Since my post last week, Trust Me, I’m Your Vendor, I’m happy to say that some automotive marketing companies have reached out for advice on how to protect their dealer clients from advertising violations. This is a very positive step and I applaud them.
That’s all well and good, but dealers need to keep in mind that not all vendors are quite so diligent about protecting their clients from legal exposure. Regulators have made it abundantly clear that they simply don’t like overly-aggressive dealer marketing campaigns. They’ve also indicated that they feel the primary responsibility for advertising compliance lies with the dealership, not the vendor.
Unfortunately, I don’t see that there’s much we can do about it in today’s consumer-centric environment. The reality is that there’s plenty of political capital in chasing car dealers.
The bottom line is that dealerships need to be proactive in protecting themselves. In a perfect world, all vendors would go out of their way to ensure complete compliance with all state and federal regulations - but we’re simply not there yet.
So here’s my contribution to the cause. I’ve compiled a list, from actual enforcement actions, of mailer and staffed event violations cited by regulators. There may be more, but you definitely want to keep an eye out for these Red Flags:
- Falsely representing that vehicles are from sources such as rental car company bankruptcies, bank repossessions, or fleet liquidations when the vehicles sold came from the dealers’ usual inventories.
- Falsely representing that a sale is being sponsored or conducted by a bank, lending institution, fleet, repossession, or liquidation company.
- Using deceptive promotions, including mailers that state “Urgent Recall-Official Notice” or otherwise imply it is from a government agency.
- Misrepresenting the number of vehicles offered at an advertised price.
- Ads that create a false sense of urgency.
- Ads that guarantee credit approval.
- Ads that guarantee a minimum trade-in value.
- Using words, phases or initials in ads that aren’t easily understood by consumers or using a font size that’s difficult to read.
- Staffed Event personnel raising vehicle prices to enable them to offer "better" deals.
- Staffed Event personnel using very aggressive sales tactics designed to maximize profit, not to offer lower-than-usual prices to consumers.
- Staffed Event salespeople and managers illegally selling automobiles without proper state licensure or without state licenses to handle insurance sales.
- Hiding the costs of extra products in payment quotes, an illegal practice called “packing.”
- Adding charges for extra products and services that were not authorized or desired by consumers.
- Negotiating a verbal or informal sales or lease agreement then changing the contract terms without a customer’s knowledge or consent.
- Advertising with the intent to not sell the vehicles as advertised.
- Misrepresenting the amount of and reasons for price reductions.
- Misrepresenting the selling price of vehicles.
- Failing to state the odds of a winning a prize, the value of that prize, and all material conditions required to obtain a prize.
- Advertising “free” merchandise and prizes without adequately disclosing that consumers would need to pay shipping, handling or other fees.
- Failing to properly disclose dealer documentary or other fees.
- Making statements that the dealer could not substantiate through its business records.
- Failing to provide disclosures required by the federal Truth in Lending Act.
- Offering a rebate that is not associated with a manufacturer or failing to disclose material terms in conjunction with a rebate offer.
- Use of simulated checks where prohibited or failing to include voiding language on the simulated checks.
- Failing to disclose limitations related to ability to obtain credit or related to the condition of a trade-in vehicle.
- Advertising “free” merchandise with the purchase of a vehicle.
- Failing to include state-required disclosures.
- Selling vehicles above the advertised price.
- Advertising vehicles that had already been sold, resulting in a “bait and switch” scheme.
- Advertising false savings such as 75 percent off the MSRP on a used vehicle or that vehicles would be sold at 95 percent off the original price without defining the “original price.”
- Statements such as “Your current loan will be paid off NO MATTER WHAT YOU OWE”.
- Making misleading statements about the availability of financing such as “$0 DOWN DELIVERS!
- Failing to disclose conditions or restrictions related to sales offers.
While regulations and “hot buttons” vary by state, keep in mind that attorneys general frequently compare notes with their peers, so you never know when your state’s AG is going to get a bee in his or her bonnet about a new issue. If you see any of the above Red Flags or you’re not completely certain that all statements made are true and not potentially misleading, it’s time to slow down and have the campaign reviewed by a qualified professional.
Remember, if you’re writing the check, you’re responsible. Good luck and good selling!