The vast majority of dissatisfied customers who threaten to call an attorney never do. For the few that follow through, the results can be devastating. While it’s true that many customers’ complaints have little or no merit, there can be a real danger if the wrong plaintiff’s attorney gets involved.

You may be thinking “we have lawyers of our own and insurance for that sort of thing, so bring it on”. Well, here’s the problem: many lawsuits that stem from seemingly insignificant complaints snowball into massive class action cases based upon other issues entirely. There are a number of plaintiffs’ attorneys out there who are absolutely brilliant at turning dealer oversights or technical violations into class action lawsuits. For instance, one dealership’s failure to honor its promise to swap rims on a vehicle resulted in a class action lawsuit for backdating rewritten contracts where the court ordered that the over 1,500 class members could elect to return their vehicles and rescind their contracts.

Let’s face it, most common consumer vs. dealer lawsuits or Lemon Law claims don’t pay big attorney fees, but class action lawsuits do. It doesn’t matter if the customer’s complaint is valid or if they have actually suffered any real damage; these attorneys simply want the opportunity to get their hands on your files. A Missouri dealer group recently settled a documentation fee class action lawsuit for over $8 million. The attorneys alleged that the charges constituted the “unauthorized practice of law”.  Ridiculous, yes, but the attorney fees totaled $675,000.

Other lawsuits have begun from mechanical issues, alleged misrepresentation of a vehicle’s condition, lies or unkept promises, undisclosed prior damage or vehicle history, payment packing claims, failure to honor warranties or service contracts, you name it. They’ve ended up becoming class action claims for improper disclosures, overcharging of fees, improper contract rescissions, undisclosed deferred downpayments, backdated contracts, etc.

Even if  class action status is not pursued or granted, attorneys often seek unfair and deceptive acts and practices claims for technical violations by painting a picture of “the greedy dealer profiting from the poor, unsuspecting consumer”.  Believe me; it’s not that tough to sell to most judges and juries, and the ultimate cost to the dealership is often substantially more.

The good news is that these lawsuits are avoidable. Most customers will not seek out an attorney unless they feel that they have no other choice or feel that they are being ignored or mistreated by dealership personnel. Two things that are virtually guaranteed to enrage a customer are unreturned calls or being treated in a confrontational manner by staff members. Many potential legal issues can be avoided by simply responding to customer complaints and perhaps offering a goodwill concession.

All customer concerns should be addressed promptly by qualified personnel, regardless of their perceived validity. It’s vitally important that care be taken when communicating with customers – their attorney may use what you say against you. Many times a customer will contact an attorney after they have felt that they were being ‘bullied” into signing a new contract or threatened with repossession, legal action or consequences to their credit rating. It’s a good idea to have customer complaints reviewed by your legal counsel or compliance officer to make sure that all your ducks are in a row.

Finally, check your ego at the door. While it may be distasteful to let an unreasonable customer “win” when you feel you’ve done nothing wrong, it makes good business sense to take a step back and examine the potential downside. Once an attorney gets involved, your chances of working out the problem directly with the customer diminish greatly. At the end of the day, does it make more sense to give in to the customer and move on with life or dig in your heels and risk a devastating lawsuit?

The vast majority of dissatisfied customers who threaten to call an attorney never do. For the few that follow through, the results can be devastating. While it’s true that many customers’ complaints have little or no merit, there can be a real danger if the wrong plaintiff’s attorney gets involved.

You may be thinking “we have lawyers of our own and insurance for that sort of thing, so bring it on”. Well, here’s the problem: many lawsuits that stem from seemingly insignificant complaints snowball into massive class action cases based upon other issues entirely. There are a number of plaintiffs’ attorneys out there who are absolutely brilliant at turning dealer oversights or technical violations into class action lawsuits. For instance, one dealership’s failure to honor its promise to swap rims on a vehicle resulted in a class action lawsuit for backdating rewritten contracts where the court ordered that the over 1,500 class members could elect to return their vehicles and rescind their contracts.

