The Indiana Attorney General’s (AG) office recently announced a settlement of a series of claims against several Indiana car dealerships. The agreements settled allegations that these dealers engaged in various forms of deceptive practices under Indiana consumer protection laws. Each of these cases included personal claims against the owners and executives of the dealerships, and resulted in significant restitution penalties, as well as other remediation steps. This is just the latest in many enforcement actions and investigations across the country by state attorney generals against dealerships.
The Allegations
The allegations from the Indiana AG included a number of unfair and deceptive practices including:
- Failing to disclose the sale of vehicles with rebuilt title brands;
- Charging customers a higher price for a vehicle if the customer financed;
- Rolling back odometers on pre-owned vehicles;
- Charging doc fees without disclosure and charging other “service” fees unconnected to any services provided;
- Mislabeling or falsely claiming that certain fees were mandatory government fees;
- A series of violative F&I practices including:
- Quoting monthly payment amounts that didn’t match final contracts
- Changing interest rates between verbal agreements and final paperwork
- Inadequate disclosure of loan terms, particularly regarding loan duration
- Misrepresentations about consumer financing options and rate eligibility
- Creating false urgency around dealership financing versus third-party options
- And an allegedly deceptive advertising campaign that involved consumers winning a prize at the dealership.
Beware Contests and Prizes/Giveaways
A quick note on this last allegation, as it serves as a useful reminder of an advertising issue that routinely gets the attention of regulators. It involved sending a mailer to potential customers stating that they won a prize—but allegedly with the ultimate goal of driving foot traffic. The AG argued that, in actuality, consumers didn’t “win” anything. Rather, everyone who came to the dealership in response to the mailer was given a nominal prize after the dealership attempted to sell them a vehicle. In addition to being deceptive under UDAP, these mailers failed to include required disclosures under Indiana law.
Both the FTC and numerous other states have brought enforcement actions in the past under broad UDAP (or Section 5 of the FTC Act) authority, alleging that such contest schemes are inherently deceptive. Dealers should exercise caution before engaging with a third party marketing company encouraging such a program.
Specific Remediation Steps
In addition to monetary compensation to consumers, dealers should note the specific remediation ordered by the AG. This included: (i) operational changes such as new standardized fee disclosure forms, and separate signature lines for each product w/ clear price disclosure; (ii) documentation and recordkeeping mandates, and; (iii) ongoing supervision mandates, such as regular compliance audits by independent third parties and mandatory compliance certification from dealership management.
Lessons Learned
What should dealers take away from this latest in a long line of recent enforcement actions against dealers? Price advertising, fee disclosures, payment packing, and product sales and advertisements—you must get these issues right.
- Transparent Fee Disclosure
- Provide clear, written disclosure of all fees in advertisements and with the customer—before presenting contracts
- Ensure all fees correspond to legitimate services
- Accurately distinguish between government-required fees and dealership charges
- Maintain consistent fee structures that don’t change during the sales process
- F&I Practices
- Get your deal jackets audited by an expert third party
- Document all quoted payment amounts and interest rates
- Obtain written acknowledgment when terms change
- Provide clear explanations of all financing terms, including loan duration
- Allow consumers sufficient time to review financing options
- Present accurate information about third-party financing availability
- Proper Contract Procedures
- Obtain explicit consent for all products included in contracts
- Prohibit post-signature changes to contracts without consumer approval
- Allow adequate time for document review without pressure
- Provide complete copies of all executed documents
- Maintain thorough records of the entire transaction process
ComplyAuto Can Help
By taking proactive steps to review and strengthen your F&I practices, you can protect your dealership from regulatory action while building trust with consumers through transparent pricing.
ComplyAuto Guardian can assist with ensuring processes are followed and compliance is enforced. We offer the most powerful and efficient deal jacket audit service in the industry. By combining the power of AI with industry experts with decades of experience, we can provide powerful insights into your F&I processes, across all locations, in virtual real time.
Don’t wait for a regulatory action to review your compliance—let ComplyAuto Guardian help you stay ahead of potential issues.