TRENTON, N.J. (Bloomberg) -- Tesla Motors Inc. will be allowed to sell its electric cars straight to consumers in New Jersey, after Republican Gov. Chris Christie signed a bill overhauling the state’s dealership laws.
Christie on Wednesday said he signed legislation allowing direct sales by manufacturers of zero-emissions vehicles. The law requires Tesla to maintain a service center in the state where consumers can have their cars fixed. The governor previously said he would sign such a bill.
The measure caps a yearlong struggle by Tesla and its supporters to allow the sales. New Jersey’s Motor Vehicle Commission voted unanimously in March 2014 to bar direct sales, a step dealerships said would protect consumers.
“We’re pleased that manufacturers like Tesla will now have the opportunity to establish direct sales operations,” Christie said in a statement.
Tesla currently has “galleries” in New Jersey, which refer would-be buyers to New York and other states.
Spokesmen for Tesla didn’t immediately respond to an e-mail seeking comment on the New Jersey law.
Tesla CEO Elon Musk has criticized the argument that dealers protect consumers from car manufacturers.
“Unless they are referring to the mafia version of ‘protection,’ this is obviously untrue,” he wrote in a post last year on the company’s blog addressed to New Jersey residents. “Consumer protection is pretty much the furthest thing from the typical car dealer’s mind.”
WASHINGTON, D.C. - Calling its Operation Ruse Control, the Federal Trade Commission joined 32 law enforcement agencies in announcing a nationwide and cross-board crackdown on deceptive advertising and fraud in auto sales, financing and leasing. The operation, which encompassed 252 enforcement agencies, resulted in six new FTC cases and $2.6 million in monetary judgments.
The announcement marks the second major enforcement sweep in 14 months - the last one netting 10 dealers for deceptive advertising in January 2014. The latest operation, which involved the United States Attorney’s Office in the Northern District of Alabama and state and local agencies in the United States and Canada, goes beyond advertising and included 187 enforcement actions in the United States and 65 in Ontario and British Columbia, Canada.
"Growing fraud and other deceptive practices in auto sales and financing are important issues affecting consumers when they are buying a vehicle," said Joyce White Vance, United States Attorney for the Northern District of Alabama. "My office has worked closely with the FTC on this issue, and has prosecuted criminal cases at a Birmingham dealership. The Mortgage, Loan Fraud and Discrimination Working Group of the Attorney General’s Financial Fraud Enforcement Task Force also is working with other law enforcement agencies to determine what we can do now to prevent fraud during the auto lending process."
The sweep included both civil and criminal charges of deceptive advertising, automotive loan application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. It also marked the first time since receiving expanded authority over auto dealers under the Dodd-Frank Act that the FTC has targeted add-ons, which the agency described as a practice of a “dealer or other third party adding to the vehicle sales, lease, or finance agreement charges for other products or services.” In its press release, the FTC listed extended warranties, payment programs, guaranteed automobile protection (commonly called GAP or GAP insurance), credit life insurance, road service, theft protection, and undercoating as examples.
“For most people, buying a car is one of the largest purchases they’ll make,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Car ads must be truthful, loan terms must be clear, and dealer practices must be honest. That’s why our partners are working together to crack down on deceptive marketing about car sales, leasing and financing.”
The FTC announced that is has charged San Mateo, Calif.-based National Payment Network (NPN) with allegedly violating the FTC Act for the way it marketed its biweekly payment service online and through its network of authorized dealers. At issue was the company’s claim that its service saved consumers money, with the agency charging the payment provider with failing to disclose the significant fees it charges - including enrollment fees that averaged $775 on a standard five-year auto loan - that often cancelled out any actual savings.
Last May, the National Automobile Dealers Association warned its members in a memo that the FTC had issued civil investigative demands to dealers in connection with the sale of biweekly payment products. The association noted that the goal of the probe was unclear, but several industry insiders, speaking off the record, said the FTC was targeting NPN and its automotive operations. The FTC, however, would neither confirm nor deny the agency’s probe at the time.
