Think You Are Too “Small” For Trouble? Think Again!

There seems to be a pervasive belief among many dealers that they are too “small” for trouble to find them and that they get to fly under the compliance radar due to their size. This is a dangerous misconception and can be very costly. Let me share a few recent examples:

This Could Be You
A Pennsylvania dealer recently called me because he was being written up by the Department of Banking. What was his sin? He was asked about his Red Flags preparation and told the examiner he didn’t know what “Red Flags” meant and didn’t have a policy. He also didn’t have any sort of information security plan in place to protect customer information, which was another area of focus. He didn’t think he needed such a plan because he operates from one location, has one computer and a printer, and sells about three vehicles a month. Yep, you read that right, three vehicles a month. No employees, no computer network, just him. That’s certainly within the reasonable definition of “small”.

We got him set up with some good written content and discussed its implementation. I gently suggested that next time he call me first, before he has a dialogue with the Department of Banking. The “take-away” from this story, folks, is that the Department of Banking followed its playbook and asked about these policies without considering whether he sold 3 or 300 vehicles a month. That’s an important lesson for everyone to learn.

Next, I spoke to another small dealer that wasn’t so lucky. Again, I’m referencing a dealer that only moves a few vehicles a month. She was faced with similar scrutiny, though, and came to me for advice. Ultimately, she didn’t want to incur any expense for help. She gambled that she was small enough that she could ask one of the Artificial Intelligence platforms for some policy content and she’d be covered. Unfortunately, when the examiner looked at the content she provided it was obvious that it was “canned” content and had nothing to do with the actual operations of the dealership. The result was a fine, a nasty examination write-up, and the continued scrutiny of the Department. This dealer shared that she is considering giving up her license due to this experience.

My next anecdote involves a slightly larger dealer, this one sells about 10 cars a month and is a buy here, pay here business that holds its own paper and collects it over time. It recently received a civil investigative demand from the state Attorney General.

The information requested will take lots of time to gather, as the time period goes back four years and the AG is requesting “the kitchen sink”. For those of you that have never been through this unfortunate experience, it becomes a total distraction from your ongoing business and can be quite tedious and nerve wracking. The AG’s office doesn’t distinguish between large and small businesses, the initial information request is pretty much the same no matter the size of the business.

As best we can tell, there were a few consumer complaints over the past year or two that may have led to their interest in this dealership. I can’t overstate the importance of having a strong complaint management process, tracking them, looking for opportunities for improvement, and being responsive to the consumer. This dealer will have to make a Herculean effort just to comply with the information request, and then they’ll stress for a year waiting to hear back from the AG.

History Will Repeat Itself
During the first Trump Administration, Pennsylvania regulators stepped into the perceived consumer protection void with a flurry. The Department of Banking hired ex-CFPB personnel and created its own miniversion to enforce consumer protection laws across the state. We saw a ramp up in activity against our industry in the years that followed. In the past several months, we are beginning to see this again with both the DOB and Attorney General.

Also, consider the recently enacted Pennsylvania Automotive Trade Practices statute, which was the subject of an Article in this publication in the October 2024 issue. This is a statute that bolsters consumer protection and expands the definition of “advertising” to include various online practices, mandates dealer inspection of vehicles within 30 days of arrival, mandates written disclosures of known defects, and restricts certain dealer practices related to “as-is” sales. What may have worked at your stores a few years ago may not work now, so it's always important to stay one step ahead.

In my view, the next few years will be challenging ones for Pennsylvania dealers, and the climate of federal deregulation will be more than offset by aggressiveness at the state level.

Conclusions
“It will never happen to me”, “the regulators can’t be everywhere”, “I should have called sooner but I didn’t think they’d be interested in what I’m doing”, and “my business is too small to get in trouble”. I frequently hear this refrain and I can say with certainty that each of these statements are not true and can’t be relied upon. Hope is not a strategy!

I’m not trying to scare anyone, I’m simply giving you an accurate “lay of the land” in which you choose to operate. Don’t become another sad story. Take your compliance obligations seriously. If you email me at This email address is being protected from spambots. You need JavaScript enabled to view it., I’ll be glad to send you a checklist that you can use to measure your risk. I’m here to help, you don’t have to go it alone.