When I was young, I used to marvel at the shear volume of stuff in my parents’ medicine cabinet.

 

“Wow, what’s it all for?!” I used to think to myself. “There’s a ton of it!  What can they possibly need all that stuff for?”

 

Those were the days I used to have a toothbrush and toothpaste in my “medicine cabinets,” if you want to even call it that.  Life was simpler for a young guy because I just didn’t need anything else – no issues and no complications.

 

Now, my medicine cabinet seems like it could serve as a local CVS…and so it is with the car business.  Things used to be much simpler than now, especially with regard to risk and compliance.  There’s just MORE of it now and more regulatory actions, regardless of who’s President and which party is in control of Congress. It would be naïve not to consider the state regulators who are very active.

 

Let’s discuss the state Attorneys General (“AG”) who act independently from the federal government.  During a recent conversation with a colleague, she referred to the AGs as “Almost Governors,” which is true as many have political aspirations.  Maura Healy, now Governor of Massachusetts, was their former AG who was very aggressive at regulating the automobile industry.   She filed numerous actions, including against JD Byrider, Jaffarian Volvo Toyota, AutoMax, Inc. ($1 million settlement), and was able to obtain a $27 million settlement against Credit Acceptance Corporation to name a few.

 

According to the National Association of Attorneys General (i.e. a 20 Group-like organization for AGs), the Attorney General has the following responsibilities:

 

  • “Issuing formal opinions to state agencies
  • Acting as public advocates in areas such as child support enforcement, consumer protections…
  • Proposing legislation…
  • Representing the state and state agencies before the state and federal courts,
  • Handling criminal appeals in serious statewide criminal prosecutions,
  • Instituting civil suits on behalf of the state…
  • Operating victim compensation programs”[1]

 

In addition, state AGs may have the authority to:

 

  • Protect the public interest.
  • Control litigation and appeals on behalf of the state or territory.
  • Appear for and defend the state or territory and its agencies.
  • Determine the legal policy of the state or territory.
  • Intervene in legal proceedings on behalf of the public interest…[2]

 

The AGs have wide latitude to intervene when the public’s interest is in question or in jeopardy.

 

Often, the AGs involve the Federal Trade Commission (FTC).  Three (3) recent actions demonstrate these interactions between the federal government and the state government.

 

On December 19, 2024, the FTC and the state of Illinois took action against Leader Automotive Group for overcharging and deceiving customers through add-ons, junk fees, and bogus reviews. The joint press release says, “A group of 10 car dealerships doing business as Leader Automotive Group and their parent company, AutoCanada, will be required to pay $20 million to settle allegations they systematically defrauded consumers looking to buy vehicles as a result of a lawsuit by the Federal Trade Commission and the state of Illinois.”[3]

 

The $20 million proposed monetary judgment is the largest the FTC has secured against an auto dealer.[4]

 

Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, was quoted as saying, “Working closely with the Illinois Attorney General, we are holding these dealerships accountable for unlawfully extracting millions of dollars from consumers through a textbook bait-and-switch scheme, and bolstering their poor reputation with fake reviews. We will continue our work to ensure that consumers are not being overcharged for cars, and that honest dealers do not need to compete with firms that cheat.”[5]

 

The Illinois Attorney General, Kwame Raoul said, “I appreciate the collaboration with the Federal Trade Commission to ensure bad actors are held accountable and our consumers are protected from deceptive business practices.”[6]

 

On December 27, 2024, the FTC and the Maryland Attorney general sued to stop Lindsay Automotive from falsely touting low prices and overcharging consumers for unwanted fees and add-ons.