In today’s announcement, the FTC announced that it also took action against Matt Blatt dealerships, which operates multiple locations in New Jersey, for violating the FTC Act by failing to disclose or adequately disclose the fees associated with NPN’s service.
The biweekly provider and Matt Blatt dealerships have agreed to settle the FTC charges, and under proposed consent orders are prohibited from misrepresenting that a payment program will save consumers money, unless the amount of savings is greater than the total amount of fees and costs charged in connection with the program. They also are prohibited from misrepresenting that the payment programs or their associated fees will improve, repair or otherwise affect a consumer’s credit record.
NPN will refund more than $1.5 million to consumers, and waive another $949,000 in fees to current customers during the fee waiver period. Matt Blatt dealerships also will pay $184,000 to the FTC as part of the settlement.
The commission voted unanimously to issue the two administrative complaints and to accept the proposed consent orders. The agreements are now subject to public comment for 30 days, beginning today and continuing through April 27, 2015, after which the commission will decide whether to make the proposed consent orders final.
sample Cory Fairbanks Mazda advertisement
The FTC also announced that three dealers - Cory Fairbanks Mazda of Longwood, Fla., Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif. - have agreed to settle charges that they ran deceptive ads that violated the FTC Act, the Truth in Lending Act (TILA) and/or the Consumer Leasing Act (CLA). According to the FTC complaints, ads touted sales, lease or financing options that seemed attractive but were cancelled out by fine-print disclaimers. In other instances, the disclaimers did not disclose relevant terms, such as required down payments.
The proposed settlements in these actions prohibit the defendants from misrepresenting the purchase cost or any other material fact about the price, sale, financing or leasing of a vehicle. Jim Burke Nissan and Cory Fairbanks Mazda are also prohibited from representing that a discount, rebate, bonus, incentive or price is available unless it is available to all consumers or all qualifications and restrictions are clearly and conspicuously disclosed. The proposed orders also address the TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these rules.
The commission voted unanimously to issue the three administrative complaints and accept the proposed consent orders. The agreements will now be subject to public comment for 30 days, beginning today and continuing through April 27, 2015, after which the commission will decide whether to make the proposed consent orders final.
Additionally, the FTC announced that, at its request, the U.S. District Court for the Southern District of Florida temporarily halted the practices of Regency Financial Services of Lake Worth, Fla., and its CEO Ivan Levy. The agency alleged that they charged consumers upfront fees to negotiate an auto loan modification on their behalf, but then often provided nothing in return.
The court also froze defendants’ assets, and last month entered a Stipulated Preliminary Injunction Order. The FTC’s lawsuit, filed on Jan. 26, 2015, is ongoing, and the commission is seeking a permanent injunction against the defendants.
According to the FTC’s complaint, the defendants violated the FTC Act and Telemarketing Sales Rule by misrepresenting that they would obtain auto loan modifications for consumers and provide full refunds if they failed to do so.
The commission voted unanimously to authorize staff to file the complaint.
The reason Porsche dealers are generally happy? They make a lot of money, and that only improved last year.
Porsche Cars North America CEO Detlev von Platen said Porsche's U.S. dealerships posted an average net profit margin of 3.9 percent in 2014, up from 3.6 percent the year prior. That compares with 2.4 percent for the nation's average dealership through the first 11 months of 2014, according to the National Automobile Dealers Association.
When measured on a per-vehicle basis, Porsche dealers make more money than any other mainstream brand, save for probably Land Rover, auto dealer buy-sell adviser Alan Haig says.
That said, the average dealership gross profit for a new Porsche has come down slightly since the Macan crossover went on sale nearly a year ago, he said. It's a lower-priced vehicle with less available margin. Haig estimates that average is now in the mid-$9,000s, down from $10,000. He says that's still more than double the average per-vehicle gross profit for a Mercedes-Benz, BMW or Audi dealership.
But Porsche's slight per-vehicle drop is not a bad thing because the trade-off is more volume overall.
GENEVA -- Infiniti's QX30 crossover concept, unveiled here last week, should boost the brand's sales in North America and Europe, but it also will help Infiniti expand its dealer body in markets outside North America.
