FI showroom red and grey logo
MenuMENU
SearchSEARCH

Consumer Advocacy Group Calls for Regulatory Review of F&I Product Pricing

The National Consumer Law Center is calling on lawmakers and regulators to investigate how dealers price F&I protections, claiming that an analysis of approximately 1.8 million vehicle transactions revealed inconsistent and discriminatory price markups over a span of six years.

by Michaela Kwoka-Coleman
October 24, 2017
Consumer Advocacy Group Calls for Regulatory Review of F&I Product Pricing

 

5 min to read


WASHINGTON, D.C. — A consumer advocacy group is calling on lawmakers and state and federal regulators to investigate how dealers price F&I protection, claiming that an analysis of approximately 1.8 million vehicle transactions revealed inconsistent and discriminatory price markups over a span of six years in all 50 states and the District of Columbia.

The National Consumer Law Center (NCLC)’s findings — including that some dealers charged different consumers different prices for the exact same product purchased on the same day — are contained in a 58-page report titled, “Auto Add-Ons Add Up: How Dealer Discretion Drives Excessive, Arbitrary and Discriminatory Pricing.” The report also offers several recommendations, including that the Equal Credit Opportunity Act (ECOA) be amended to require documentation of a customer’s ethnicity for non-mortgage credit actions.

Ad Loading...

“These fixes are good for the market, for dealers, and finance entities themselves,” said John Van Alst, an attorney for the NCLC. “We certainly found that finance entities had an interest in limiting or stopping interest rate markups because it really hurt them. It increased the likelihood of default; it raised all sorts of problems. And those are things that both dealers and finance companies should want to avoid if we really want to have a healthy market in the long run and have people compete on a fair basis.”

Alst said the study’s findings are based on unprotected data posted online by a national F&I product provider. The data set included information on vehicle transactions from September 2009 through June 2015, which resulted in the sale of almost 3 million add-on products by more than 3,000 dealers.

Since the NCLC published its findings on Oct. 11, however, the unnamed product provider’s data has been taken off the web. Van Alst said the NCLC is not going to name the provider, because the group wants lawmakers and industry officials to focus on the study’s overall conclusion: that “inconstant pricing for the same add-ons leads to pricing discrimination.”

“This provider is representative of this market as a whole, and we’re really anxious to focus on the market rather than individual market rather than individual providers,” Alst said. “We aren’t naming dealers, either, for the same reason.”

The study offers several examples to back the group’s arbitrary markup claims.

Ad Loading...

There’s the Connecticut dealer who sold more than 1,000 window etching products with a dealer cost of $16 each. The dealer charged customers $189 for the product— a markup of $173, or 1,081%. Then there’s the dealer in Kentucky who charged most customers $69, $99, $199, or $299 for an etch product with a dealer cost of $55. Another dealer in Virginia charged customers between $1 and $1,995 for an etch product with a dealer cost of between $35 and $65.

For GAP and service contracts, according to the study, 38 dealers averaged markups of 300% or more. Alst said NCLS focused more on the markup from dealer cost vs. pricing disparities when it came to products such as service contracts because it was difficult to account for different options and terms.

And since dealers and finance sources are prohibited by the ECOA from collecting race and ethnicity information on non-mortgage credit applications, the NCLS was limited to checking for pricing disparities between consumers with Latino surnames and non-Latinos. According to the report, the group found significant differences in what Latinos were charged in terms of percentage and dollar amount compared to non-Latinos.

In Oklahoma, for example, the average markup for a non-Latino was around 125%; for Latinos, it hovered around 170%. In Kentucky, non-Latinos averaged a markup of about $750; for Latinos, the average markup was around $950.

Alst admitted the group took some queues from the proxy methodology the Consumer Financial Protection Bureau (CFPB) used to examine rate markups, but said focusing on pricing disparities for Latinos only made the study’s methodology less susceptible to error.

Ad Loading...

