Dealer Practices to be Scrutinized by the FTC and CFPB

“Bottom-Feeders” to Be the First Scrutinized...

By: Thomas Hudson


When you are a lawyer, it seems that all your friends insist on telling you every lawyer joke they hear. One of my favorite recent ones: “What’s the difference between a lawyer and a carp?” The answer, after my obligatory “I give up” was, “One’s a scum-sucking bottom-feeder, and the other one’s just a fish.”

I immediately thought of that one when I read that Federal Trade Commission Chairman Jon Leibowitz, in a speech to the U.S. Chamber of Commerce, used the term “bottom-feeder” in describing the FTC’s agenda for the coming year in light of the creation of the Consumer Financial Protection Bureau (CFPB), with which the FTC will share enforcement authority over financial services companies.


Read the rest of this excellent article here: http://www.autodealermonthly.com/79/4078/ARTICLE/Dealer-Practices-to-be-Scrutinized-by-the-FTC-and-CFPB.aspx



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Creative financing

by Gil Van Over

I recently had a conversation with a dealership manager about creative financing.

As sales tighten, some employees are tempted to use shortcuts or whatever means necessary to sell a vehicle.

One such means is to give cash back to the customer in order to seal the deal.

This type of creative financing could put you at risk of having to pay off the deal if the lender finds out about the cash back.

My point
Most lender agreements in place today define the amount financed that the lender is willing to advance as the cost of the vehicle plus tax, title, license, registration fees, doc fees and approved options and F&I products.

Increasing the vehicle cash price (and subsequent amount financed) to include a check to the customer for whatever purpose is a potential violation of the lender agreement.

The manager’s point
The manager was adamant that the lender allowed up to 125% as an advance guideline and he only needed 105% to cover the price of the car and the tax, title and license. Why shouldn’t he be able to give the customer the difference?

It is an interesting concept, but here’s the flaw in his thinking.

The lender’s guideline on advance is to provide the dealership with a maximum structure. It is not permission to take any or every transaction up to the maximum advance to provide customers with a side loan. The lender agreement limits what comprises the advance.

Not bank fraud
However, if the lender knows about the cash back, for whatever reason, and still approved the advance, it is not bank fraud. If you do obtain the lender’s approval to make a side loan, make sure you get it in writing and keep copies of the approval.

Advertising?
As an aside, you may also be running a risk of a deceptive advertising claim if you advertised the vehicle at one price and sold it for a higher price.

Gil Van Over is the President and founder of gvo3 & Associates, a nationally recognized F&I, Sales and Red Flag Rule compliance consulting and training firm (www.gvo3.com).

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GM’s Top-Selling Chevy Dealer Out of Business

Seems like it always comes back to ethics and the principle of "reap what you sow". I wonder how many more dealers are up there on the cliff looking down - AFI

By Cliff Banks (embellishments by AFI)
WardsAuto.com

General Motors Corp.’s top-selling Chevrolet dealer group is closing all of its 13 dealerships this week, citing various reasons for the drastic measure.

Bill Heard Enterprises Inc. sold more than 40,000 new vehicles – most of them Chevrolets – in 2007 and was ranked 11th on the Ward’s Megadealer 100 this year with $2.2 billion in total revenue.

W.T. Heard Sr. opened the group’s first dealership in 1919 in Columbus, GA. The group had dealerships in Alabama, Arizona, Georgia, Florida, Nevada, Tennessee and Texas with more than 2,700 employees.

All 13 of Heard’s stores ranked on the Ward’s Dealer 500 list this year.

A statement released by the company cites rising fuel prices, truck and SUV-laden inventory and the overall economic slowdown as reasons for going out of business.

Within the last couple of weeks, GMAC Financial Services stopped financing the inventory for several of Bill Heard’s stores, hampering the group’s ability to floor plan and order vehicles.

It looks like it all comes down to ethics:

GMAC did not say why it did so, but several Heard stores have come under fire the last several years for a slew of allegations regarding violating business and ethical regulations in the states in which they operate.

GMAC reportedly threatened to pull its financing last year after Bill Heard sent 10,000 customers what appeared to be a recall notice but actually was a bid for service-department business. Probably sounded like a good idea at the time.

Georgia’s Governor’s Office of Consumer Affairs filed a $50 million deceptive-advertising lawsuit against the group’s four Georgia dealerships for the same offense.

It was the first lawsuit filed by the OCA in its 32-year history against a dealership, according to a report in the Atlanta Business Chronicle last year.

The report also claims Bill Heard has paid more than $280,000 in fines to the state of Georgia since 1991.

Other states, including Florida, Texas and Arizona have been investigating the false recall notice claims, as well.

In early September, Bill Heard closed its Scottsdale, AZ, store which opened to great fanfare less than two years ago. And last year, the company sold its dealership in Antioch, TN, which at one time was selling more than 1,000 new and used vehicles a month. (a grinder dealership for sure - AFI).

GM likely will reopen several, if not all, of Bill Heard’s stores once buyers are found and the deals completed. GM spokeswoman Susan Garontakos says the auto maker will look to find new owners to keep the stores running.

In 2005, GM named Bill Heard one of its “Dealers of the Year,” an exclusive list of auto retailers demonstrating strong sales performance and customer service. Each of the 110 dealers on the list received the 2004 Jack Smith Leadership Award.

WOW. No other comments.


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Chrysler dealer, ad agency sign consent decree over deceptive ads

Customers will each get $550 settlement!.

A New Orleans-based marketing company and a Maine Chrysler, Dodge, Jeep dealership have signed a consent decree to prohibit ads that the state attorney general called "unfair and deceptive," according to a report in the Portland Press Herald.

Level 10 Marketing of New Orleans and the dealership did not admit wrongdoing in signing the agreement.

According to the Maine Attorney General, ads for a November 2006 car sale offered "vouchers" that suggested buyers could receive "$4,000 Instant Savings," but those savings were never realized. (any wonder?)

The agreement also said that the marketing company and dealership can't use other promises of savings without documenting those savings. Those promises, including offering cars for sale for "pennies on the dollar," savings of "up to 90 percent off original M.S.R.P," prices "slashed for immediate liquidation” or "wholesale pricing direct to the public.”

Twenty-two customers who purchased vehicles at the Chrysler Dodge Jeep sale will receive refunds of $550 each. The two companies also must pay a civil penalty of $6,250.

Level 10 designed the advertising flyer for the sale and provided a team of salespeople at the dealership to attempt to sell the cars.


INSIDERS ADVICE:

*If you are in the market for a vehicle and hear of a current sale such as the one above, call the dealership and make contact with a salesperson (if you are interested in that particular brand of automobile).

*Set an appointment away from the "festivities".

*Do research online and negotiate a fair deal with a DEALERSHIP EMPLOYEE ONLY.

*You should think twice about buying a car from a dealership that hires a promotional company who brings in it's own salespeople for the "event". It just sounds shady to me. How compliant do you think their F&I practices are?

AFI

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