Let’s face it, most common consumer vs. dealer lawsuits or Lemon Law claims don’t pay big attorney fees, but class action lawsuits do. It doesn’t matter if the customer’s complaint is valid or if they have actually suffered any real damage; these attorneys simply want the opportunity to get their hands on your files. A Missouri dealer group recently settled a documentation fee class action lawsuit for over $8 million. The attorneys alleged that the charges constituted the “unauthorized practice of law”.  Ridiculous, yes, but the attorney fees totaled $675,000.

Other lawsuits have begun from mechanical issues, alleged misrepresentation of a vehicle’s condition, lies or unkept promises, undisclosed prior damage or vehicle history, payment packing claims, failure to honor warranties or service contracts, you name it. They’ve ended up becoming class action claims for improper disclosures, overcharging of fees, improper contract rescissions, undisclosed deferred downpayments, backdated contracts, etc.

Even if  class action status is not pursued or granted, attorneys often seek unfair and deceptive acts and practices claims for technical violations by painting a picture of “the greedy dealer profiting from the poor, unsuspecting consumer”.  Believe me; it’s not that tough to sell to most judges and juries, and the ultimate cost to the dealership is often substantially more.

The good news is that these lawsuits are avoidable. Most customers will not seek out an attorney unless they feel that they have no other choice or feel that they are being ignored or mistreated by dealership personnel. Two things that are virtually guaranteed to enrage a customer are unreturned calls or being treated in a confrontational manner by staff members. Many potential legal issues can be avoided by simply responding to customer complaints and perhaps offering a goodwill concession.

All customer concerns should be addressed promptly by qualified personnel, regardless of their perceived validity. It’s vitally important that care be taken when communicating with customers – their attorney may use what you say against you. Many times a customer will contact an attorney after they have felt that they were being ‘bullied” into signing a new contract or threatened with repossession, legal action or consequences to their credit rating. It’s a good idea to have customer complaints reviewed by your legal counsel or compliance officer to make sure that all your ducks are in a row.

Finally, check your ego at the door. While it may be distasteful to let an unreasonable customer “win” when you feel you’ve done nothing wrong, it makes good business sense to take a step back and examine the potential downside. Once an attorney gets involved, your chances of working out the problem directly with the customer diminish greatly. At the end of the day, does it make more sense to give in to the customer and move on with life or dig in your heels and risk a devastating lawsuit?

Employee training can cost a lot of money. Not training your employees can cost even more. In lawsuits, courts and regulatory agencies sometimes impose after-the-fact training requirements in addition to large monetary penalties. Consider these actual cases:

A dealership faced a wide range of complaints, including failure to disclose material defects and misrepresenting sales and extended service contract prices, and was ordered to pay $1.5 million in restitution to victims, plus $300,000 to the state Department of Consumer Protection. As part of the settlement, the dealer also agreed to initiate a mandatory education program for all its employees within 60 days of the settlement, instructing employees on state consumer protection laws.

A jury awarded a $14.4 million wrongful death verdict against a dealership that performed a faulty tire repair and failed to take the tire out of service, leading to a rollover crash that killed a couple. As a condition of the post-verdict settlement, the dealer agreed to implement a training program to better train its technicians about safe tire repair practices to improve consumer safety.

The Equal Employment Opportunity Commission (EEOC), entered into a $1.5 million settlement of a sex and age discrimination lawsuit with an auto dealership. Along with the monetary penalty, under a consent decree the dealership must provide current employees with four hours of EEO training annually and new hires must receive such training within ten days of employment.

The EEOC reached a $700,000 settlement of a national origin, religion and racial discrimination lawsuit against another dealership. According to the Consent Decree resolving the case, the dealership is required to hire a presenter approved by the EEOC to provide annual training to all of its managers and supervisory personnel on all aspects of Title VII.

What’s that old expression about closing the barn door after the horses are out?

Employee training can cost a lot of money. Not training your employees can cost even more. In lawsuits, courts and regulatory agencies sometimes impose after-the-fact training requirements in addition to large monetary penalties. Consider these actual cases:

A dealership faced a wide range of complaints, including failure to disclose material defects and misrepresenting sales and extended service contract prices, and was ordered to pay $1.5 million in restitution to victims, plus $300,000 to the state Department of Consumer Protection. As part of the settlement, the dealer also agreed to initiate a mandatory education program for all its employees within 60 days of the settlement, instructing employees on state consumer protection laws.

