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Jim Radogna

Jim Radogna President

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Doing Mailers and Staffed Events? Look Out For These Red Flags

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!

Scott Joseph
Jim, Outstanding blog and dead on the money. Before we evolved into a full service direct marketing agency a large percentage of our business was sales events. While it still makes up about 40% of our business, the market and our dealer clients demanded that we offer multi channel direct marketing strategies in sales, service as well as every day lead generation programs (Now that my free plug is done)... Over the last five years we now work directly with several OEMs such as BMW, MINI, Mercedes-Benz, General Motors and Chrysler. Obviously, when working with these clients we are required to do our best to make sure the programs we create are compliant. The point of my comment is this... From the beginning we have always done extensive testing and measuring on all our marketing programs. We've found that doing the things you suggest in your blog have NOT hurt response and closing percentages for dealers. In fact, we have seen an up tick in both. When writing good ad copy the more believable and credible an offer is the more likely people are to respond to it. In addition, the advancements in data analytics and predictive modeling have eliminated the need to try the approaches you are warning against. High level marketing vendors should be able to really pin point who should be targeted for specific offers. This means a much higher percentage of the people targeted will actually be interested in the offer. This goes far beyond targeting customer segments like the year, make and model of vehicles or simply targeting customers based on how long ago they visited your service department. Unfortunately there are still some out there who continue to push the legal envelope. So, great blog... keep them coming!
Jim Radogna
Thanks Scott and hats off to your approach! Consumers really do expect and appreciate honesty and transparency and I think the marketers that deliver it will surely prosper.
Jeremy Alicandri
Jim, This is quite an extensive list. I've just shared it with my staff. BTW, we've used J&L Marketing(Scott's company) for several events. Thank you for sharing. Jeremy
Russell Grant
Jim, great blog. Jeremy, we appreciate the kind words. At J&L we spend an extensive amount of time in making sure we are complaint we OEM restrictions, state restrictions, major dealer group compliance issues, etc. The bottom line is we all have to work together(Dealers, OEM's, and Vendors) to make sure we hold each other accountable. The good news is .... forums like DrivingSales is making it easier to have these type of discussions. Jim, I have always admired your work and you are a true asset to the Dealer Community.
Jim Radogna
Thanks Russell, appreciate the kind words! This issue is really a pet peeve of mine. Last week I was doing a routine check of a dealer group’s websites during their quarterly compliance review. I didn’t expect to find any problems because the last time I checked everything was perfect. Well, the dealer recently changed website providers and the new sites had none of the required state disclosures, a dozen non-compliant banner ads, and no privacy policies as required by law in the dealer’s state. Good thing I was paying attention because the vendor sure wasn’t… Jeremy, I'm glad to hear you're having success with J&L. Sounds like they're a model for doing it the right way!

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