As if the government’s scrutiny of auto dealer rate markups isn’t enough, it’s clear that regulators are beginning to focus on F&I product sales in a big way. The NY Attorney General’s office is investigating over a dozen dealers and has settled with one for almost $14 million so far.
Here are some key takeaways from this latest action:
Carefully scrutinize what products you’re selling – any product offering should be signed off by legal counsel. In these cases, the credit repair services being sold were illegal in New York. Chances are, the dealerships’ attorneys would not have approved the sale of these add-ons had they been consulted.
Regulators are focusing on the perceived value of F&I add-ons. Do the products you sell offer real value to consumers? Would you buy these products yourself? If you can’t confidently answer yes to these questions, the add-ons that don’t pass the test should probably be removed from your menu.
Even high-value products like service contracts or GAP need to be sold at fair, consistent prices. Price-gouging is a recipe for disaster in the current regulatory environment. US Bank notified dealers in May that it will be monitoring F&I product pricing – this is likely a result of pressure they’re feeling from the CFPB and other agencies.
Disclose, disclose, disclose! It’s vital that every customer in every transaction knows exactly what they’re buying, agrees to the purchase without coercion or deception, and that you can prove it. Always separately itemize after-market products on sale or lease documents.
To read the full article referenced, N.Y. targets dealerships' sale of credit-repair, identity-theft products, click here.
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