Channel | Compliance

A View from the Dark Side

Attorney Terry O’Loughlin examines the hostile lens through which many view the auto industry, and offers some simple solutions to improve perceptions
By: Terrence J O'Loughlin

A View from the Dark Side

Car dealers and the industry, in general, are savvy, creative entrepreneurs and possess great common sense. But, they have an enormous blind spot as it relates to how they are perceived by the regulating community. Federal and state agencies, consumer protection organizations, and private plaintiffs, the Dark Side, are openly hostile to the industry of which dealers are unaware. This hostility precipitates regulation and litigation.

This failing was underscored, recently, as I listened to an excellent presentation made by an assistant attorney general of my acquaintance, at a conference I attended. He outlined the powers of the state attorney general and the issues which the attorney general was prosecuting against dealers in the present day. His remarks could have been made in 1995, as opposed to 2014, since the consumer complaints remain unchanged. Advertising, spot delivery, payment packing, and so forth continue to be the focus. These are the same complaints against dealers, which affect how regulators and the public view the automotive industry. And this perspective remains static.

The National Association of Attorneys General (NAAG), Consumer Federation of America (CFA), and the National Association of Consumer Protection Investigators (NACPI) annually rank industries based upon consumer complaints. In the past twenty years, in almost every listing, automotive complaints are at the top of the list.

For example, here is the consumer complaint list from the CFA for 2013:

  1. Automotive
  2. Home Improvement/Construction
  3. Credit/Debt
  4. Utilities
  5. Services
  6. Home Solicitations
  7. Landlord/Tenant
  8. Internet Sales
  9. Household Goods

These listings affect how regulators are deployed to police consumer affairs. Never mind the fact that all complaints related to the automotive industry are swept into one category, which creates a biased result.

An equally unsettling Gallup poll released in 2012, for “Honesty and Ethics in the Professions” places car salesmen last in the ranking of 22 professions. Gallup has been releasing this poll for many years and car salesmen have had a lock on the last place for the past decades.

  1. Nurses
  2. Pharmacists
  3. Doctors
  4. Engineers
  5. Dentists
  6. Police Officers
  7. College Professors
  8. Clergy
  9. Psychiatrists
  10. Chiropractors
  11. Bankers
  12. Journalists
  13. Business Executives
  14. State Governors
  15. Attorneys
  16. Insurance Salesmen
  17. Senators
  18. HMO Managers
  19. Stockbrokers
  20. Advertising Practitioners
  21. Congressmen
  22. Car Salesmen

Why the list only posts 22 professions is unclear. Remarkably, attorneys have been moving up this list as they were previously ranked nineteenth. Certainly the automotive industry can do better if the legal profession can move up this list.

Federal Trade Commission Roundtables

A couple of years ago the FTC hosted a series of roundtables where industry and consumer interests were presented. I had the pleasure of appearing on two of these panels. Two of the remarks from the consumer interest panelists were truly remarkable:

  1. “Never finance a vehicle through a dealer.”
  2. “I’ve never seen a spot delivery which wasn’t fraudulent.”

Dealers certainly offer competitive, if not better rates, than other finance sources. And, they may be able to finance consumers banks would reject. Moreover, a zero interest rate is only available through a dealer.

There are hundreds of thousands of spot deliveries. If they were all fraudulent there would be economic chaos. The truth is that only a miniscule number may be actionable.

Other Hostile Statements

Some of the other remarks I’ve heard over the years also indicate great hostility and distrust of the industry. For example, I heard an assistant attorney general from California comment that her office always investigates profit in vehicle transactions. From any legal perspective, profit is irrelevant as it relates to a legal infraction. It is not the business of government to investigate such matters.

I was a speaker at a consumer rights conference many years ago and I opined that spot deliveries did not violate the Unfair and Deceptive Trade Practices Act (UDAP). I was roundly booed for expressing my legal opinion, which remains the correct legal conclusion.

In view of the current disparate impact issue, increased dealer regulation, and the NADA’s legally valid and resourceful response to the disparate impact issue, an attorney from the Department of Justice, recently stated at a conference that he would be concerned if the cost of credit would increase due to these recent regulatory government actions. It is axiomatic that increased regulation ultimately increases costs to the consuming public. It is naïve of any regulator to believe otherwise.

Consumer interest attorneys often don’t think that the attorney general is aggressive enough. The attorney general for whom I worked at that time, was accused of “being in the hip pocket of the automotive industry.” It was an erroneous and defamatory remark. Nevertheless, it indicated outright antagonism to car dealers as this angry consumer attorney wanted more action.

Some Simple Solutions

Consumer Complaints

Dealers can control many consumer complaints before they are filed with government agencies or with a consumer attorney by addressing them at the dealership level. As presented in this column recently, a good consumer complaint protocol should be implemented.

Goodwill Efforts

Continued goodwill outreach efforts would improve the industry’s profile but these efforts need to be advertised. For example, dealers contribute to charity, sponsor many events in their communities, such as little league baseball, but rarely receive fair credit for their efforts. Marketing these goodwill efforts may help. For those dealers who aren’t involved in these ways of being generous corporate citizens, they may wish to begin doing so.

It is also remarkable as to how much sales tax dealers pay into the state coffers and how much other commerce benefits from dealers. These should be highlighted.

Consumer-Friendly Sales Efforts at the Store

Why the sales and financing process is viewed by the public as such a struggle is unnecessary. Efforts should continue to be made by dealers to improve this process.

It should also be underscored that programs, such as AWARE (Americans Well-informed on Automobile Retailing Economics), and the availability of the details of the vehicle purchase, allows more transparency than you get when purchasing almost any other product.

Conclusion

By improving the public’s perception of the industry there might be less reason for regulators to focus on the automotive industry. In addition, consumers would be less likely to seek redress by filing complaints with governmental agencies or their attorneys. This result would be a wonderful change to the present.

GOVERN YOURSELVES ACCORDINGLY

This article was written by:

- has written 18 posts on P&A Magazine.

Terry O'Loughlin is the director of compliance for Reynolds & Reynolds. Prior to joining Reynolds in 2006, he was employed by the Office of the Attorney General, State of Florida, from 1990, in the Economic Crimes Section. For most of those years he was involved in the investigation and prosecution of automobile dealers, manufacturers and finance and leasing companies. He was also the mediator of Florida’s Motor Vehicle Lease Disclosure Act, a statute that he assisted in drafting. He has served as a consultant to the Federal Reserve Board’s Leasing Education Committee, an observer/advisor for the Uniform Consumer Leases Act Committee, and has been a consultant to “PrimeTime Live,” “Dateline” and various other media and publications. In addition, Terry routinely assisted numerous states agencies nationally regarding motor vehicle fraud. In 2010, he was elected to the Governing Committee of the Conference on Consumer Finance Law.

Contact the author

The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of P&A Magazine or any employee thereof.

One Response to “A View from the Dark Side”

  1. Matt Pollak says:

    Thanks for the good write up Terry, I really appreciate the insight you have provided, and your professionalism.

Trackbacks/Pingbacks


Leave a Reply

css.php