I have the opportunity to work with several clients that provide sales and F&I training to dealers. On those occasions where I’m asked to help develop training content, I always include a section on payment packing — the practice of loading up the monthly payment with charges for aftermarket products the customer has neither agreed to nor requested — and why dealers should avoid it. As a consumer, it seems simple enough to me — after all, who among us would want to find out after the fact that we paid for products we didn’t need or want? As a lawyer, it’s even simpler — it’s a classic unfair and deceptive act and practice.
What is surprising to me are the reports I get about how much resistance trainers get from some of their dealer clients. Apparently, there are some dealers who believe packing is the only way to make a profit. Others seem to find it a little more troublesome, but feel like they’re flying under the radar screen and no one will notice. If you’re one of the dealerships that condones payment packing and haven’t been caught, consider yourself lucky. You’ve dodged a bullet for now, but it can be pretty painful when it hits.
Take for example the recent $100,000 settlement agreement obtained by Oregon Attorney General Hardy Myers from a Salem automobile dealership. According to a press release, Myers’ staff investigated complaints against Salem Nissan and found that “in almost every car sold, both new and used, the company was ‘packing’ the contracts with several aftermarket products without the consumers knowing they didn’t have to purchase the products. This was done under a program entitled ‘Pride of Ownership,’ which included a variety of extended service warranties, security products, insurance and a useless gas-saving device called a Vortex Fuel Maximizer.”
As part of the settlement, the dealership agreed to make extensive changes to its operating procedures, including “not representing that the sale or lease of an automobile is contingent on buying additional product such as extended warranties.” The rest of the settlement addresses various alleged violations regarding pricing disclosures and spot deliveries, and requires employees to put forth a good-faith effort to resolve consumer complaints filed with the Oregon Department of Justice within 20 days of a complaint’s filing. If a complaint is not resolved in the 20-day period, the company will arrange for mediation, and, if that fails, arbitration (presumably, at the dealer’s cost, although that is not clear from the press release).
Finally, the company must conduct training for all of its sales, finance and management personnel for the next year. It must do the same for all new personnel within 15 days of employment.
I do not know whether Salem Nissan actually committed any wrongdoing (it admitted none in the settlement), but whether it did or not is almost irrelevant at the end of the day. The damage to the dealership is done, both in an economic (fines, attorneys fees, training, changes to operating procedures, etc.) and reputational sense. Even worse is this occurred at a time when few dealers can afford such costs. Good-faith efforts directed at meeting compliance obligations can significantly mitigate this kind of damage.
The costs of not complying with the laws that regulate your business can be substantial. You may also feel the cost of achieving compliance is substantial. It may be, but my experience has taught me that an ounce of prevention invariably costs far less than a pound of cure.
Michael Benoit is a partner in the Washington, D.C., office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. He can be reached at michael.benoit@bobit.com. Nothing in this article is intended to be legal advice and should not be taken as such. All legal questions should be addressed to competent counsel.