 

The allegations here described Lindsay Automotive systematically deceiving and overcharging car buying consumers for years, costing them millions of dollars in junk fees and unwanted add-on products.[7]

 

Maryland Attorney General Anthony G. Brown said, “Buying a car is a significant financial investment.  Marylanders deserve to know up front how much they will actually pay for a vehicle and should not be surprised by hidden charges they did not budget for. Our office will not let car dealerships profit from unfair and deceptive practices.”[8]

 

According to the complaint, Lindsay regularly advertises deceptive prices on its website and its and in its advertising, promoting vehicles for sale at a price that is not actually available to the vast majority of consumers. Lindsay employees continued the deception when the consumers call, claiming the advertised price is real.[9]

 

The allegations continue, “Only when consumers get to the dealership do they learn the price is hundreds or even thousands more than advertised because they do not qualify for a raft of rebate programs, or because they must pay thousands of dollars in additional fees. One dealership manager cited in the complaint told a consumer that the price on the website “was not realistic,” and that “no one would qualify for it because it was nearly impossible to qualify for all the rebates to get to that price.”[10]

 

Third, in October, 2024 the FTC and the state of Wisconsin took action against Rhinelander Automotive and its General Manager alleging they regularly charged many customers junk fees for “add-on” products or services without the customer’s consent.[11]

 

As a result, the FTC is sending more than $1 million in checks to 7,531 consumers.

The FTC has an interactive dashboard showing how much money they have returned to consumers.[12]  As of the writing of this article, the FTC touts a return of $2.33 billion to 15,066,892 over 185 cases.

 

So, how does it start?  How does this happen?

 

The dealerships put themselves in a position to be vulnerable to these AG and FTC complaints.  Most regulatory issues begin with unresolved consumer complaints.

 

Consider a few of these best practices:

 

  • Addressing and resolving consumer complaints no matter:
    • How big or small
    • Whether or not the dealership legally “owes” the customer whatever they are asking for
  • Advertising prices on vehicles which everyone can (easily) obtain
  • The dealership should consider using a menu showing what items the customer chose and which ones they rejected
  • For any products which the customer purchased, the dealership should have a corresponding product purchase page signed by the consumer
  • For any products which the customer purchased, they should be listed on the final Buyer’s Order and final Retail Installments Sales Contract (RISC)

 

And there’s more.  Preventing regulatory issues at the state and federal levels requires a robust risk and compliance process.  This requires the dealership have policies in place and audit those policies to ensure they are being followed.  Then, these activities must be documented and stored for easy retrieval.

 

The prescription for steering a dealership through risk and compliance issues requires more than a toothbrush and toothpaste. That simple approach worked decades ago. Now, you need all the medicines, all the pharmaceuticals at your disposal, i.e. a full medicine cabinet, replete with: antiacids and heartburn medication, ibuprofen, Neosporin, cough drops, antihistamines, and antidiarrheals.   You may need to utilize some of these for yourself while you are managing these daily issues.  They can be painful in many ways.  When you catch the problems early, you will only need over the counter solutions.

 

If you don’t have a strong risk and compliance program, you may need the doctor to prescribe the strong stuff!   Remember, just two aspirin a day helps keep the AG away…

 

 

 

[1] https://www.naag.org/attorneys-general/what-attorneys-general-do/

 

[2] https://www.naag.org/issues/powers-and-duties/

 

[3] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-illinois-take-action-against-leader-automotive-group-overcharging-deceiving-consumers-through

 

[4] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-illinois-take-action-against-leader-automotive-group-overcharging-deceiving-consumers-through

 

[5] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-illinois-take-action-against-leader-automotive-group-overcharging-deceiving-consumers-through

 

[6] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-illinois-take-action-against-leader-automotive-group-overcharging-deceiving-consumers-through

 

[7] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-maryland-attorney-general-act-stop-lindsay-auto-falsely-touting-low-prices-overcharging

 

[8] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-maryland-attorney-general-act-stop-lindsay-auto-falsely-touting-low-prices-overcharging

 

[9] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-maryland-attorney-general-act-stop-lindsay-auto-falsely-touting-low-prices-overcharging

 

[10] https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-maryland-attorney-general-act-stop-lindsay-auto-falsely-touting-low-prices-overcharging

 

[11] https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-sends-more-1-million-consumers-harmed-rhinelander-autos-unlawful-junk-fees-discriminatory

 

[12]https://public.tableau.com/app/profile/federal.trade.commission/viz/Refunds_15797958402020/RefundsbyCase