Innovation is in the eye of the beholder. The same tactics that automotive dealerships attempt to use to make more money from sales may appear, to regulators and attorneys, as unfair, deceptive, or abusive acts or practices.
A recent F&I and Showroom article digs into this dichotomy, cautioning dealerships that if a new sales technique sounds “too good to be true, it probably is.” The article presents for consideration a trick in which salespeople sell a vehicle above the advertised price by asking customers to add a “tip” for outstanding service. While a few states may not unequivocally prohibit dealerships from selling a vehicle above advertised price using this trick, lawsuits and regulatory actions are another story:
“Can you avoid the ad price rule by adding the additional cost to an aftermarket product? You may be able to get away with such a practice for a while, as it would be harder for a prosecutor to spot the violation by looking at the sales contract, but this is playing with fire.
In some cases, a prosecutor may allege that this amounts to ‘payment packing’” or quoting a price or monthly payment to a customer that includes products or services that the customer did not request. California has explicitly prohibited this practice. In other states, prosecutors have relied on their [UDAAP] statutes to target these practices. For example, New York Attorney General Eric Schneiderman has brought nearly a dozen cases in the last several years charging dealers with ‘jamming,’ another word for payment packing.”
Lest we forget, UDAAPs are born through legal argument. “Unfair” and “deceptive” are open to interpretation, and federal agencies such as the Federal Trade Commission, the Department of Justice, and the Consumer Financial Protection Bureau are always on the lookout for practices that fall under the UDAAP umbrella.
“If, for example, your dealership sells more of an aftermarket product to Spanish-speaking customers and at a higher price than to English-speaking customers — and a legitimate business reason for the pricing difference does not exist — this could be the basis for a lawsuit that alleges the dealership unfairly discriminates against Hispanic customers.”