DALLAS — Dealers are reeling from General Motors Co.’s new disclosure requirement for vendor service contracts, according to panelists at the 2017 Industry Summit last week.
In early August, GM sent a letter to its franchise dealers requiring F&I offices to disclose to consumers when they are being sold a service contract that is not approved by GM. Although an implementation date has not yet been communicated to dealers, failing to disclose would result in a $500 fine per vehicle and possibly the loss of their franchise agreement.
The “Draconian language” that GM has attached to the disclosure form has raised concerns, John Luckett, senior vice president of sales and marketing at The Warranty Group, said during a panel discussion. GM is trying to “create an environment of fear by pushing services toward their local provider,” he added.
GM did not respond by press time to a request for comment.
Many dealers have sided with state dealer associations and have sent letters to GM on the issue, arguing that it goes against state franchise agreements.
In New York, disclosures are not state-mandated, but an OEM can require a franchise dealer to make the disclosure in “a separate statement, acknowledged by the consumer,” according to state law. Meanwhile, states such as California and Ohio have statutes prohibiting manufacturers from discriminating against a franchisee for selling F&I products not approved, endorsed, sponsored, or offered by the manufacturer.
Some manufacturers, such as American Honda Motor Co., have disclosure forms that operate as an incentive — rather than as a penalty — if a dealer sells a Honda contract versus an off-Honda brand, Luckett said.