Automotive Risk Management Partners ARMP

FTC Enforcement Actions Show Need for Physical F&I Sales Audits

Terry Dortch President, Automotive Risk Management Partners

Key takeaways

  • The FTC recently took action against Coulter Motor Company in Arizona and David McDavid, which has three stores in Texas.
  • The FTC alleged payment packing, disparate impact discrimination, and undisclosed erroneous fees charged on vehicles in these cases.
  • A compliance company that only handles cybersecurity without doing physical audits of the sales process and F&I departments is not accomplishing as much as one that combines both.
  • Physical audits can catch issues like disparate impact and payment packing before they become larger problems.
  • Catching these issues allows a dealership's management team to build a process that supports an affirmative defense if litigation arises.

Summary

Recent FTC enforcement actions against Coulter Motor Company in Arizona and David McDavid's three Texas stores highlight the risks lurking in a dealership's sales process. The FTC alleged payment packing, disparate impact discrimination in pricing, and undisclosed fees charged to customers. These cases show regulators are actively scrutinizing how deals are structured and priced, not just how data is stored, and any dealership could face similar allegations if its F&I and sales practices go unchecked.

Physical, on-site auditing of the sales floor and F&I department is presented as essential, not optional, alongside cyber security compliance work. Terry Dortch argues that a compliance provider focused only on cyber protection misses issues like payment packing or discriminatory pricing patterns that only surface through direct review of deals and processes. Regular audits let management catch and correct these problems early, building a documented process that supports an affirmative defense if litigation or regulatory action arises. The core message for dealers: protecting the dealership's assets requires pairing cyber compliance with hands-on sales process audits.

Transcript

Recent FTC actions against dealerships

Hi, my name is Terry Dortch. I'm with Automotive Risk Management Partners. I want to talk to you today about a couple of situations, a couple of things that have occurred over the course of probably the last 10 days, and that's where the FTC has gone after two different organizations, the Coulter Motor Company out of Arizona and David McDavid out of Texas.

Allegations of payment packing and discrimination

So the David McDavid has three stores. FTC's alleging a number of different things. They're alleging payment packing, they're alleging disparate impact or discrimination. Coulter Motor Company, same thing, they're alleging discrimination. They're alleging that there were fees charged, erroneous fees charged on vehicles that weren't disclosed.

Need for physical audits beyond cybersecurity

I am telling you right now, if you don't have a compliance company doing physical audits and coming into your dealership and looking at your sales process, looking at your F&I dealers, F&I departments, you don't need a compliance company. Then don't have them just doing your cyber part. That's not going to accomplish nearly as much as having that coupled with the physical auditing.

Catching issues and building affirmative defense

Occurs, we catch things like that, we're going to catch that disparate impact, we're going to catch that payment packing scenario, and we're going to be able to sit down with your management team and come up with a process so that now you can wage that affirmative defense should anybody come in with any type of litigation against your organization.

Protecting dealership assets

Our whole goal is to protect the assets of the dealer. If your compliance company isn't doing that, give us a call. Information right here on the screen.

Questions this video answers

What did the FTC allege against Coulter Motor Company and David McDavid?

The FTC alleged payment packing and disparate impact discrimination against David McDavid, which has three stores in Texas. Against Coulter Motor Company in Arizona, the FTC alleged discrimination and erroneous fees charged on vehicles that were not disclosed.

Is cybersecurity compliance alone enough to protect a dealership?

No. If a compliance company is only doing the cyber part without physical audits of your sales process and F&I departments, that is not going to accomplish nearly as much as having both coupled together.

Why does a dealership need physical audits of its F&I sales process?

Physical audits catch issues like disparate impact discrimination and payment packing scenarios. This allows the management team to create a process so the dealership can wage an affirmative defense if litigation is brought against the organization.

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Covered in this video

  • FTC enforcement actions
  • payment packing
  • disparate impact discrimination
  • F&I compliance audits
  • affirmative defense