What sort of sales shop do you have at your dealership? Is it the kind of store where top management infuses a sense of ethics and decency into the personality of the place?
Or does it produce high fives when a customer has been packed with every item of potential F&I income known to humanity?
If it is the first sort of shop (we'll call that “Good Guys Motors”), chances are the management teaches that customers should be treated fairly and get real value for their money. There is probably a mantra based on repeat business, customer satisfaction, referral and service.
In the second sort of shop (let's call it “Snake Pit Motors”), the emphasis is on maximizing the revenues from the deal at hand, whatever the cost. Customer pressure and even intimidation are the order of the day. Outright fraud is not unusual. Unsophisticated customers are nothing more than sheep in need of fleecing.
Customer complaints are treated as if the customer is the enemy. If the customer never darkens the door again, so what? Salesperson turnover is high and salesperson satisfaction is low.
When we do dealer compliance reviews, the first thing we try to do is determine the philosophy of the dealership. If the place is a Snake Pit Motors, compliance becomes a much greater challenge than it is if ethics and decency rule the roost like they do at Good Guys.
That's because there is really no such thing as a Truth in Lending Act claim.
Yes, that's what I said. It's a bit of an exaggeration, of course. Every now and again a lawyer will buy a car and review the paperwork looking for TILA claims (you really don't need to worry about lawyers who buy Benzes and BMWs, though, since TILA doesn't apply to a car finance transaction when the amount financed exceeds $25,000). Everyone else who buys a car signs all the paperwork and goes home and throws it into a drawer. Until there's a problem.
If a customer learns she paid $1,000 more for her Belchfire V-8 than her co-worker down the hall, or reads in Consumer Reports that credit insurance is a rip-off, or starts thinking that perhaps her etch protection isn't worth $995 or has a mechanical or electronic problem with the car, she will complain to the dealer.
If there is no satisfactory response and she gets mad enough to see a lawyer, the first thing the lawyer wants to see are those papers that went into the drawer.
Then the lawyer starts dissecting the credit contract and other documents looking for every technical violation he can find, and you end up on the receiving end of a Truth in Lending Act claim.
Except it's not really a TILA claim, it's an “I-paid-too-much” claim, or an “I-got-ripped-off-somehow” claim, or a “my-car's-not-working” claim, or, maybe just an “I'm-not-going-to-take-it-anymore” claim. Whatever, Truth in Lending is just the stalking horse for the real problem.
Have I digressed? Not really.
At Good Guys, the customer likely received fair treatment to start with, and problems like these are less likely to surface. When they do, management fixes them quickly.
At Snake Pit, all the people involved in the initial transaction with the customer have moved on, and those currently in charge will not give the customer the time of day. With no satisfaction, the customer caroms off the dealership into her lawyer's office.
Both Good Guys and Snake Pit need legal compliance programs, constant legal training, and ethics workshops.
But the best compliance program is treating customers right in the first place. Good Guys does that.Guess which dealership spends less time fighting off lawsuits?
Tom Hudson is a lawyer, editor of CARLAW and publisher of Spot Delivery. He's at 410-865-5400.