Federal regulators will be focusing on deceptive practices at dealerships, especially in regard to ancillary products and how they are wrapped into the financing of a vehicle, lawyers said during a panel discussion at the Auto Finance Performance and Compliance Summit.
“Going forward, I think the federal and state regulators will be honing in on the area of deceptive practices,” said Kenneth Rojc, managing partner of Nisen & Elliott, LLC’s automotive finance group. “Deceptive practices could [come] in a variety of actions, one of which is disclosures — if you haven’t properly disclosed to the buyer what he or she is getting in terms of cost in terms of coverage.”
One of the examples Rojc gave is a lender who approached him asking if the company should be concerned about a dealer who has a 90% penetration rate on ancillary products. If that’s inline with the average or median then there’s no problem, but the lender said their average is about 30%.
“Well, you probably have a problem,” Rojc responded. “Because you either have a super salesman involved at this dealership or they are conditioning credit on the purchase of these GAP products.”
Panelists John Redding, partner at Buckley Sandler LLP, and Kathleen Ryan, partner at Akerman LLP’s consumer financial services practical group, both agreed. Check out their responses below in the latest installment of AFN’s video series.
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