A jury awarded a $14.4 million wrongful death verdict against a dealership that performed a faulty tire repair and failed to take the tire out of service, leading to a rollover crash that killed a couple. As a condition of the post-verdict settlement, the dealer agreed to implement a training program to better train its technicians about safe tire repair practices to improve consumer safety.

The Equal Employment Opportunity Commission (EEOC), entered into a $1.5 million settlement of a sex and age discrimination lawsuit with an auto dealership. Along with the monetary penalty, under a consent decree the dealership must provide current employees with four hours of EEO training annually and new hires must receive such training within ten days of employment.

The EEOC reached a $700,000 settlement of a national origin, religion and racial discrimination lawsuit against another dealership. According to the Consent Decree resolving the case, the dealership is required to hire a presenter approved by the EEOC to provide annual training to all of its managers and supervisory personnel on all aspects of Title VII.

What’s that old expression about closing the barn door after the horses are out?

If your sales staff told you that they had a 50% closing ratio, would you take their word for it? I suspect not – you would probably track all of their opportunities to determine the true percentage. Most dealerships measure a vast number of items on a daily basis. After all, you can’t manage what you don’t measure, right?

How about the level of compliance and ethical behavior in your dealership? Is that something you measure or do you just take everyone’s word for it? Have you really thought about how your staff is conducting itself in these areas? Is it possible that some of these thoughts are floating around?

“We’ve always done it this way – haven’t been caught yet”
“Hey, if we get sued, that’s what insurance is for.”
“Compliance is not in my pay plan. I’ll do whatever it takes to make a decent paycheck.”

Sure, you can bury your head in the sand and hope for the best, but is it really worth finding out the hard way that you were mistaken, or that your customers are not being treated the way you expect?

Instead, why not follow a few simple steps?

1. Audit your operation to determine where you really stand.
2. Have your staff properly trained in all aspects of legal compliance.
3. Once trained, have them sign a code of ethics which will not only help protect the dealership, but let everyone know that the organization is serious about compliance and ethical behavior.

These steps are easy and far more affordable than the costs associated with lawsuits, regulatory actions and, most importantly, hits to your valuable reputation. Don’t find out the hard way that your operation isn’t as clean as you thought it was.

If your sales staff told you that they had a 50% closing ratio, would you take their word for it? I suspect not – you would probably track all of their opportunities to determine the true percentage. Most dealerships measure a vast number of items on a daily basis. After all, you can’t manage what you don’t measure, right?

How about the level of compliance and ethical behavior in your dealership? Is that something you measure or do you just take everyone’s word for it? Have you really thought about how your staff is conducting itself in these areas? Is it possible that some of these thoughts are floating around?

“We’ve always done it this way – haven’t been caught yet”
“Hey, if we get sued, that’s what insurance is for.”
“Compliance is not in my pay plan. I’ll do whatever it takes to make a decent paycheck.”

Sure, you can bury your head in the sand and hope for the best, but is it really worth finding out the hard way that you were mistaken, or that your customers are not being treated the way you expect?

Instead, why not follow a few simple steps?

1. Audit your operation to determine where you really stand.
2. Have your staff properly trained in all aspects of legal compliance.
3. Once trained, have them sign a code of ethics which will not only help protect the dealership, but let everyone know that the organization is serious about compliance and ethical behavior.

These steps are easy and far more affordable than the costs associated with lawsuits, regulatory actions and, most importantly, hits to your valuable reputation. Don’t find out the hard way that your operation isn’t as clean as you thought it was.

Many of the big money, big publicity compliance meltdowns in the auto industry have been the result of vehicle financing issues. Remember the Gunderson Chevrolet news clips showing the management team being convicted and sent to jail? Being a fearless bunch, some F&I folks still walk a fine line when it comes to compliance. Maybe it’s because no one ever showed them a better way?

