- consumers were falsely told that VPPs were (i) free or (ii) required in order to purchase or finance their car;
- VPP fees were added to transactions despite consumers specifically declining the products; and
- while there is no allegation of intentional discrimination, ECOA was nevertheless violated because the multistate dealership had a "discretionary policy that permits its employees to mark up interest rates and add charges for add-on products” which resulted in higher costs to minority applicants than similarly situated white applicants.
As part of the terms of the settlement, the dealership group must establish a comprehensive fair lending program that, among other components, requires the dealership in retail installment sale contracts involving dealer participation to (i) establish a standard dealer participation rate (SDPR) below a certain threshold that will be charged to all consumers, and (ii) only deviate below the SDPR for certain defined reasons that are recorded and approved by the dealership’s fair credit compliance officer. This program is very similar to the optional NADA/NAMAD/AIADA Fair Credit Compliance Policy and Program.
As with other recent actions, this consent order underscores the FTC’s intention to hold dealer leadership—as well as the dealership entities themselves—responsible for alleged unlawful behavior, and it further highlights the need for dealers to conduct robust training on and oversight of all aspects of their sale and finance operations.
As a reminder, NADA offers multiple products to assist dealers in this area, including the optional NADA/NAMAD/AIADA Fair Credit Compliance Policy and Program, referenced above and the optional NADA/NAMAD/AIADA Model Dealership Voluntary Protection Products Policy, which provides guidance and a policy template to help promote compliance with the selection, sale, and administration of VPPs that are offered to consumers. Dealers should carefully review these products with an attorney who is familiar with federal, state, and local law governing fair credit and VPPs as well as their dealership operations to determine appropriate compliance measures to adopt for their dealership.
The FTC’s press release, complaint, and proposed settlement are available here. For questions, contact firstname.lastname@example.org.