The FTC is cracking down on what they’re calling deceptive add-ons and discrimination in the car buying process. Shannon Robertson, Executive Director of AFIP, the Association of Finance and Insurance Professionals, joins us on the latest episode of Inside Automotive to elaborate further on what this means for dealers.
Key Takeaways
1. In the last year, at least four major cases have emerged, with one recent enforcement involving Asbury Automotive Group. Robertson points out that while the Asbury case is getting attention, other dealerships also face fines for similar deceptive practices. These enforcement actions highlight the growing risk for dealers who fail to comply, signaling that the FTC will continue aggressively pursuing offenders.
2. One of the central issues in these FTC cases is the lack of transparency in pricing, especially regarding add-ons like warranties or CPO certifications. For example, in one case, a dealership was fined for charging customers twice for CPO coverage—once in the vehicle price and again as an additional fee. Shannon emphasizes that dealers must ensure every cost is disclosed upfront, as failure to do so is considered deceptive by the FTC. This means dealerships need to be clear about vehicle prices, add-ons, and any associated fees from the start of the sales process.
3. Another focus of the FTC’s scrutiny is the disparity in pricing among different customer groups. The government examines whether certain protected classes, such as African-American, Latino, or female buyers, are charged higher prices for aftermarket products or receive different financing terms than other customers. Shannon warns that it’s difficult for dealers to defend themselves against such allegations if they don’t have strict policies in place. He highlights that a $1,200 price difference was found in one case, stressing that dealers must ensure consistent pricing regardless of customer background.
4. The lack of training is a key vulnerability for dealerships. Many F&I managers and sales staff may not be aware of past compliance issues, such as the massive fines levied against banks for discriminatory lending practices nearly a decade ago. Shannon stresses that training isn’t a one-time event but an ongoing requirement. Without it, dealerships risk repeating mistakes, and dealerships and individual managers can be liable for enforcement actions. Shannon recommends that dealers adopt written policies that cap markups and ensure uniform pricing across all customer groups.
5. Overall, Shannon reminds dealers that non-compliance costs are steep. Fines can reach the millions, with one dealership paying $2.6 million and another facing $10.1 million in penalties. Even more concerning, general managers and other decision-makers are being named in enforcement actions. This underscores the importance of having strong policies in place and enforcing them. Shannon notes that dealerships can reduce their fines by up to 92% if they can demonstrate due diligence through internal audits and adherence to training programs, making compliance a critical business strategy.