Becky Chernek of Chernek Consulting, Inc., who is one of the finest F&I trainers in the industry, was kind enough to share some feedback that she received from F&I managers when discussing ethical sales practices in her seminars.

"Never happened before, not going to now."
"Just a bunch of hype for car dealers to buy into."
"We love Becky, but don't pay too much attention to the regulations; she will get to the meat & potatoes."
"Yeah, the minute we implement that policy you might as well shut our doors."
"I know you learned it this way...but this is the right way to do it if you want to make some money."
"Payment packing is legal if you tell the customer afterwards what products they bought."
"I just tell the customer that the payment to include the service contract is only $5.00 difference."
"Consistent pricing? What about the nonprime customers?"
"What do you mean you can't backdate a contract, we do it all the time."
"So what if we give the customer a raise? That's just how we do it here."
"We always use in-house rebates - how else do you a get loan bought."
"Hey, we sell cars here... its up to finance to get them bought... YoYo deals? 50% of our business is that way."
"No way am I telling the bank this customer is $5000 upside down. Itemize what?"
"Base payment is loaded, that’s just how we do it here."
"I love the idea of getting the customer in the "yes" mode but let's not do that with confirming the true buying numbers that will only confuse them more."
"The interview that is just a waste of time and it doesn't serve any purpose... slows me down."
"When we cancel a policy I don't have to give the customer back the profit just the cost?"

Becky went on to say, “Transparent selling is easy... reduces charge backs, keeps the money on the books and a customer coming back for life…what's so darn hard to understand?”

That’s a great point Becky makes. Whatever happened to good old-fashioned principles like salesmanship and value-building? Do you really think dishonesty is the only way to make a sale?

I was fortunate enough to attend a great seminar given by Jim Ziegler a few years back where he taught ethical F&I selling. To be quite honest, at first I was taken aback. Most of the previous F&I training I was exposed to was the “old school” variety. (Of course, I use the word “training” loosely – most of it was “tribal knowledge” from the old-timers). Jim Z, in his inimitable fashion, taught us how to produce big numbers while doing things the right way. No excuses, just salesmanship. And guess what? It works.

Okay, here’s the part where I piss some people off…

If you feel that you need some help becoming a better, more honest F&I practitioner, I recommend that you contact Becky, Jim or one of the other fine F&I trainers out there. But if, on the other hand, you feel that you need to operate unethically and buy into the lame excuses listed above, maybe you’re in the wrong business. Think about it…

Tags:
 

Many of the big money, big publicity compliance meltdowns in the auto industry have been the result of vehicle financing issues. Remember the Gunderson Chevrolet news clips showing the management team being convicted and sent to jail? Being a fearless bunch, some F&I folks still walk a fine line when it comes to compliance. Maybe it’s because no one ever showed them a better way?

Becky Chernek of Chernek Consulting, Inc., who is one of the finest F&I trainers in the industry, was kind enough to share some feedback that she received from F&I managers when discussing ethical sales practices in her seminars.

"Never happened before, not going to now."
"Just a bunch of hype for car dealers to buy into."
"We love Becky, but don't pay too much attention to the regulations; she will get to the meat & potatoes."
"Yeah, the minute we implement that policy you might as well shut our doors."
"I know you learned it this way...but this is the right way to do it if you want to make some money."
"Payment packing is legal if you tell the customer afterwards what products they bought."
"I just tell the customer that the payment to include the service contract is only $5.00 difference."
"Consistent pricing? What about the nonprime customers?"
"What do you mean you can't backdate a contract, we do it all the time."
"So what if we give the customer a raise? That's just how we do it here."
"We always use in-house rebates - how else do you a get loan bought."
"Hey, we sell cars here... its up to finance to get them bought... YoYo deals? 50% of our business is that way."
"No way am I telling the bank this customer is $5000 upside down. Itemize what?"
"Base payment is loaded, that’s just how we do it here."
"I love the idea of getting the customer in the "yes" mode but let's not do that with confirming the true buying numbers that will only confuse them more."
"The interview that is just a waste of time and it doesn't serve any purpose... slows me down."
"When we cancel a policy I don't have to give the customer back the profit just the cost?"

