It's a Small World Wide Web After All

Anonymity can be a very good thing. My high school and college buddies and I often joke about how fortunate we are that we made it through our awkward stages before the explosion of the information superhighway. Hopefully, my personal gaffes and bad hairdos will remain dead and buried back in college where they belong. (Don’t laugh— that mullet you sported in ’87 won’t do you any favors today.)  

Alas, times have changed. It looks like a Texas car dealership could have used a little bit of that anonymity we all took for granted. According to a Fox 26 news exposé, a Texas woman sued a dealership for fraud, claiming that the dealership made “material misrepresentations” to her by “charging her a higher interest rate than what she qualified for so they could make more money on the deal.”

As if being on the receiving end of a lawsuit wasn’t bad enough, according to the news report, after deposing the dealership CFO about the dealership practices, the plaintiff’s lawyer posted a video excerpt of the deposition on YouTube for the entire world to see.

So, what did the CFO say in the video? My point-click wasn’t quite quick enough to find out. By the time I searched YouTube, the dealership had filed a motion for a protective order, and the judge made the plaintiff’s lawyer take the video down. But, according to the news article, the video featured the CFO responding to questions about how the dealership determined the rate of finance charge it would offer customers on a contract.

Allegedly, the CFO explained what the dealership did with the extra money from the marked-up rate charged to the customer. Per the news article, the CFO explained that the “mark-up” was split between the dealership and the credit union that agreed on the rate, with the dealership receiving 75 percent of the cut. “It’s not a kickback,” he said, “It’s a fee.”

The news article also quoted the plaintiff’s lawyer as saying that the dealership promised to find the customer the “best deal,” but that it offered the customer a rate that was 3 percent above the “approved rate of 7.5 percent.”

Now, I have no idea what actually happened in this particular incident and the only information I have is what I can read in a news article. But, the idea of anyone using YouTube to expose a dealership’s alleged misdeeds piqued my curiosity. So much, in fact, that I searched YouTube for similar stories. Using the search term “dealership fraud,” I pulled up 467 videos on YouTube. I don’t know how many of these videos are on point, but most of the videos have titles like, “Car Dealership Scams Burn Buyers, Sellers,” and, “Car Dealer Scams Revealed.” Many of these videos began as local news reports. Now, thanks to modern technology, they are available worldwide.

This story also got me thinking about the all-too-common practice of dealerships telling customers that the contract rate is the “best rate.” Dealership employees need to be trained to be as transparent as possible regarding the financing process and avoid those two little words like the plague.

Perhaps most shocking to me, however, was the plaintiff’s lawyer and CFO’s apparent lack of understanding of the indirect finance process. Folks familiar with how indirect finance works know that dealers often write a retail contract at a higher rate than the wholesale “buy rate” offered by the finance company. This “buy rate” is the wholesale rate at which the finance company will purchase the contract, and not the rate for which the customer qualifies.   

I’d like to gather all the participants in one room – the lawyer, the dealer, the customer, the press – and hand out copies of “Understanding Vehicle Finance.” It’s a nifty little booklet produced by the American Financial Services Association and the National Auto Dealers Association, which accurately describes the indirect financing of motor vehicles. It’s so good, in fact, that the Federal Trade Commission reviewed it and slapped its seal on it before the publication was printed in both English and Spanish. It is free and downloadable from the NADA and AFSA Web sites. It isn’t copyrighted, either, so you can make copies for all your employees, the media reporters you deal with, your customer and anyone else who might benefit from an accurate description of how dealer financing works.

But, then again, you might be the kind of person who likes to see your personal and professional gaffes broadcast all over the world. If so, I hear the Jerry Springer Show is always looking for content.