"It's a very good business proposal for dealers who are interested in investing in dealerships with Infiniti of Europe," says Roland Krueger, president of Infiniti Motor Co. worldwide. "This model gives us access to a volume base that we couldn't previously offer to our business partners. We're seeing investors come forward to talk to us now."
Infiniti officials met with retailers at its Geneva show stand to discuss dealership opportunities and inspect the new crossover, which will reach showrooms in 2016.
The brand also has been working with its U.S. retailers to make sure the new Q30 compact hatch launches correctly in the United States late this year, followed by the QX30 crossover, its sister model, next year.
Compact crossovers are a growing segment in the U.S., but they represent some of Europe's biggest volumes, for both mass-market and luxury lines. Until now, Infiniti has been absent from the segment.
"Everybody's targeting that segment," Krueger says. "It's an important source of sales for us, for conquesting and upgrading, as consumers move up from mass-market brands."
Infiniti's global sales rose 14 percent last year as it worked to expand its presence outside the United States to the U.K., Germany, Russia, China and other markets. It sold 68,870 vehicles outside the U.S. last year.
The brand remains little known in some luxury markets, such as Germany, where it has just six dealerships.
Krueger says Infiniti will be adding more dealers in Europe -- Germany in particular -- in the coming year. He broke away from the show to visit an Infiniti dealership and service center that was under construction in downtown Geneva. That outlet will become Infiniti's 67th European store.
Even just a few years ago, if you attended any industry event, there would inevitably be a discussion at some point about the “old guard” among car dealers who were refusing to accept a rapidly changing landscape of lead generation and management. At the time, that term applied to those who would not accept Internet leads as on par with those acquired via phone calls or other methods; today, that term is also being used for those who are slow to accept mobile technologies in the same capacity.
But is there really an “old guard,” or has the industry as a whole become more accepting of the rapid changes technology is imposing on it? ADM asked experts to weigh in on the subject, and they are optimistic about the current state of the industry.
“In my recent experience, most dealers understand the importance of this medium and how vital it is to lead generation and sales,” notes Bill Wittenmyer, a partner in Orange County, Calif.-based ELEAD1ONE. “I see a much greater importance placed on the website and its content — not just sales, but also on the fixed-ops side.”
“More and more, we see that all dealers know the value of Internet leads,” notes Alexi Venneri, co-founder and CEO of Digital Air Strike in Scottsdale, Ariz. She went on to say that where the disconnect is still happening isn’t in knowing the leads are important, but rather in figuring out the best way to handle the diverse types of leads. “They may just not know all the best ways to respond. They may also not realize all the new types of Internet leads; this includes questions and comments on social networks and reviews. When handled quickly and professionally, even negative reviews can be converted into prospects and sales.”
“Sometimes new concepts are hard for us old car dogs to embrace. However, if you aren’t embracing the new digital marketing age, you’ve missed the bus,” stresses Tim Parker, president and co-founder of DealerLink Inc., based in Charlotte, N.C. “This is the first time you have the opportunity to really do what we hoped for in the retail business: Everything you do digitally is 100% accountable, you know exactly where every customer came from and you can instantly pinpoint what works and what doesn’t.”
Accountability, and its ultimate impact on the bottom line, is something Shane Born, ProMax Unlimited’s COO, is looking at. He notes that dealers need to not just be passive about collecting leads from a single source and sitting on them, but they need to be proactive in both obtaining them and managing them. “There are still some [dealers] that only work leads generated from their own website,” says the Davenport, Iowa-based executive. “Often it’s because of their marketplace. In some areas it’s extremely expensive to buy third-party leads, so if you don’t have the right processes in place to get good conversions, you are not going to get acceptable ROI.”
All About Education
Part of the issue isn’t always an unwillingness to embrace change, but rather a lack of knowledge about where to begin and how to properly implement a new solution that leaves many dealers frozen. “I’m not sure ‘old guard’ is the issue,” notes Kim Jennett, the director of marketing and brand strategy for Redwood City, Calif.-based Dealix, a CDK Global Company. “That said, I do think there is a level of education for lead follow-up based on where the lead is coming from that needs to be addressed. This may sound controversial, but I would take a cue from Larry David: Throw out the scripts! Having a loose outline will make the salesperson more human and approachable.”
