Saturday, April 24, 2010

When the Going Gets Tough, the Tough Get an Attorney

It’s been a tough couple of years for just about everyone in this business. I suspect there is an exception though – attorneys that specialize in suing car dealers.

It seems that the recent economy has caused a higher than usual amount of disgruntled customers. An example is the customer who can no longer afford his or her car payment and would like to find a way out of the deal. Then there are the folks who got used to trading in their vehicles pretty much at will. No down-payment? No problem. Upside-down? No sweat. Well, as we’ve become painfully aware, those days are over. So, unfortunately, there are customers out there who feel that they got “screwed” by a dealer because they owe far more than their vehicle is worth and actually need money down to trade it in.

Enter the consumer attorney. Just Google “auto dealer fraud” and you’ll see what I mean. Besides the numerous law firm websites, you’ll find several consumer advocate sites which “educate” people about “car dealer scams”. After browsing through a few of these sites, a consumer may decide to call for a “free consultation” or ring up his local attorney general’s office. Not a pleasant thought. An innocent dealer can easily become the target of a government investigation or lawsuit simply because a customer is trying to wiggle out of a transaction.

According to the above-mentioned websites, these are some potentially “fraudulent activities” by dealers:

• Improper contract disclosure and concealing material facts

• Negative equity/Over allowances

• Payment packing

• Backdating of rewritten contracts

• Forced service contracts or “add-on” concealment

• Undisclosed deferred down payment

• Foreign language translations

• Used vehicle disclosures/Misrepresentation

• New/Used/Demo/Unwind misrepresentation

• Forgery

• Fraudulent credit applications

• Improper Contract Rescissions

• “Yo-yo financing” or spot delivery

• Overcharging of fees

• Undisclosed prior vehicle history or damage

• Odometer issues

• Bait and switch advertising

• False & misleading advertising

• Lying about credit scores

• Buy-lease switch

• Straw purchases

• Price gouging or discriminatory pricing

• Failure to sell at advertised price

• Contract re-negotiation

• Warranty fraud

A number of actions also start out as potential lemon law claims. I’ve actually seen freeway billboards for Lemon Law attorneys. The infamous 10,000 RV negative equity case in California began as a service contract dispute on a used motor home. Once the plaintiff attorneys got their hands on the deal jacket, well, the rest is history.

Unfortunately, dealers are more and more frequently becoming the targets of lawsuits, enforcement actions and, of course, the associated negative publicity. Attorneys general in many states identify accusations against dealerships as being their #1 concern, and recognize the political capital in going after dealers.

It’s more important than ever for dealers to dot there “I”s and cross their “T”s when it comes to compliance. Processes should be put in place to ensure that transactions will hold up to legal scrutiny in case of a customer complaint, such as:

• A vehicle history report should be run on all used vehicles to detect potential disclosure problems such as prior rental, damage, mileage, title issues, etc.

• A consistent process should be used for quoting payments, rates, etc.

• Consider having price caps on F&I products.

• Have an extra set of eyes check out all paperwork. If a mistake or oversight is discovered, correct it immediately.

• All employees should be properly trained in both legal compliance and company procedures.

In this environment, it is vital to take compliance seriously and understand that it is downright fashionable to target auto dealers. Let’s not make it so easy for them.

Friday, April 9, 2010

Avoiding Workplace Harassment Claims

Another day, another news story about a sexual harassment lawsuit against an auto dealer. This time it’s the general manager and the GSM versus the receptionist. Allegedly, they were snapping her bra, whacking her backside with a back scratcher, hounding her with come-ons, and sending her inappropriate text messages among other things. According to the suit, the abuse became so bad that the receptionist quit her job after only 6 weeks.

If any of this is surprising to you, simply Google “auto dealer harassment” to get an idea of how common these types of lawsuits are in our industry. You will find many cases of not only sexual harassment, but also racial harassment, age discrimination, etc. The amounts of fines and damages that dealers have been assessed are eye-popping.

In a statement about another case against a dealership, U.S. Equal Employment Opportunity Commission (EEOC) regional attorney John Hendrickson said that it was “amazing that at a time when the auto industry is struggling for survival and women exercise so much influence in the marketplace that anyone would in engage in sexual harassment or show contempt for female customers.”

EEOC Acting Chairman Stuart J. Ishimaru also said in a statement that "sexual harassment and sex discrimination against women in traditionally male-dominated industries, such as the auto industry, are still unfortunate realities."

Harassing conduct is sometimes so commonplace that we often don’t recognize the behavior as being inappropriate. Many people who have been around auto dealerships for any length of time may not be very surprised that this type of behavior exists, while others may feel that these are mostly frivolous lawsuits designed to extort money from dealers. Perhaps the accused were “just kidding around” and meant no harm?

No matter what, the dealer loses. Any lawsuit is a bad lawsuit. Besides the cost of defending these claims, there will likely be immeasurable damage to a company’s reputation. What owner wants the public to be exposed to media stories accusing their dealership of employing harassers or racists?

To help avoid these types of claims, dealership employees should be trained in harassment prevention. Staff members (especially supervisors) need to understand that it is simply not okay to snap bras, whack backsides or use derogatory nicknames in today’s world, no matter what the intention. As far as the law is concerned, harassment depends on how the conduct was received, not on the intent.

Some states, such as California, require harassment prevention training for supervisors. That’s great, but what about the non-supervisory employees? There is often a great of down-time at a dealership, and employees may get bored and tend to “goof around”. Is it harmless horseplay or perhaps behavior that crosses the line? Are supervisors able to monitor their subordinates’ behavior at all times? Are supervisors setting a proper example (bra-snapping)?

Most companies have an anti-harassment policy that all employees must sign, although I would venture to guess that the majority of people don’t read it or understand it. Having a policy in place and hanging posters is simply not enough protection for a dealership. Once again, All Dealership Employees Should Be Trained In Harassment Prevention.

Perhaps then the media, the EEOC and employees looking for an easy target to sue, can go pick on somebody else.

For information on convenient and affordable harassment training programs, use this link: