30
April
2025

A Tale of Two Dealers

Don't wait for a legal challenge to recognize the importance of compliance! Investing in a strong compliance program can save your business time, money, and headaches, ensuring you're prepared when scrutiny arises.

A Tale of Two Dealers

For this month's article, I thought I'd share some personal experiences to illustrate why it is so important for dealers and finance companies to invest their time and resources in compliance. Dealer "A" and its related finance company received a demand letter from a very active consumer trial lawyer regarding the sale and financing of a vehicle. The letter attacked everything from the disclosures made in the sale process, the quality of the vehicle in relation to its value, and the actions of the RFC in servicing and collecting on the account, and threatened that a lawsuit was imminent.

Luckily, Dealer "A" knew a thing or two about compliance. It had chosen to get its documents reviewed yearly, had written policies and procedures and a documented training program, and even had someone in charge of compliance who conducted spot checks on various matters. Dealer "A" even held quarterly compliance meetings with us (again, documented) and had its personnel interact with us on a regular basis on things like customer complaints and operational issues that arise.

Needless to say, when the attorney demand letter arrived, Dealer "A" didn't panic, it had me look into the matter and craft a reply that included information about its compliance program, training initiatives, and why it was in a strong position to defend this matter, should the attorney choose to proceed. The attorney went "dead in the water" after that first salvo and was never heard from again. While I can't be sure, I like to think that the attorney was discouraged from pursuing the matter. After all, there are lots of cases out there, and maybe he moved along and chose to pursue an easier target when he saw that Dealer "A" had its compliance house in order.

Contrast that to Dealer "B", who only came to me after receiving a similar demand letter. This dealer never took the time to weave true compliance into its operations. Like a lot of dealers, the owner shared with me that he meant to pay more attention to compliance, but it always got pushed back when there were more pressing business issues. As a result, it had vaguely written policies that didn't match what personnel did; there was no proper training strategy, just new hire training on how to sell cars and use the various systems, and a review of the deal jackets showed some sloppiness and inconsistencies.

Unfortunately for Dealer "B", there wasn't a whole lot of ammunition to discourage the consumer's lawyer, and it wound up spending lots of time defending the lawsuit. Remember, lawsuits aren't just expensive, they are a distraction to personnel and can weigh down the entire business. While this wasn't a "bet the company" kind of case, it disrupted the dealer for several months, created financial pressure, and encouraged some "copy-cat" complaints when other customers learned of the lawsuit. On the bright side, though, after learning the hard way, Dealer "B" began to pay more attention to compliance and figured out that an ounce of prevention is more pleasant than a pound of cure.

Whether it's consumer lawyers, the Department of Banking or, the Attorney General, or even your own bankers or other capital sources, you'd better believe that at some point, someone is going to put your commitment to compliance under the microscope. You'll be in a much better position to survive that scrutiny when you tackle compliance on a regular basis and make it a part of your daily consciousness. Don't know where to get started? Feel free to reach out to me at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Categories: Dealer News Stories

Steve Levine

Steve Levine

Steve Levine is an auto finance lawyer with over 30 years of experience protecting car dealers and finance companies. He is an owner and Chief Legal and Compliance Officer of Ignite Consulting Partners, which offers guidance on compliance, operations and best practices. He has also published two books, Winning the Fight: A Guide to Protect Car Dealers and Counterpunch: Compliance Strategies for Car Dealers which are both available on Amazon. Or contact info@IgniteCP.com to learn more. Please follow Steve on X @LawyerLevine for compliance and industry related content.

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