By: Jim Radogna
The Federal Trade Commission announced that effective August 1, 2016, the maximum civil penalty amount has increased from $16,000 to $40,000 per occurrence for a number of violations of the FTC Act, including those that address unfair or deceptive acts or practices (UDAP).
The FTC’s UDAP regulations are extremely broad and cover virtually every aspect of a dealer’s sales and finance operations. UDAP claims can be founded on oral misrepresentations, the failure to disclose, or ambiguous statements that are technically accurate, but deceptive as interpreted by the consumer. In recent years, the FTC has identified auto dealers as a major target for enforcement actions. Here are some examples of potential violations that dealers can be accused of:
- Engaging in false or misleading advertising
- Making false statements or failing to disclose material facts to a consumer
- Oral promises made to the customer that the dealer fails to deliver upon
- Failure to disclose known vehicle history
- Adding the cost of an F&I product to a consumer’s purchase agreement or lease without first obtaining the consumer’s express consent to purchase the product
- Payment Packing or “jamming” F&I products
- “Yo-yo” financing
- Falsifying credit information
- Failure to safeguard customer information
- Used Car Rule (buyer’s guide) violations
While history shows us that it’s unlikely the FTC will assess the maximum penalties available, the fact that they have more than doubled the maximum amount likely indicates that the fines moving forward will be far greater than we’ve seen in the past. Also keep in mind that these penalties can be assessed per violation, per day;so they can add up quickly.For example, an FTC representative used this example for potential advertising violation penalties during a 2014 webinar on the subject: “If an unlawful advertisement goes up on Day 1 and the dealer keeps it up until Day 90, or the FTC enforcement unit catches it on Day 90, the dealer could be liable for 90 days of violations.”
It’s never been more important for dealerships to have a comprehensive compliance management system in place. What are you waiting for???
Bio: Jim Radogna is a nationally-recognized auto industry consultant specializing in dealership sales and finance department legal compliance. His background includes founding and operating a national compliance consulting firm as well as having spent over 15 years in various dealership management positions.
Being well-versed in all aspects of dealership operations, Jim has used his knowledge and industry experience to develop unique, no-nonsense compliance and reputation management solutions for automobile dealerships of all sizes. These programs are designed to not only protect dealerships from liability, but also greatly enhance the company’s reputation, increase profitability through consistent processes, and increase customer satisfaction and retention.
Jim is a sought-after speaker and frequent contributor to several automotive industry publications including Dealer Magazine, Automotive News, WardsAuto, Auto Dealer Monthly, DrivingSales Dealership Innovation Guide, AutoSuccess, CBT News Magazine, and F&I Magazine. In addition, he has participated in Automotive News, DealerOn, DealersEdge, and KPA webinars and is featured in instructional videos for DrivingSales University and the College of Automotive Management.