The Federal Trade Commission is paying close attention to the sale of ancillary products at dealerships and how lenders are enforcing compliance with this rule, said Colin Hector, attorney for the division of financial practices at the FTC.
“We see something like ancillary products being accepted across the industry at a rate of 20%,” Hector said last month during a regulators panel at the 2017 Auto Finance Risk and Compliance Summit. “So when a particular dealer is [accepting] 95%, that’s something we may consider along with other evidence of deception.”
In particular, the FTC is focusing on ancillary products sold at the very end of the sales process, he added. This is a vulnerable time period for the consumer, the agency argues, because the longer someone goes into a multi-hour sales process, the less likely they are to back out.
“The concern we have is misrepresentations that goes, ‘You need this product in order to get financing,’ or making it a prerequisite or a requirement or something like that,” he said. “At that point the consumer has already invested a lot of time and energy into the process, and to leverage that with a point of deception can cause real serious harm.”
He also identified the increased use of third-party vendors as an area of focus for the FTC and encouraged lenders to ensure those partners are fully compliant.