“Dealers need to research opportunities for learning and get training directed specifically around the digital consumer,” says Todd Dearborn, vice president of sales for CarsDirect, El Segundo, Calif. “A dealer can attend any of several trade shows, attend Internet Sales 20 Groups and hire consultants who can come in and assess and recommend changes, establish processes and suggest vendors to work with.”
“It is not really Internet leads that dealers need to start embracing,” says ActiveEngage CEO Todd Smith, based in Orlando, Fla. “They need to fully understand that the way people buy cars today is completely different than 20 years ago — or even five years ago. Dealers must be open to learning about the shopping habits of today’s car buyer as well as how these shoppers prefer to receive information. I believe most dealers have at least started this process.”
Elise Kephart, the vice president of Internet sales training for Charlotte, N.C.-based Phone Ninjas, quantified it, noting, “Eighty-six of customers are going online now before purchasing a vehicle. That statistic alone should show dealerships that customers are well-informed and do hours of research before coming into a dealership.”
Room for Improvement
However, while the industry as a whole has started moving in the right direction, there are still holdouts. Some are still refusing to accept Internet and mobile leads as valid, while others are responding to the leads, but are slow to realize that even that must change.
“There are dealers who still refuse to respond to leads in a timely manner, and there are dealers who still refuse to give pricing information,” says Scott Pechstein, vice president of sales for Autobytel, based in Irvine, Calif. “Instead of understanding that their processes need to evolve, they complain about lead quality when they don’t get a response back from the consumer. A majority of the time, that prospective buyer has moved on to another dealer, and they’ve already ruled out the dealer from whom they never got a response — or a response that lacked pricing information.”
At the end of the day, dealers who fail to adapt will find themselves left behind by their competitors and the car-buying public. Those who cling to the “old ways” or who refuse to change because “We always did it this way” will find it increasingly difficult to do business going forward. Zach Klempf, the CEO of San Francisco, Calif.-based A1 Software Group put it best, saying, “Dealers who are stubborn to adapt to new changes in consumer car buying preferences — and don’t embrace Internet leads — risk becoming showroom roadkill!”
CHICAGO — Organizers of Compliance Summit, a series of regional events dedicated to front-end compliance, have announced that the next event will be held April 20–21, 2015, at the DoubleTree Chicago O’Hare in Rosemont, Ill. The Midwest event will follow a successful inaugural event held in the Miami area this past November.
“We are delighted to have the opportunity to bring Compliance Summit to the Midwest,” said David Gesualdo, show chair. “If the outcome of the Florida event is any indication, attendees will leave with an invaluable education in region-specific regulatory challenges and solutions.”
The Midwest conference will begin with a Welcome Reception on the evening of Monday, April 20, and continue with a full day of educational sessions and panel discussions on April 21. The events are open to automotive industry professionals who are involved in front-end compliance, including dealer principals, general managers, compliance officers, sales and F&I professionals and general agents.
Speakers at the Florida event included the head of the state dealer association, attorneys and dealership compliance officers. The agenda covered challenges specific to Florida and the Southeast region as well as a comprehensive review of current threats toward dealers and finance companies by the Federal Trade Commission and Consumer Financial Protection Bureau.
Further details, including the full agenda and information about registration and accommodations, will be available in the coming weeks. For sponsorship and exhibition opportunities,
contact Eric Gesualdo via email or call (727) 612-8826.
PORTLAND, Ore. - AutoAp rolled out a new service designed to help dealers easily verify whether their vehicle inventory has any “open” safety recalls that need to be repaired. The company’s Dynamic Recall Management SM service also tracks daily the recall status on every vehicle in a dealer’s inventory.
In 2014, more than 60 million vehicles were affected by safety recalls, challenging dealers to keep track of vehicles with open safety recalls. AutoAp’s Dynamic Recall Management SM service solves this by automating most of the process for dealers.