Becky went on to say, “Transparent selling is easy... reduces charge backs, keeps the money on the books and a customer coming back for life…what's so darn hard to understand?”

That’s a great point Becky makes. Whatever happened to good old-fashioned principles like salesmanship and value-building? Do you really think dishonesty is the only way to make a sale?

I was fortunate enough to attend a great seminar given by Jim Ziegler a few years back where he taught ethical F&I selling. To be quite honest, at first I was taken aback. Most of the previous F&I training I was exposed to was the “old school” variety. (Of course, I use the word “training” loosely – most of it was “tribal knowledge” from the old-timers). Jim Z, in his inimitable fashion, taught us how to produce big numbers while doing things the right way. No excuses, just salesmanship. And guess what? It works.

Okay, here’s the part where I piss some people off…

If you feel that you need some help becoming a better, more honest F&I practitioner, I recommend that you contact Becky, Jim or one of the other fine F&I trainers out there. But if, on the other hand, you feel that you need to operate unethically and buy into the lame excuses listed above, maybe you’re in the wrong business. Think about it…

Tags:
 

Before the internet, when there were only phone pops, we learned valuable lessons on how to handle calls, such as selling the appointment, creating urgency, not giving shopping numbers and keeping information close to the vest until the customer showed up. It was good advice then and it may be good advice now. But keep in mind that many customer inquiries tend to come online rather then by phone. While the ultimate goal remains the same – to get the customer into the dealership – the rules for execution have become trickier because online communication creates a permanent written record of all interactions with customers.

In addition, many dealers are now utilizing social media as an easy and affordable way to promote their products and services. It’s important to understand that even though it may not require writing a big check, certain social media postings may be considered advertising and proper care should be taken to avoid legal exposure. As we are painfully aware, there are plenty of federal and state regulations that govern automotive advertising. For instance, social media postings that list vehicle prices, payments, downpayments or drive-off amounts may trigger advertising disclosure requirements.

Here’s an illustration of how an online interaction could potentially come back to haunt you. A few days before this past Labor Day, I saw a posting from a dealer on their Facebook page about a Labor Day weekend special that offered zero drive-off leases. During this time period, several competing dealers ran newspaper advertising on similar lease programs with “no money down, zero driveoff, leave your checkbook at home” and so forth. On closer inspection, many of these ads indicated in the fine print that certain fees were due at signing, such as tax, license, doc fees and acquisition fees.

I logged on to the Facebook dealer’s website to check out the actual ad (there were no disclosures on the Facebook posting other than zero drive off). The ad indicated that the customer was responsible for tax and license. I then contacted the dealer online to inquire whether I had to pay for the tax & license or if it was indeed “zero out of pocket”. The dealer representative responded that yes it was zero down, but since it was the last day of the month, I needed to come in before close of business to take advantage of the special lease.

Now, let’s look at some possible outcomes if a customer decided to go to the dealership that night.

If the customer went to the dealer to lease the car and there was indeed no money down required and they gave her the advertised payment, she would probably leave happy and nothing else would matter.

But, if she showed up at the dealership and they informed her that she had to pay other fees to get the advertised payment, a few other things might happen:

1. She might reluctantly pay the fees or roll them into a higher payment. The salesperson’s closing ratio would go up and his CSI would go down.
2. She might leave and go lease a car from another dealer.
3. She might decide to take the written evidence of the transaction to her friendly neighborhood attorney. This could happen the next day or sometime in the future if she decides that she no longer wants the car.

Here are some potential claims that an attorney might make. First, I wouldn’t be surprised if an aggressive attorney would try to make a case for Unfair and Deceptive Acts and Practices (UDAP) for the dealer rep’s little miscommunication about zero down (remember, the customer has an email from the rep that said there was no money required).

Next, the dealer’s Facebook posting stated that they were having a “Labor Day Weekend” sale, yet the dealer rep claimed (in writing) that the sale was over the Tuesday BEFORE the Labor Day weekend. Another deceptive act?