“It would be more problematic if we used it as a proxy for African Americans, which is why we didn’t do that,” Alst said. “But, certainly, from everything we’ve been able to gather, it is relatively accurate.”

The NCLC called for more transparency, recommending that dealers post on their vehicles non-negotiable product prices along with the vehicle’s price. His group, however, also recommended that the CFPB, the Federal Trade Commission, the Federal Reserve Board, and state attorneys general mount an investigation into product pricing similar to the bureau’s examination of dealer rate markups.

Mentioned in the group’s report was U.S. Bank’s May 2015 decision to monitor its dealer partners’ “unexplained differences in pricing or excessive add-on product pricing.” Also cited was the Center for Responsible Lending’s now-discredited study on rate markups.

Alst said he has yet to hear from policymakers about any specific actions they’ll take based on the report’s finding, but noted that they have expressed interest in its conclusions. At the very least, he said, posting non-negotiable pricing for add-on products would reduce the likelihood that a regulator would take action against a dealer for discriminatory pricing. The National Automobile Dealers Association disagreed.

“Voluntary protection products are incredibly valuable for millions of consumers — just ask consumers who were made whole by GAP insurance on the total loss of their vehicles due to hurricanes Harvey and Irma,” the association said in a statement issued to F&I and Showroom. “But the NCLC’s approach of limiting consumer discounts on these products would only make them more expensive and harder to obtain for many consumers.

Ad Loading...

“When six in 10 Americans don’t have enough savings to cover a $500 emergency expense, we should be working to make these voluntary products more accessible and affordable, not less,” the NADA added.

More F&I

Industryby StaffMarch 6, 2026

Explore the 12 Rules for an F&I Life at EFI

EFI 2026 will take place April 13–15 at The Cosmopolitan Las Vegas.

Read More →
F&IMarch 4, 2026

Creating Your Own Economy

In this video, Reese Dailey explains how effective follow-up drives better results across the dealership, including increased sales, higher F&I penetration, and stronger customer retention.

Read More →
Industryby StaffMarch 2, 2026

Prove You Can Do F&I at EFI

‘So You Think You Can Do F&I’ is a live role-play contest taking place at the 2026 Ethical F&I Managers Conference.

Read More →
Ad Loading...
Industryby Lauren LawrenceFebruary 25, 2026

Report Finds Year-End F&I Strength

Deal volume ebbed and flowed throughout 2025, but product performance remained steady, according to automotive technology and data intelligence solutions provider StoneEagle.

Read More →
Industryby Hannah MitchellFebruary 23, 2026

Some Auto Brands Cheaper to Insure

A new top 10 list ranks the least expensive for average full insurance coverage on a clean driving record and high driver credit scores.

Read More →
F&IFebruary 13, 2026

Business Office Blueprint

Try following these 20 steps to greater success in the dealer F&I office this year.

Read More →
Ad Loading...
Industryby Lauren LawrenceFebruary 11, 2026

Insurance Shopping on the Rise

A TransUnion study found that relationship-driven sales models proved to be important, as consumers who used an agent had a lower shopping intensity than those going it alone.

Read More →
Industryby Hannah MitchellFebruary 4, 2026

Auto Insurance Cost Reprieve

2025 brought consumers relief after years of rate hikes, but 2026 could bring renewed policy pain, depending on how U.S. trade policy affects prices.

Read More →
Reese Dailey from Automotive Training Academy by Assurant
F&IFebruary 4, 2026

Cash Deal Strategies

In this video, Reese Dailey of the Automotive Training Academy by Assurant reveals strategies to make cash deals profitable without relying on monthly payment bumps.

Read More →
Ad Loading...
Cox Automotive and Dealertrack logos displayed over a dealership showroom background.
F&Iby StaffFebruary 3, 2026

Cox Auto Says Dealertrack Offers Greater Finance Efficiency

Suite of new APIs, product enhancements and integrations is designed to help maximize contracting and funding efficiency for lenders and their dealer partners.

Read More →