Think Twice Before You Hand Over Those Keys!

My husband and I live just a short walk away from the Capitol Building in Washington, D.C. So, when all the plans for the Presidential Inauguration started brewing, many of our friends and neighbors encouraged us to rent our home to out-of-towners who were traveling in for the event. After all, we heard tales of folks renting out itty-bitty studio apartments for hundreds or thousands of dollars a night and we seriously considered hopping on the bandwagon.

We ultimately decided against it. It’s not that we have a particularly valuable home, or that we own anything that anyone would want to steal. Call us a couple of wimps, but we just couldn’t get past the idea of handing over the keys to our home and letting strangers take it over for a few days. To be honest, it creeped us out a bit.

So, it always comes as a bit of a surprise to me when I hear stories about dealers who willingly turn over the keys to their dealerships to third-party sales outfits and let them take the reins and run willy-nilly through the dealership for days or weeks at a time.

Take the recent story of a dealership in New York. According to the press release issued in late January by the New York Attorney General’s office, the dealership will have to pay $20,000 in restitution and fees for defrauding customers. Attorney General Cuomo’s Office entered into an agreement with the dealership, which allegedly deceived customers through misleading advertisements and promotions and failed to inform customers that cars purchased were previously used as rental vehicles. All of these deeds were in violation of a 2005 agreement the dealership already had with the AG’s office.

In one promotion, the dealership allegedly included an instant savings certificate in the form of a check worth $2,988 off the price of a used car. In another promotion, the dealership allegedly included a “Customer Cash Back Savings” voucher worth $4,000 off the price of a vehicle, but the dealership then increased the retail sales price of the vehicle to account for the rebate. To top it all off, several of the consumers bought cars they did not know were previously used as rental vehicles.

According to the release, the Attorney General also alleged that the dealership engaged in other deceptive acts, including:

• Using footnotes that contradict, modify or limit the principal message of an advertisement

• Using deceptive sweepstakes offers in marketing materials

• Implying that a sale was a liquidation or public sale, when such was not the case

• Engaging in deceptive credit sales advertising

• Using deceptive photographs and artwork

• Increasing the retail price of an automobile to allow for a rebate or discount, thus saving the consumer no money.

Now, these allegations are pretty strong, but that wasn’t what caught my attention. What really got me were some comments made by the dealership’s lawyers.

A local news outlet, Central New York News, reported the dealership’s attorney’s explanation for the alleged misdeeds. The dealership’s lawyer said that the advertising and sales violations were conducted by an out-of-state marketing company as part of two special sales held at the dealership in 2007 and 2008.

Under a contract with the dealership, the marketing company handled all advertising and promotions for the sales and brought in its own staff from out of state to negotiate with customers and transact the sales. According to the dealer’s lawyer, some of the dealership’s staff were present during the sales, but were not privy to all of the details of the transactions. “These are negotiations that go back and forth with the customer,” said the dealer’s lawyer, “We are not 100 percent sure what the out-of-state salesmen said.”

Stop the presses!
Let me get this straight. You spend years, not to mention gobs of money, to develop and build your dealership’s reputation. You’re in one of the most highly regulated industries in the country, where lawsuits and enforcement actions against car dealers are as common as muck. Yet, with all this at stake, you hand over the keys to your dealership to a third-party, out-of-state marketing company and let it take your store for a spin. You’ve clearly got more nerve than I do.

But, this topic makes me think about a whole bunch of things. I wonder if the third-party marketing company offered compliance or ethics training to its employees. I wonder if the marketing company made any efforts to familiarize itself with the nuances of New York laws and regulations. I wonder if the company offered to indemnify the dealership for any fines or penalties that the marketing company racked up in the dealership’s name. I also wonder (but think I know) whether the dealer did its due diligence on the marketing company by asking the marketing company these and a few other pretty basic questions.

Unfortunately, I was unable to find answers to any of my questions. I struck out when I googled the name of the marketing company and tried to find its company Web site. It was nowhere to be found. Instead, I pulled up tales of a dealership picking up the pieces.

Something to think about the next time you’re considering handing over those keys.

Vol. 3, Issue 2