Auto Dealer Compliance Horror Stories

Shocking examples of why compliance matters for your dealership…

At Total Dealer Compliance, we have an expression, “pay a little now, or a lot later!” We understand that in the daily business of running an auto dealership, issues of regulatory compliance may not get the attention they deserve. However, auto dealerships must understand the enormous potential risks they face in not meeting compliance laws.

Total Dealer Compliance has created a complete compliance package that enables auto dealers to ensure total compliance with regulations in sales, finance, human resources, and more. To understand the critical importance of these compliance solutions, consider the situations below…

Dealer Fined $690,000 for Consumer-Protection Law Violations

A report from F&I magazine details the shocking consequences that dealers can face from poor compliance programs. A used car dealership was ordered to pay $693,645.91 for 640 total violations of consumer protection laws!

The violations reported against this dealership included the Consumer Fraud Act, the Motor Vehicle Advertising Regulations, the Automotive Sales Regulations, the Used Car Lemon Law, and more. These are all critical compliance areas that TDC covers in our comprehensive compliance solutions and audits.

When it comes to compliance, there are so many small regulations that are easy to fulfill beforehand, but very costly if ignored. For example, this dealer failed to pay a $.50 administrative fee for each car sold - a 50 cent mistake resulting in thousands of dollars in penalties! This is just one example of small compliance costs that can lead to huge penalties when ignored.

Auto Executive Faces 5 Years in Prison for Loan Falsification

Another F&I magazine report shows just how severe the consequences for compliance failures can really be. In this case, the part-owner and CEO of a New York auto dealership was found to have deliberately inflated and falsified financial information to help customers secure loans.

The CEO is facing more than just a slap on the wrist. He could face up to 5 years in prison, a $250,000 fine, and over $100,000 in forfeited restitution. This story should help to convey to dealer owners and managers the truly critical nature of compliance. Failures to understand and obey finance laws result in more than just some red tape and bureaucratic nuisance. There are serious personal penalties for those who break auto dealer compliance laws.

Aggressive Marketing Costs this Dealership $74,000 in Fines

In this important warning to dealership marketers and sales managers, a Washington-based dealership faced a heavy fine due to misleading advertising practices. The dealership sent out a flyer implying that some consumer’s cars had been recalled.

This is perhaps an example of “creative” marketing gone wrong. Someone at this dealership probably thought this was a great idea to get attention and drive sales. However, the attorney general considered the advertisement deceptive, and issued a harsh fine. This is just one of many examples showing that auto dealers need to carefully consider legal compliance requirements before starting new marketing and sales programs.

NY Dealers Ordered to Pay Nearly $2 Million in Fines for Payment Packing

A recent story out of New York shows the incredible risks that dealers face in not understanding or not obeying auto finance laws. The dealerships in question bundled credit repair and identity theft services in customers’ auto deals, without the customers fully understanding the products.

As these dealerships discovered, “It is a violation of state and federal law to charge upfront fees for services that promise to help consumers restore or improve their credit.” This is just one of many specific and critical F&I compliance issues that dealerships must understand to avoid crippling financial penalties.

Dealer Forced to Return $700,000 To Consumers

An article from The Consumerist details how a Colorado dealership offering “buy here, pay here” services was forced by federal regulators to refund over $700,000 to consumers due to financing programs deemed “abusive” by government regulations.

This dealership published 9.99% annual percentage rates in marketing materials, but did not disclose other fees including warranty costs, GPS fees, and other credit fees. This ultimately resulted in consumers paying much higher rates than advertised. Like the other stories above, this extreme penalty shows the importance of precisely following federal F&I and disclosure regulations.

Is your dealership doing anything similar to the stories above? Are you sure that your finance, marketing, and sales policies meet federal and state regulations? Don’t risk a huge penalty! You can be sure that all the dealerships in the reports above would have chosen to implement compliance policies if they’d known the risks. Don’t wait until you have an emergency - contact Total Dealer Compliance today for a free consultation.