Aftermarket Selling – The New Focus of the CFPB

The automotive retail market has been under the federal microscope for some time now….with no end in sight.

Federal agencies are focusing in on a range of issues within the automotive retail market.  Everything from the Consumer Financial Protection Bureau (CFPB) issuing guidance on credit discrimination in the indirect automotive financing market to the Federal Trade Commission’s Operation Steer Clear initiative against deceptive automotive financing advertising seems directed at automotive dealers in one form or another.

And now, the CFPB appears to be expanding its scrutiny of automotive dealers and lenders to the sale of aftermarket products.  It’s no secret that the CFPB does not think aftermarket products provide value to consumers.  It is also questionable which aftermarket products the CFPB can assert jurisdiction over although it is apparent that they believe any financed aftermarket product is fair game.

In the recent past, the CFPB has attacked add-on (aftermarket) products sold by credit card companies by entering into several large consent decrees for deceptive and unfair marketing practices, imposing remuneration of customers and penalties of more than $200 million, and in one case a consent decree requiring payment of almost $800 million.

The CFPB also entered into a consent decree with an automotive finance lender and its service provider related to deceptively marketing aftermarket programs to military service members.  Each entity was assessed in excess of $3 million for customer remuneration and penalties. Statements like “GAP will only cost you a few pennies a day” were deemed deceptive when the actual cost was 43 cents a day.  Same thing for extended service plans for which the lender and service provider also did not adequately disclose coverage limitations.

To protect your dealership, you need to take a closer look at how you present and sell aftermarket products to your customers.  This includes, among other things:

  • Creating a plan for selling aftermarket products in a consistent and transparent manner  
  • Performing due diligence on third-party service providers
  • Developing a comprehensive employee training and monitoring program 
  • Establishing a customer dispute process 
  • Considering the pros and cons of videotaping aftermarket sales presentations 
  • Leveraging the latest eMenuing technology

In the June issue of Dealer Magazine, I discuss some of the federal cases involving aftermarket products and share guidelines to help your dealership. To view an online version of the article, titled Aftermarket Products: The CFPB’s Next Frontier, click here.

Taking the time to implement a consistent, compliant process for aftermarket selling could help your dealership avoid audits, fines, and damage payments from federal agencies or State Attorneys General in the future.  Aftermarket products do seem to be the CFPB’s next frontier in their continuing indirect attack on automotive dealers.

 

Randy Henrick is Associate General Counsel, Regulatory and Compliance, for Dealertrack.

From credit transactions and ID verification to menu selling, tracking and reporting and document management capabilities, Dealertrack offers the most comprehensive suite of Sales and F&I compliance tools. For more information on how Dealertrack’s compliance tools and programs can assist your dealership against potential loss, protect your customer information and help maintain compliance with federal and state regulations, or request a copy of the Dealertrack 2014 Compliance Guide, click here.