The attorney might also throw in a few advertising violation claims for good measure, such as that the Facebook posting may have lacked some required advertising disclosures and the disclaimer in the dealer’s website may not have been clear and conspicuous enough to be in compliance.

There’s a good chance that an aggressive lawyer would throw all of those nitpicky claims against the courthouse wall to see what sticks. Plaintiff’s attorneys love UDAPs, they can often get multiple damages and attorney fees if successful.

So, here’s my two cents: Be careful what you say; even more careful what you write and if you communicate with customers, it’s not a bad idea to get some training in legal compliance.

Before the internet, when there were only phone pops, we learned valuable lessons on how to handle calls, such as selling the appointment, creating urgency, not giving shopping numbers and keeping information close to the vest until the customer showed up. It was good advice then and it may be good advice now. But keep in mind that many customer inquiries tend to come online rather then by phone. While the ultimate goal remains the same – to get the customer into the dealership – the rules for execution have become trickier because online communication creates a permanent written record of all interactions with customers.

In addition, many dealers are now utilizing social media as an easy and affordable way to promote their products and services. It’s important to understand that even though it may not require writing a big check, certain social media postings may be considered advertising and proper care should be taken to avoid legal exposure. As we are painfully aware, there are plenty of federal and state regulations that govern automotive advertising. For instance, social media postings that list vehicle prices, payments, downpayments or drive-off amounts may trigger advertising disclosure requirements.

Here’s an illustration of how an online interaction could potentially come back to haunt you. A few days before this past Labor Day, I saw a posting from a dealer on their Facebook page about a Labor Day weekend special that offered zero drive-off leases. During this time period, several competing dealers ran newspaper advertising on similar lease programs with “no money down, zero driveoff, leave your checkbook at home” and so forth. On closer inspection, many of these ads indicated in the fine print that certain fees were due at signing, such as tax, license, doc fees and acquisition fees.

I logged on to the Facebook dealer’s website to check out the actual ad (there were no disclosures on the Facebook posting other than zero drive off). The ad indicated that the customer was responsible for tax and license. I then contacted the dealer online to inquire whether I had to pay for the tax & license or if it was indeed “zero out of pocket”. The dealer representative responded that yes it was zero down, but since it was the last day of the month, I needed to come in before close of business to take advantage of the special lease.

Now, let’s look at some possible outcomes if a customer decided to go to the dealership that night.

If the customer went to the dealer to lease the car and there was indeed no money down required and they gave her the advertised payment, she would probably leave happy and nothing else would matter.

But, if she showed up at the dealership and they informed her that she had to pay other fees to get the advertised payment, a few other things might happen:

1. She might reluctantly pay the fees or roll them into a higher payment. The salesperson’s closing ratio would go up and his CSI would go down.
2. She might leave and go lease a car from another dealer.
3. She might decide to take the written evidence of the transaction to her friendly neighborhood attorney. This could happen the next day or sometime in the future if she decides that she no longer wants the car.

Here are some potential claims that an attorney might make. First, I wouldn’t be surprised if an aggressive attorney would try to make a case for Unfair and Deceptive Acts and Practices (UDAP) for the dealer rep’s little miscommunication about zero down (remember, the customer has an email from the rep that said there was no money required).

Next, the dealer’s Facebook posting stated that they were having a “Labor Day Weekend” sale, yet the dealer rep claimed (in writing) that the sale was over the Tuesday BEFORE the Labor Day weekend. Another deceptive act?

The attorney might also throw in a few advertising violation claims for good measure, such as that the Facebook posting may have lacked some required advertising disclosures and the disclaimer in the dealer’s website may not have been clear and conspicuous enough to be in compliance.

There’s a good chance that an aggressive lawyer would throw all of those nitpicky claims against the courthouse wall to see what sticks. Plaintiff’s attorneys love UDAPs, they can often get multiple damages and attorney fees if successful.

So, here’s my two cents: Be careful what you say; even more careful what you write and if you communicate with customers, it’s not a bad idea to get some training in legal compliance.