Compliance, Compliance, Compliance ByJohnnie Brown, Esq. Pullin, Fowler, Flanagan, Brown & Poe PLLC COUNSELOR’S CORNER Risking repetition, I appreciate that I frequently write about the importance of compliance. Nevertheless, it would be a mistake for us to believe that because the courts struck down the Federal Trade Commission’s Vehicle Shopping Rule (aka CARS), the emphasis on advertising and compliance practices with voluntary protection products has lessened. Quite the contrary, many states are drafting their own mini-Vehicle Shopping Rules to implement. For example, California has just passed a law addressing advertising practices and granted consumers a three-day return right on used motor vehicles costing under $50,000. ADVERTISING I wish to emphasize again the importance of properly advertising the correct price, the “offering price” of a motor vehicle. I encourage motor vehicle dealers to review their dealership practices to ensure that we are not including rebates that do not apply to everyone, overstating the availability of a lower interest rate, or pricing that excludes “add-ons.” We need to ensure that our advertising clearly displays the full purchase price of the vehicle. While we have long discussed “trigger terms” for retail and leased motor vehicles, the emphasis today seems to be on pricing that does not accurately reflect the actual price that a consumer would pay to purchase the motor vehicle. It is important that those responsible for advertising understand their legal duties and not fall into the trap of thinking that all is well because we have always done it that way or everyone does it. FAIR PRICING POLICY Second, I encourage all motor vehicle dealers to develop a fair pricing policy. The National Automobile Dealer Association (NADA) has created a guide that has been made available to all motor vehicle dealers. I encourage all motor vehicle dealers to have a policy setting the maximum price on voluntary protection products, such as service contracts, gap and other products and services. While we can certainly negotiate a price down, I strongly caution against arbitrary pricing by our F&I managers or sales managers. This could result in claims of discrimination and may lead to an embarrassing discovery of profits far outside regular or average ranges. DOCUMENT, DOCUMENT, DOCUMENT I cannot overemphasize the importance of paperwork disclosures. Paperwork should disclose the nature of the product, its terms, price and clearly indicate the consumer’s decision to purchase. I would hope that a voluntary protection product would be clearly disclosed upon a motor vehicle purchase agreement, a retail installment contract and individual paperwork related to that particular voluntary protection product. A customer should normally sign at least three documents in their decision to purchase the product. If the dealer uses a menu system that shows the voluntary protection product being purchased by the consumer, we have the opportunity to have four documents evidencing the voluntary purchase. WVADA NEWS 20
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