According to company officials, the service cuts the time it takes to manually track safety recalls from more than 80 hours per month down to just a few minutes each day, saving an estimated $18,000 per year for an average dealer with a monthly inventory of 100 vehicles.
Even when dealerships buy vehicle history reports that include recall checks, they have to buy new reports on each vehicle every day to check for newly issued recalls from the National Highway Traffic Safety Administration. Making this process even more challenging are the errors in the NHTSA safety recall database. AutoAp’s new service solves these issues with its single-source safety recall database, which discovers and corrects those reporting errors.
“Although AutoAp saves people time and money when buying and selling used vehicles - and keeps them safe through safety recall alerts - we also integrate our solution with dealers,” said Mark Paul, AutoAp’s CEO. “With all the news about dealerships having difficulty staying on top of manufacturers’ recalls, we decided to do something about it.”
AutoAp is current offering special introductory pricing of up to 30% off MSRP (Conditions apply). For more information, visit dealer.autoap.com.
OMAHA, Neb. And DALLAS — Berkshire Hathaway Inc. completed its acquisition of the Van Tuyl Group on Tuesday. The transaction, announced in October, is the largest in the retail automotive industry’s history, officials said.
Van Tuyl Group, the largest privately held dealership group in the United States, has been renamed Berkshire Hathaway Automotive and is headquartered in Dallas. Larry Van Tuyl will serve as chairman of the board of the new company. Jeffrey C. Rachor, formerly Van Tuyl Group’s president, will be chief executive officer of the enterprise.
The cornerstone of the Van Tuyl business model is local entrepreneurial dealership managers with minority ownership stakes, officials said. Every managing partner has enthusiastically committed to stay on with Berkshire Hathaway Automotive and they will remain equity partners in their respective dealerships.
“This is the beginning of a journey that will have no end,” said Warren Buffett, CEO of Berkshire Hathaway, Inc. “Cecil and Larry have given us the ideal platform with which to build an auto dealership business that will be thriving and growing 50 and 100 years from now. The fun has just started.”
“Mr. Buffett and I made this deal on a handshake and it is no surprise that completing the transaction went smoothly and according to plan,” Van Tuyl said. “Berkshire Hathaway’s acquisition of the Van Tuyl Group has been embraced by all internal and external stakeholders. I want to take this opportunity to thank our manufacturer partners for their universal support and approval of the transfer of their franchises. Warren Buffett and Berkshire Hathaway are the perfect owners of this business. My father Cecil, the original founder of the Van Tuyl Group, would be very proud today.”
SANTA MONICA, Calif. — Sales of certified pre-owned vehicles hit an all-time high of 2.3 million units sold in 2014, making up 20.8% of total used-car sales at franchised dealerships, according to the latest Used Vehicle Market Report from Edmunds.com.
Edmunds said it expects this trend to continue through 2015, with lease vehicles expected to return to dealerships at a faster rate than in previous years.
“This allows dealers to maintain a large CPO inventory," said Jessica Caldwell, senior analyst at Edmunds.com. “Car shoppers are finding a great selection to choose from, and in the current economy, many are comfortable spending a bit more for that extra peace of mind that a CPO car brings.”
Used cars that are lightly used are appealing to car shoppers because they are more often equipped with modern technology and have already taken the biggest hit in depreciation, added Caldwell. In 2014, 19% of used vehicles sold were one to two years old, up from 14% in 2013.
The average transaction price of a used car also increased from $15,900 in 2013 to $16,800 in 2014. One-year-old vehicles sold at an average of $30,000, increasing 5.7% over 2013. Edmunds attributed the increase to several factors, including low interest rates, longer loan repayment terms and declining gas prices. Customers also sought out larger, more expensive vehicles, bu they were able to pay less monthly for them, Edmunds noted.
For the first time in years, Utah lawmakers are making a serious push to dismantle — or at least chip away at — state laws protecting car dealerships.
The assault on longstanding rules by free-market Republicans who view them as protectionist and anti-competitive has taken the form of several bills up for consideration in the current legislative session.
One would amend a 1991 law that prohibits establishment of a new-car dealership within 15 miles of an existing one, unless it is OK'd by a board whose members include several representing current dealers.
