F & I Practices and Menu Mishaps That Can Sink Your Dealership
By: Keith E. Whann
Deanna L. Stockamp
Whann & Associates, LLC
Motor vehicle dealers are increasingly becoming targets for disputes
about improper disclosures and deceptive trade practices and, in
particular, dealership F & I practices. The negative reputation
continues to get fuel from media programs like Dateline NBC’s story
warning consumers to “Read the fine print and sift through the paperwork”
to avoid being “tricked” when buying a car and reports from consumer
groups like Public Citizen that ran “Rip-Off Nation: Auto Dealers’
Swindling of America” that foster the consumers’ perception that
misrepresentation is rampant in the motor vehicle industry. This
is occurring even as many dealers are working diligently to reform
their sales and F & I practices to make them more disclosure
and consumer friendly.
The goal of most dealers is to ensure that all of the Dealership’s
products and services are offered to all of the customers all of
the time. Claims frequently raised by consumers are related to allegations
that the dealership’s representatives failed to make disclosures
or made inconsistent disclosures. Examples of these claims include
that the dealership included the cost of optional products or services
that the consumer did not know he was purchasing in the price of
the vehicle (commonly referred to as “payment packing”) or was told
that he had to purchase them in order to complete the transaction.
Most F & I managers will not use payment packing to sell optional
F & I products, while other practices commonly used to sell F & I
products can likewise lead to legal problems for the dealership.
A popular F & I trend geared toward avoiding consumer claims
regarding deceptive F & I practices is menu selling. Using a
menu selling approach can help increase profits by presenting after-market
products in a consistent and professional manner. If done right,
menu selling can also help to ensure that the customer is provided
with complete information about the F & I products and services
that are available at the dealership and create a dialog where the
customer is involved in the decision-making process. Typically, customers
are more satisfied if they feel like they have made an intelligent,
well informed purchase decision selecting products and services they
truly desire.
Let’s be clear though, menu selling will not, in and of itself,
eliminate all of the dealership’s potential exposure in the F & I
department. In fact, it may raise a number of additional legal and
regulatory issues for the dealership. We have reviewed many menus
that contain incomplete information about the products and services
offered, inappropriately make reference to products as “insurance”
or “environmental protection products,” improperly use the word “waiver,”
and make reference to a “package” when in fact all of the products
and services being offered by the dealership are being sold individually.
The more thorough the menu, the more protection it should afford
the dealership. The menu presentation should let customers know that
all products are optional and will not affect their ability to obtain
financing. It should include all of the products and services available
with consistent descriptions of each one and, at a minimum, how much
the product or service will increase the customer’s monthly payment.
Finally, the menu will often contain the ability for a customer to
designate the products they elect to purchase and those they decline.
To avoid potential pitfalls, dealers should evaluate their current
sales process to determine if the sales strategy supports a full
disclosure selling effort. The dealership’s policies should stress
ethical and honest sales practices and detail how performance will
be regularly assessed. If a legal claim arises, the written polices
will help the dealership raise a defense that an error occurred notwithstanding
the dealership’s established business practices and policies. An
ongoing audit process of completed deals remains one of the dealership’s
best defenses. Dealers should also consider how F & I Department
pay plans are structured and their potential impact on the issue.
Traditional dealership sales paperwork can also play an important
role in this area. Using documents such as an F & I Product Purchase
Confirmation in conjunction with an F & I Menu gives the dealership
another opportunity to discuss the F & I products and services
that are available, while reinforcing that the F & I products
that have been offered to the consumer are optional and verifying
that the consumer had the opportunity to read the applicable brochures,
applications and contracts and to ask questions if any of the information
is unclear. Finally, utilizing a Delivery Confirmation, as opposed
to a “We Owe” or “Due Bill”, gives the dealership a final opportunity
to obtain a customer’s acknowledgement that he had the opportunity
to review the documents and understands the entire transaction.
Dealership sales and F & I paperwork should be reviewed and
updated at least on an annual basis and anytime the dealership modifies
its product offerings to ensure that they accurately reflect the
products and services available at the dealership. Reviewing these
materials and properly training employees on how to sell F & I
products and services can go a long way in protecting your dealership
from unwanted legal exposure.
The information contained herein has been provided by Keith E. Whann
of the Law Firm of Whann Associates, LLC, and is for general information
purposes only. You should contact legal counsel for specific application. |
