GM Stands by Service Contract Penalties to Ensure Quality Dealers

Although General Motors Co.’s network of dealers expressed concern over the penalties in the manufacturer’s new service contract disclosure forms last week at the 2017 Industry Summit, GM feels they are ultimately necessary.

Failing to disclose to consumers that they are being sold a service contract that wasn’t approved by GM will soon subject dealers to a $500 fine per vehicle and possibly the loss of their franchise agreement, according to a letter distributed to franchise dealers in early August.

“There has been a franchise agreement in place for years that requires dealers to disclose [if a service contract is not approved],” James Cain, a GM spokesman, told Auto Finance News. Revoking a franchise agreement “is a remote and extreme end of a very long road,” he added.

“For the disclosure requirements to have any meaning, however, there must be a consequence for a dealer who ignores or refuses to make these very important disclosures,” Steve Hill, GM’s vice president of U.S. sales, service, and marketing, said in the letter, in addition to clarifying a number of questions dealers still had.

Dealers now know that implementation is scheduled for December, and it was clarified that non-GM parts and accessories installed prior to receipt by the dealer are not included in disclosure requirements.

However, several dealers also questioned the legality of penalties for noncompliance, maintaining that they may violate dealer-protection laws.

“The purpose of this new process is to ensure that customers understand the source of the products they purchase at a GM dealer and to promote retail transactional integrity,” Hill said. “This process is not intended to be punitive.”

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.