I hear my share of interesting comments and questions when I hang out and perform “booth duty” at dealer conferences. At a recent conference, a dealer shared with me his “secret formula” for avoiding consumer lawsuits. This dealer explained he didn’t need to concern himself about the technical “nuts and bolts” of the laws, but that by “treating customers right,” and “trying to do the right thing,” he was able to sleep at night and not worry about lawsuits.
This comment caught my attention. After all, we sure have written enough articles through the years about how consumer-friendly programs can be a great deterrent of consumer claims and class action lawsuits. After all, happy customers don’t call complaining to their local Better Business Bureau and state consumer credit regulators.
If you read state attorney general press releases, you might just agree with this gentleman. After all, state AGs have cranked up their enforcement actions against the sales practices of car dealers, most of whom, if the AG allegations were true, were not adhering to the Golden Rule.
For example, just recently, an Oregon AG accused some local dealers of payment packing, among other things. According to the AG press release, the dealership included the cost of additional, optional products in the transaction and misled the customers as to the true cost of the products.
A couple weeks later, the AG in next-door Washington State tapped a bunch of dealers for naughty deeds. While the dealerships admitted no wrongdoing, they settled claims of all sorts of misdeeds, including credit application fraud and not timely paying off liens.
Based on these AG reports alone, you might be inclined to agree with my pontificating dealer friend that bad behavior is the cause for disciplinary actions against car dealers, and that by nixing the bad behavior, a dealer could eliminate the risk of regulatory enforcement. That is, of course, unless you set your sights on the other coast—New Jersey, to be exact.
The New Jersey State Division of Consumer Affairs announced recently that it conducted unannounced inspections on New Jersey car dealerships for compliance with the federal Used Car Rule and certain provisions of the Consumer Fraud Act. As a result, the Division issued notices of violation to 49 dealerships throughout New Jersey.
The dealerships cited failed to post prices for the used vehicles offered for sale in accordance with the Consumer Fraud Act and/or failed to post a Used Car Buyers Guide on used motor vehicles in accordance with the Used Motor Vehicle Trade Regulation Rule.
Based on the press release, Division investigators found 49 of the 97 dealerships inspected in six New Jersey counties to be in violation. Of the 2,144 used vehicles inspected, 1,492 were offered for sale without a posted price and 472 failed to contain a Used Car Buyers Guide.
The Division listed the non-complying dealers by name in the press release—kind of like a teacher writing the names of misbehaving students on the chalkboard. (Certainly not the kind of free advertising they had hoped for!)
The Division explained that, by sending the notice of violation, the it sought to ensure that the dealerships posted the required information on all used vehicles offered for sale. Named dealers were given 15 days to respond to the notice of violation. Oh, and the Division also asked for a civil penalty and “reimbursement of investigative costs.” While I couldn’t confirm the amount of the penalty, several news articles stated the penalty as $2,000.
This AG press release got me thinking.
First, I think some of the dealerships got off pretty easy. In this case, the state regulatory agency came knocking. Had the Federal Trade Commission paid them a visit, the dealers who violated the Used Car Rule could be facing an $11,000 per-violation penalty. That ain’t no small change.
Second, I’d bet you dollars to donuts that most of these dealers didn’t see this coming. A local newspaper reporting on the investigations and citations quoted the general manager of one dealership as saying, “In the 33 years I've been a dealer, [the law] was never enforced.” My bet is, many of these dealers thought that because these issues had been overlooked for so long, they’d continue to be overlooked. Unfortunately for these guys, that wasn’t quite the case.
Finally, I think the story of the New Jersey dealerships goes to show that, while treating customers right is a great way to stay out of the consumer cops’ warpath, there is no substitute for knowing and complying with the nuts and bolts of the law—even the ones you don’t think will be enforced. But, while you figure those laws out, don’t forget to be nice!
Vol. 2, Issue 5