Don't Get Burned on Compliance During the Lazy Days of Summer

In my experience, summer is a notoriously slow time for compliance initiatives. In between vacation schedules and July 4th sales, compliance is placed on the back burner. That’s a mistake and a missed opportunity, because now is the perfect time to do a compliance “tune up” on some issues that tend to get swept under the rug once things get busier. Here are some ideas based on some repetitive issues we’ve seen over the past few months:

Website
A website review is one of the first things I do when taking on a new client. It gives me a window into the operations of the business through the eyes of the consumer and shows me the things the dealer thinks are important. Unfortunately, I tend to find some pretty significant issues that need attention.

It’s important to note that websites are considered advertising in the eyes of the Federal Trade Commission (“FTC”), so all of those statements being made mean something and can be used against the dealer if found to be incorrect. The FTC just issued new guidance on advertising and “total price”. Are you up to speed on the change and is your website vendor? The internet makes it extremely easy for your state or federal regulator to“let their fingers to the walking” and see your business practices with relative ease. It's critical that dealers get their sites reviewed regularly by competent professionals, preferably before the content is live.

Some of the issues I’ve recently seen that cause my heart to flutter include:

“Internet special” prices on vehicles. Having different internet pricing can create legal liability.

Not following the FTC’s new guidance on advertised “total price” and still thinking that hyperlinks and asterisks will keep the dealership safe.

Touting “certified” programs without supporting information. Also, the FTC may view certified programs as a safety claim, depending on the wording used, so it expects to see information regarding recalls and provide the viewer with a link to check whether the vehicle is subject to a recall.

Use of some but not all trigger terms. Repeat after me……down payment, amount of finance charge, payment amount, term. If you provide one of these terms you need to provide all of them. Too often I see dealers call attention to only one term and omit the rest. That’s just too easy for the regulators to jump on.

Online credit applications that leave out necessary language. Credit applications can create liability! Too often I see condensed versions that leave out critical language that protects the dealer. If your online credit application is much shorter than your paper one, I suggest you seek the advice of a professional. Also, if you are accepting online applications electronically there should be relevant language about security, safeguarding of information, and a robust submission process that addresses customer consent for further contact.

Payment portals. The ability to accept payments online is a great tool to offer consumers. Unfortunately, many dealers are oblivious to the plethora of potential issues and think their third-party service provider is covering all of the bases. They often are not, or if they are, their terms of use protect the third party but not the dealer. It’s a good idea to have terms that directly protect the dealer.

Facebook and other Social Media
Dealers are using Facebook to sell a lot of cars. Unfortunately, everything I said about websites being advertising also applies to Facebook and other social media. It’s important to teach this to personnel, because I’ve seen very few posts that withstand careful scrutiny. In fact, I recommend having a social media policy that sets forth the rules for these ads and who is authorized to post them. Having a professional craft a template that can be used repetitively is also a good idea.

I’ve heard lots of dealers speak favorably about the sales lift they get from the posts of their employees, yet they scoff when I remind them that it truly is advertising and subject to those same pesky rules I mentioned above. This is especially true when failing to use all of the disclosures in the trigger term requirements. I’ve also noticed a tendency to use industry jargon or abbreviations that can create unintended consequences. What’s even worse, I find that many salespeople list vehicles on the site in such a way that could leave a consumer to believe the vehicle is sold by an individual and not a dealership. That fact pattern could easily be turned into a lawsuit of deceptive or even abusive practices. Again, there should be controls in place governing the content of these listings.

Vendor Management
There is a lot written on the subject of vendor management and I mention it again here because I think this is a great opportunity for a real world example of where “the rubber meets the road”. Too often the dealer thinks that it is throwing any potential liability over the fence by hiring a third party service provider. Frequently, though, the contracts being signed leave all liability back with the vendor. I’ve seen examples of this with a print advertising vendor as well as a website provider.

The remedy is strong contracts and due diligence. Know who you are entering into business with and make sure they have the desired expertise. Make sure the contract clearly explains which party is responsible for certain behaviors and have the vendor represent and warrant its services. Vendor contracts are usually one sided. The good news is that they are also negotiable. The dealer can handle the business terms, but seek out the help of qualified professionals to craft a fair agreement.

Conclusions
Summer presents a great opportunity to focus on some overlooked gaps in your business. This article provides a great starting point of opportunities for improvement. These are often overlooked, especially during the busiest sales months, so now is a great time to take control of these areas and get your house in order for the rest of the year. As always, we’re here to help if you have questions or would like more information.