Another would scrap the state mandate that a dealership must close on one weekend day — effectively a Sunday-closing law the late car dealer and Utah Jazz owner Larry H. Miller successfully requested in 2000.
A third measure would open the door for manufacturers to sell directly online, and another would change the formula for distribution of local tax revenue from auto sales.
Freshman Rep. Kim Coleman, R-West Jordan, said the bills take baby steps toward where she would like to end up.
She describes the raft of proposals as the "initial opening of this set of laws that we're going to try to repeal and or modify in the years to come. This is 25 years of protections in the making — very embedded in the industry — so it's going to take a while to peel some of these back."
Craig Bickmore, director of the New Car Dealers of Utah association, said the industry is concerned about attempts to shake up the current system that he said works "marvelously well."
Dealerships operate under unique protection laws because it is a unique industry, he said. The manufacturers set all the terms of the franchise agreements and franchisees have to take risks and make huge investments to open a new dealership.
"The reason for franchise laws is to keep that critical balance between the very, very large manufacturer and a comparatively small entity like a dealership," Bickmore said in an interview.
Although many people have labeled the laws as "anti-competition," he said that is not the case. "They are valuable because in any free-enterprise system, there has to be a set of rules and regulations for free enterprise to flourish. …[Car dealers] are the most competitive people on the planet. But there is one group they can't compete against: the manufacturers."
Danger zone • The bill that appears to have the most juice in this legislative session is one sponsored by Rep. Mike McKell, R-Spanish Fork, that would ease restrictions on opening new car dealerships anywhere near existing ones.
McKell said his main motive in pushing HB290 is to get more car dealerships in his city, one of the fastest-growing in the state.
"Car dealerships are great citizens of their community and they add tremendous value to a community," he said during a public hearing.
HB290 easily cleared committee and last weekpassed the House on a 70-0 vote and won unanimous approval Monday in a Senate committee.
A big attraction car dealerships hold for local governments is the lucrative slice of sales tax revenue — ten of millions of dollars — which now goes to the city where a dealership is located.
"That is only enjoyed by a handful of cities," Coleman said in an interview. "The state, through its regulation, through its sanctioning of protections, has picked winners and losers among cities."
NEW YORK — In a regulatory filing Tuesday, JPMorgan Chase revealed that it is engaged in discussions with the U.S. Department of Justice about “potential statistical disparities” in the markups on auto loans charged to car buyers of different ethnicities.
JPMorgan said it is having the discussion about rate markups on loans originated by car dealers and purchased by the firm, but did not disclose whether it was the target of an investigation by the regulator.
Several other finance sources have been subpoenaed by the DOJ in recent months related to their subprime lending practices, including Santander Consumer USA, GM Financial, Credit Acceptance Corporation, Ally Financial and Consumer Portfolio Services. The regulator has also paired with the Consumer Financial Protection Bureau (CFPB) on possible enforcement actions against captive finance companies Toyota Motor Credit Corp. and American Honda Finance Corp. The regulators have alleged that both of the captives have allegedly engaged in practices that resulted in minorities paying more for auto loans.
WASHINGTON, D.C. — Santander Consumer USA Inc. has agreed to pay at least $9.35 million to resolve a lawsuit filed by the U.S. Department of Justice (DOJ), which charged the auto finance source of violating the Servicemembers Civil Relief Act (SCRA). The complaint and the settlement, which is subject to court approval, were filed on Wednesday in the U.S. District Court for the Northern District of Texas.
The settlement covers repossessions of 1,112 motor vehicles between January 2008 and February 2013. According to the DOJ, the proposed consent order represents the largest settlement involving vehicle repossessions ever obtained by the United States under the SCRA.
“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” read a statement from Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable."
The SCRA protects service members against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any repossession if the service member took out the loan and made a payment before entering military service. The court may delay the repossession or require the lender to refund prior payments before repossessing. It can also appoint an attorney to represent the service member, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the service member.
The DOJ charged Santander with failing to obtain court orders before repossessing motor vehicles owned by protected service members, preventing them from obtaining a court’s review on whether their repossessions should be delayed or adjusted in light of their military service.
