NADA recently published a policy guide for protection products and we should commend the association for being proactive. Highlights are below but, if you’re a practitioner, you must read and heed the full document.
- Consistent presentation, i.e. use a menu
- Prominent disclosures like the AutoNation pledge
- Consistent, non-discriminatory pricing
- Detailed waiver explaining any variance from standard pricing
Why? Because otherwise dealers and lenders may be prosecuted. NADA cites the $11 million Santander GAP settlement and the U.S. Bank deceptive marketing settlement. I can see this going the way of dealer reserve. Regulators will force lenders to restrict dealers’ discretion in setting markups.
NADA and others have warned on F&I markup since 2013, when the CFPB issued its first subpoenas on the topic, and last year the National Consumer Law Center published their report, subtitled: How dealer discretion drives excessive, arbitrary, and discriminatory pricing.
The chart above is one of several alleging discriminatory pricing in F&I. As for lender pressure, the NCLC paints a big target on Ally Financial, reminding their readers that “state and federal authorities should investigate … and bring enforcement actions.”
Good operators will not have much to change for the model policy. The recommended new waiver is a bit cumbersome, but the rest of it is already best practice, like menu selling. The AutoNation pledge has been around for fifteen years. Frictionless cancellation is discussed here.
In addition to regulatory pressure, there is also competitive pressure on F&I markup. I’ll cover that in a later post. On the bright side, AutoNation is near $2,000 a copy and their compliance has always been excellent. So, no excuses.