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3 Sales F&I Practices That Will Cost Your Dealership $10 Million

Robert Ebin /

Nobody wants to give away $1 million, much less $10 million, right? Unfortunately, a particular auto dealer group in Illinois allegedly used unfair and deceptive business practices, including discriminatory sales tactics and “junk fees,” resulting in a record-setting $10 million settlement from the state of Illinois and the Federal Trade Commission (FTC). Let’s look at the 3 Sales F&I Practices that could cost your dealership millions and the lessons learned to keep this from happening to you.

1. Misleading Customers with Add-on Fees

Although the details are worth reading, the complaint states that the dealership defendants misled customers in several different ways and added optional products to their bills without their consent or sometimes even their knowledge. The dealerships achieved this by:

  • Telling the customers, the add-on services or products were required to purchase or finance the vehicle
  • Waiting to add charges that customers specifically declined or after confirming that the price didn’t include any add-ons
  • Not saying anything to the customer but sneaking the charges onto long sales documents after finishing hours of negotiations

The complaint also states that since 2017, the dealerships have charged over $70 million in unauthorized or unwanted add-on feels.

Lesson learned: The FTC has its sights set on assumptive sales and other deceptive practices.

Assumptive sales are when a contract is given to a customer that already shows charges that weren’t discussed with the customer or weren’t agreed to. Some states like California might already have requirements or laws in place to counteract these practices, but it’s often up to the dealership use better business practices.

The FTC is also clearly concerned with how optional products are disclosed to customers. Misrepresenting that things like theft deterrent devices, surface protection products, services contracts, and debt cancellation agreements are not optional can violate the Truth in Lending Act.

2. Discriminating Against Customers

The FTC states that the dealerships were discriminating against certain customers, by charging higher costs on Black credit applicants on average than non-Latino White applicants. The dealerships allegedly used policies that permitted sales employees to markup consumer transactions at their own discretion.

The complaint states that Black customers were charged around $190 more in interest than similarly situated non-Latino White customers and paid on average $99 more for the same add-ons than non-Latino White customers. The FTC found the disparities to be statistically significant and unrelated to “underwriting risk or credit characteristics of the applicants.”

Lesson learned: The Equal Credit Opportunity Act (ECOA) remains important to the FTC.

You’ve likely received communication from your lenders about markup policies and ECOA compliance, which prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or public assistance. Those notices and this current claim emphasize just how important having a Fair Credit Policy and Fair Credit Compliance Program are to your dealership.

3. Violating Advertising Rules

Finally, the FTC alleges that the dealerships violated several advertising rules, including Regulation Z by not including required financial disclosures when advertisements presented a “triggering term,” for example, advertising “$90 down” without any further financial disclosures.

Lesson learned: You can’t be careless about your advertisements, and you can’t forget about Regulation Z.

Remember that Regulation Z states that once a “triggering term” is used, the ad has to state:

  • The amount or percentage of the down payment,
  • The terms of repayment, and
  • The annual percentage rate (APR)

The bottom line is that your dealership is best served with compliant selling and advertising practices. The FTC is teaching us that it’s watching dealerships.  Moreover, the FTC is not just looking for one specific violation but is willing to build out a broad case over many years. Stay vigilant and remember that KPA is here to help you maintain compliance and save you that potential $10 million settlement.

Learn More About KPA F&I Software & Services Designed for Dealerships

Vera F&I software and services are specifically designed for vehicle dealers, including automotive, truck, RV, marine, and power sports. Our F&I compliance solutions will help you develop compliant sales processes, train sales and finance teams, and maintain clean deal jackets—all to help you minimize risk and stay out of the spotlight with the FTC.

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