Many of you might recall all the effort we put into trying to understand what the various government agencies wanted us to do to stay compliant. It was not that long ago that Obama had urged Congress to include automotive dealers in the Dodd-Frank Wall Street Reform Act and under the review of the Consumer Financial Protection Bureau. While we dodge that with the help of the NADA and a few of our elected officials, Congress did authorize the Federal Trade Commission to speed up its review of what they consider unfair, deceptive and abusive practices. Obama went so far as to state that automotive dealers should be the focus of the FTC. This executive command lead to the FTC exploring what type additional oversight was needed and if so how to effectively include all dealers and retailers under new regulations.
Many of us had speculated that the FTC and CFPB would start to work closely together on drafting new rules on dealer involvement in auto financing, with the FTC serving as the enforcer. We witness the start of with the several “round-table” events the FTC was held in 2011.
At the Detroit Round Table event, several consumer advocates stated that dealerships generated too much profit from the F&I office by offering a customer rate over the bank’s buy rate. Many of you will recall that I personally voiced a concern that these agencies could start to audit our F&I deals to set the stage to determine how much profit was “too much” and what limits could be placed on dealerships to limit our markup with our indirect lending. Some of these advocates have already started to push the FTC to force dealers to disclose their profits from indirect financing to the customer before they complete the purchase of a car or truck.
This year the FTC sent out “Civil Investigative Demand” letters to dealerships across the country. The agency is asking for data from years 2009, 2010, and 2011. They are asking for the number of deals the dealer had spotted for each of these years, the names and numbers of every customer that was denied financing, the number of individuals and names of those customers the dealer re-signed or obtained conditional approvals. How many of these consumers had trade-ins and how many trade-ins were sold prior to assigning the contracts. Oh by the way the FTC wants this information now, no waiting period.
The FTC is also asking for documentation of dealer’s in house training, in store polices, and compliance procedures. Dealers that have received this request hopefully can show a Compliance Work Book, a structured compliance process and have a in store Compliance Officer.
If by chance your dealership has not received this FTC request, you still may want to review your compliance policies before your focus is taking away from selling cars and trucks. Compliance was the buzz word last year and appears to be the reality this year.