Like it or not, more regulations and rules are coming for car dealerships. Most dealers are already aware of the new changes to the Federal Trade Commission Safeguard Rule, which requires dealers to develop an information security program to protect consumer information. And recently, the FTC proposed a new rule to prohibit unwanted fees and bait-and-switch advertising tactics.

The National Automobile Dealers Association. will ask dealers to try to stop or limit the scope of these rules. I am not optimistic about the success of these efforts. As vehicle prices have increased and affordability has declined, there has been a significant increase in consumer complaints. History shows us that there is a direct correlation between consumer complaints and the adoption of rules.

In addition to new regulations, the FTC is stepping up its enforcement efforts. Dealers will either have to comply or face hefty fines.

How to prepare

If you look at the FTC’s proposed rule to ban unwanted fees and bait-and-change advertising, all it requires is more transparency from car dealerships, something consumers have been asking for for years. Key requirements for dealers include:

  • Require full disclosure and customer consent to purchase optional F&I products such as paint sealants and cup bras. Dealers will no longer be able to pre-load these products before the consumer purchases the vehicle, and consumers cannot be required to purchase these products as a condition of vehicle purchase. Dealers will also be required to post a product price list online.
  • Dealers can no longer introduce unwanted charges into purchase contracts for items that the consumer is unaware of or has declined. Examples of unwanted charges include payment insurance and paint protection.
  • The FTC is also considering a requirement that dealerships must produce an actual “offer price” for each specific vehicle they promote.

With respect to the FTC’s new safeguard rule amendments, most dealerships have chosen to partner with a third-party service provider to implement and monitor their information security programs. DMS vendors, law firms and information technology companies can all help dealerships comply with the new rules, but ultimately the responsibility rests with the dealership.

Any violation of the safeguard rule will result in a heavy fine against the dealer, not the service provider. Therefore, it is up to each Principal Dealer and senior staff to understand the basics of what is required under the new rules.

Training Resources

Compliance is no longer just the domain of the F&I manager, but also the responsibility of master dealers, general managers, used car managers, accounting staff, marketing staff and legal staff.

NADA and other companies offer some resources, but for comprehensive training, consider having key personnel certified by the Association of Finance and Insurance Professionals (AFIP). AFIP is a non-profit, non-aligned sanctioning body that offers a certification course designed to give dealership professionals all the knowledge necessary to maintain compliance requirements.

AFIP certification can also be used as proof of knowledge of F&I law and ethics to help resolve disputes with employees and serve as the cornerstone of a dealership compliance management system.

It’s important that dealership personnel are trained and knowledgeable about compliance, and don’t rely on vendors to keep your dealership compliant. For example, with the new safeguard rule, it is up to your dealership to complete a risk assessment for each vendor you work with, such as a document destruction company. In addition, an internal employee must supervise and monitor all service providers and submit a written report to the board of directors each year.

You can choose to fight new regulations or you can choose to prepare for them. Providing customers with full transparency and protecting their personal information is best for long-term customer relationships. Plus, you’ll equip your employees with valuable skills that can help your dealership better handle customer complaints and increase efficiency.

Erica Cooper (photo, top left) is responsible for executive training operations for APCO Holdings, a supplier and administrator of F&I products for the automotive industry.

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