July 29, 2021

Compliance offers dealerships best shield against regulatory scrutiny

The Federal Trade Commission’s settlement with Bronx Honda this year marks the first time the regulator has brought an unlawful discrimination claim against a car retailer. Compliance experts believe it could be a gateway to increased enforcement actions against dealerships by the FTC.

Dealerships should work particularly hard in this exacting environment to ensure customers are being treated fairly and that discriminatory behavior is not tolerated in the finance and insurance office.

Patty Covington, a partner at Hudson Cook, said the New York dealership case is significant and potentially sets a precedent for the agency’s approach.

Terry O’Loughlin, director of compliance for Reynolds and Reynolds Co.’s documents business, said dealerships should internally audit car deals on a quarterly basis and bring in an external auditor at least once a year.

“The dealership needs to demonstrate that it has not deviated from its routine,” O’Loughlin said. “Dealers are at risk and have to pay attention, even though this adds more burden on their programs.”

Dealerships can brace against potential regulatory oversight by examining and adhering to preferred industry guidelines for fair lending, Covington said, such as the Fair Credit Compliance Policy jointly released by the National Automobile Dealers Association, the American International Automobile Dealers Association and the National Association of Minority Automobile Dealers.

“It would behoove a dealer to start paying attention to the issue of unlawful discrimination,” Covington said. “If it’s bad enough, a federal regulator is going to move against discrimination.”

Dealerships should conduct a review of their business practices to ensure they have fair lending standards in place and that those standards are being properly documented and adhered to by staff.