The lawsuit alleges that Santander initiated and completed 760 repossessions without court orders. The agreement requires Santander to pay $10,000 plus compensation for any lost equity (with interest) to each of these service members. The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated finance sourced had conducted in violation of the SCRA before Santander acquired the loans. The agreement requires Santander to pay $5,000 to each of these service members. Santander is also required to repair the credit of all affected service members.
“The SCRA is an important protection for the men and women serving our country in the armed forces, and this settlement not only will rectify the past improper repossessions of service members’ vehicles, but will work to prevent such improper repossessions in the future,” said Acting U.S. Attorney John Parker of the Northern District of Texas.
For future repossessions, the settlement requires Santander to check the Defense Department’s automated database to see if a car’s owner is in military service prior to conducting a repossession.
The Department of Justice first learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. The referral involved a claim that Santander illegally repossessed the car of a service member, U.S. Army Specialist Joshua Davis, in the middle of the night, after having been informed that he was at basic training. The department also opened its investigation after learning that Santander used an arbitration clause included in its loan documents to prevent a second service member from pursuing systematic relief through a class action lawsuit he filed. It alleged that Santander had repossessed service members’ vehicles in violation of the SCRA.
As part of its investigation, the United States has already identified Santander’s illegal repossessions and efforts to collect unlawful repossession fees between January 2008 and February 2013. Service members identified based on that investigation will be contacted by an independent settlement administrator later this year. And according to the settlement, Santander must conduct a review and provide compensation for any additional unlawful repossessions that may have occurred since February 2013.
DETROIT -- Fiat Chrysler has taken the unusual step of warning some of its most enthusiastic customers -- about some of its dealers.
At issue is outsized consumer demand for the 2015 Dodge Charger and Challenger SRT Hellcats and dealer practices that the company says are “unscrupulous” and perhaps illegal.
Gualberto Ranieri, FCA’s senior vice president for communications, says that a “handful of dealers” have accepted large numbers of orders for the 707-hp Dodges “without regard to available supply and without advising their customers that orders may not be filled, if at all, for many months or longer. We believe such a practice may constitute a breach of the Dealer’s Sales and Service Agreement with FCA US LLC and a violation of other applicable laws.”
“Accordingly, we wanted our customers to hear directly from us how we are allocating Hellcat vehicles and we hope that you will bear with us as we, in conjunction with our supply base, continue to balance the supply and overwhelming demand,” Ranieri wrote late Friday on Fiat Chrysler's Objects in the Mirror blog. Ranieri's piece describes the unique way that Dodge is allocating Hellcat Challengers and Chargers to its dealers.
As Automotive News first reported, the allocation method is based on total Dodge sales and how long previous Hellcats have remained in inventory. The effect is to indirectly penalize dealers who might hold the wildly popular cars for themselves or place a large market adjustment on the sticker, slowing their sales to consumers.
Ranieri says that the allocation system “can be an even greater opportunity for unscrupulous businesses or individuals to take advantage of customers.” He urges consumers to ask pointed questions of their dealer before placing a Hellcat order, including whether a deposit is required and whether the deposit is refundable, and to “consult your state law governing the vehicle orders and return of deposits.”
Jim Arrigo, the current chairman of the National FCA Dealer Council, said that “any time you try to allocate through a shortage, it’s going to be difficult.” However, Arrigo said that an automaker’s allocation system is what it is, and dealers have to learn to live within it.
Arrigo said he has heard of some dealers taking deposits on Hellcats “just so that customer can’t go down the road and order the car from a competitor. I think that’s wrong. For somebody today to take 200 deposits or even 30 orders for that car, when they know that they’re not going to get that many, that’s just wrong.”
Arrigo, who owns five FCA dealerships in south Florida, said both the automaker and the dealers have to act with integrity through this process.
“This one car’s not going to make or break a dealer,” Arrigo said. “And to treat this vehicle without some kind of integrity, you have to ask yourself as a dealer if you want to go down that road.”
Resource:
Dodge dealers called out for 'unscrupulous' Hellcat sales practices by FCA exec
