Why Regulators Are Keeping a Close Watch on Dealers

Dealers are faced with an assortment of issues today when it comes to the red-tape of compliance.

From the Consumer Financial Protection Bureau to the Department of Justice and state attorneys general, they are all keeping a close watch on dealer business practices. But some issues, more than others, are worrying both independent and franchise dealers — such as class-action lawsuits against dealers who may not have been at fault or not having available tools to help manage compliance issues.

The unknown legal expense for non-compliant dealers that American Financial & Automotive Services Inc. does business with “keeps me up at night,” President Arden Heltand told attendees during a panel discussion at the 2017 F&I Industry Summit yesterday. Being associated with a non-compliant dealer will cause the CFPB to scrutinize the entire industry, he added.

Woodlands, Texas-based American Financial & Automotive Services provides insurance products and services to dealers across the United States. It products include repair and maintenance, theft protection, compliance programs, and other training and administration services to dealers.

“We have a responsibility as providers and administrators and marketing agents to make sure that our accounts are compliant and do the right thing,” Heltand said. “We have to make sure we do the training in the stores and provide them a compliance piece, because ultimately if they do something wrong you know [the CFPB is] going to come at us because we either provided the product, administered the product, or did something wrong in training.”

But an issue in maintaining compliance for independent dealers in particular, is a lack of resources and tools available, added Lance LaCoe, president and chief executive of Cars Protection Plus Inc. — a vehicle service contract provider. The lack of resources is an issue “we talk about extensively at our office because  if our product is sold correctly — and if the customer understands what they are buying — they’ll typically have a good experience with it,” he said, adding that when a product is sold incorrectly those customers are more likely to pose a problem later.

But whether a product was sold incorrectly or not, it does not matter for a class-action lawsuit which is concerning, said Kelly Price, chief executive of National Automotive Experts and NWAN.

“We talked to our insurance company to see what they have seen, and they said they have seen a big uptick in class-action lawsuits,” she said during the panel, adding that “it doesn’t mean that anyone has done anything wrong; you don’t have to do anything wrong to just have a lawyer say that you did.”

And the financial ramifications are hard, with a minimum of $50,000 to $75,000 gone “within a blink of an eye” just to mitigate it down from a class-action lawsuit, she said. The bar for filing a class-action lawsuit is pretty low, she said, and dealers are now getting “attacked” by them.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.