

Prudence’s mom knew a dealer with the exact truck Romeo wanted. Mom had done some consulting work for the dealer and emailed him and his assistant. Turned out the owner was out of town and didn’t see Mom’s email, but his assistant knew her and they were ready for the kids. And were they ever.

They wanted to finance Romeo through one of their finance sources. Romeo said he wanted to check with his credit union. They told him to sign the contract. If he got a better deal, they promised to do a new contract the next day. Fortunately, Prudence and Mom were texting through all of this, so Romeo declined.

The dealership representatives told Romeo he had to buy GAP, even though his large down payment made it unlikely he’d ever be upside down. When the kids told the sales rep they wanted to think about it and check with their credit union, he almost held them captive.

Romeo got financing the next day from his credit union at half the rate the dealership was offering. Mom got in touch with the dealer and told him what had transpired. He was upset and embarrassed.

Then it was time to find wheels for Prudence. She was looking for a late-model Ford Explorer and went to look at a 2014 at a big national used-car store. The Explorer had a clean Carfax, but she smartly decided to take a peek underneath and found rust on the inside of the door frame. She said, “I think this is a flood car.” The sales rep said, “All Fords rust in the first two years.”

Turned out the Explorer was a fleet vehicle, so the flood damage wouldn’t have been reported. She called Mom and said, “Maybe I should buy it and hire our lawyers to sue them.”

Prudence moved on to a franchised dealership that had an Explorer she loved. She could afford the advertised “out-the-door” price, having been pre-approved by USAA. She went alone. The sales rep told her she had to buy the $200 etch product and the $500 protection package because they were preloaded on the car. She told them “No,” and they refused to come off the price.

Turned out Mom had a connection with the general manager, so Prudence got a call the next day and went back to buy the Explorer. When the sales rep tried to talk her into a service contract, she declined. They said they’d throw in a “tire-and-wheel warranty.” When Prudence looked over the paperwork, she discovered they had charged $600 for tire-and-wheel. She made them redo the paperwork without it.

So here’s a litany of federal and state law violations, misrepresentations, and unfair and deceptive practices. It seems the sales and F&I representatives of these three dealerships were doing these bad things without the knowledge of management, as unlikely as that seems.

The lesson here is don’t assume you’re running a clean shop, because the next young woman who gets this sort of flim-flam treatment may be an investigative reporter or a mystery shopper for a federal or state regulator. And if you aren’t training and supervising your folks to make sure this stuff doesn’t happen, it’s you the enforcement folks will hold accountable.

Thomas B. Hudson is a partner in the firm of Hudson Cook LLP, publisher of Spot Delivery, and the author of several widely read compliance manuals. © 2015, all rights reserved. Single print publication rights only, to F&I and Showroom (7/17). HC No. 4811-5872-3652.


  1. 1. Joe shmo [ July 10, 2017 @ 04:36AM ]

    Point taken, but kind of a ridiculous story. Perhaps the finance guy lowered the service contract by $600 to "throw" the wheel & tire in there. There has to be at least some cost itemization for the wheel & tire to show up on the buyers order. Not to undermine your point of the importance of compliance, I agree, but not the best illustration to prove your point. And who would sue somebody for saying all trucks rust in the first two years?? Especially with no proof of it being a flood vehicle? I enjoy this magazine a lot. But this story was weak guys, c'mon


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