Tag Archives: compliance

Who Is Tapping YOUR DMS?

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There is a lot of controversy in the automotive industry regarding which vendors are pulling data (customer or transactional) from a dealer’s DMS and then re-selling it to vendors like TrueCar and others. (I guarantee you that TrueCar is not the only vendor that’s using your data against you, FYI)

[Note: For non-automotive industry readers: DMS stands for Data Management System and is what contains all customer, financial, vehicle and transactional data (ie. all that information on the credit application you filled out when you bought that car). There are dealer vendors (website companies, 3rd party services like TrueCar.com, Edmunds.com, Cars.com, etc.) that are given access to this information for various reasons.]

Consumer privacy laws and red flag compliance keep getting stricter and stricter when it comes to customer personal information and how it needs to be protected. This is all well and good but I’d argue that most consumers don’t care about their personal information. They may say they do but actions speak louder than words.

An industry acquaintance shared a website yesterday that assists people in seeing, and cleaning up, which apps and websites are accessing your various social media accounts. (You can find it at http://mypermissions.org/ )

As I played around with it, there wasn’t much in there that surprised me but I’m also very diligent about which apps I allow to access my information and I periodically monitor them to remove permissions for apps or websites I no longer use. Even though I do that, there were a few in there that I was surprised to see. I guarantee you that a normal consumer has way more apps and websites accessing their personal information than I do – games, iPhone apps, websites with social media log-ins, plug-ins etc. Most require (or ask) to access your personal information to use their service. How convenient is it to use Facebook Connect? It’s super-easy but, every time you do, you are giving yet another website or app permission to access your personal information – essentially trading your information for convenience and/or the ability to utilize that particular website.

As I thought about this collection of different social media sites – Facebook, Twitter, G+, LinkedIn, etc. – it started to feel more and more to me like this was MY OWN PERSONAL DMS.

These accounts – singly and collectively – contain more personal information about me than any other source including the government.

Those social networks are free to use, but are they really? In one sense, they do exactly what your vendors are doing to your dealership’s DMS – selling your personal information for profit. Most consumers know this on some level and have chosen to allow that access in exchange for their information on some level. Sure, there are times when a consumer outcry occurs -  say when Facebook changes a privacy setting – but those quickly go away mostly because the consumer modifies the permissions again (ie. who can see your posts or other activity on Facebook).

So consumers do care about protecting their information, posts, etc. from people on an individual level, what they’re not shielding themselves from or thinking about is what companies are getting their personal data (either from the sites themselves or from outside apps and websites that they’ve allowed access) and what those companies are doing with it.

So, while we’re in an uproar about what vendors are getting access to customer data and what they are doing with it, keep in mind that you also have your own personal DMS and, just like you should care who has access to your customer’s information, you should care about who has access to your own.

Buy Here ‘Cause They Suck

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Most dealerships and businesses in general know that it’s bad practice to bad-mouth your competition. That being said, I know of and have heard plenty of salespeople and managers using their online reviews to help close a deal by comparing them to their competitors online reviews. This practice is similar if not exactly the same. You are leveraging negative comments about your competitor left by other people (who you are representing as real – we all know fake reviews exist) to your positive reviews (you aren’t really showing people any negative reviews about your dealership, are you?) in an effort to “sell” yourself and your dealership. So, while this isn’t talking bad about your competitor directly, it is indirectly, and what you say can now get you in some deep water.

In a precendent setting ruling, an Alabama car dealership has been awarded $7.5 million dollars due to slanderous comments made during a close to consumers by both the salesperson and sales manager. Apparentley, the dealership’s competitor was owned by an Iranian-born but naturalized U.S. citizen. The sales manager told at least one couple while attempting to close a deal that the competitor was “helping fund insurgents there and is also laundering money for them.” The salesperson was also accused of telling the same couple that the dealer was ”funneling money back to his family and other terrorists…” and that he has a “brother over there and what you’re doing is helping kill my brother.” It is also reported that the competitor was frequently referred to as “Taliban Toyota”.

The jury awarded the Alabama dealer  $2.5 million in compensatory damages and $5 million in punitive damages after deliberating for 3 hours.

While this is certainly an extreme example, it bears watching where the “line” is. This had more to do with a leveraging of race, stereotypes and bigotry but there’s no telling what future lawsuits outcomes would be utilizing this ruling as precedent.

I find it astonishing that, it appears, the sales manager, at least, is still employed at the dealership based on the statement that neither of them were available for comment per a “dealership spokesman”.

I think there are now 7.5 million reasons to add prohibiting the “bad-mouthing of your competitor” to your employee handbook. 

The Case Of The $30 Million Rims

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(Originally published at Dealer magazine)




Last week, a California Court of Appeals judge determined that a dealer violated several California state laws and ruled in favor of the plaintiff in a class-action lawsuit that will have huge ramifications for dealers within the state. The ruling was the result of some poor decisions from start to finish. Ultimately, this ruling will allow 1,500 car buyers the right to have their purchase contracts rescinded, which is estimated to potentially cost the dealership upwards of $30 million.


The story began in 2004 when Reginald Nelson purchased a vehicle from Pearson Ford (now Kearny Pearson Ford) in San Diego, CA. The car cost $9,995 and was spot-delivered without financing being secured. The customer also did not have existing auto insurance, so a binder was purchased for $250. This was added to the purchase price of the vehicle as well as some rims that were promised the customer. The insurance binder was on a “due bill,” but it is unclear whether the rims were. (My guess is that the rims were initially on a due bill but, once the approval came through, either the profit was reduced or the structure didn’t meet the approval’s financing restrictions. So, to keep the car on the road, the rims were taken out of the deal.) Six days later, the dealership contacted Reginald asking him to return to the dealership to fill out more paperwork. The paperwork reflected a change in the financing terms per the actual approval received by the dealership and was dated the date the vehicle was spot-delivered. Mr. Nelson signed the new contracts.


In interviews with Mr. Nelson, he says that he repeatedly tried to get the rims he was promised by the dealership but the dealership would not give them to him. Eventually, this led Mr. Nelson to contact an attorney. Unfortunately for the dealer, he contacted Hal Rosner, a consumer-advocate and auto law expert attorney specializing in automobile transactions and dealerships.


Mr. Rosner immediately identified several things that the dealership did that were not in compliance with state laws:


1. The second contract was backdated to the date Mr. Nelson took delivery of the vehicle, not the date in which he signed the new contract.


2. The insurance binder was added to the price of the vehicle, not itemized separately on the contract.


Both of these are violations of the state’s one document rule. Through discovery, Mr. Rosner was able to determine that these violations had occurred many times at this dealership. The 1,500 occurrences that Pearson Ford manipulated were all illegal. “That’s more than once a day for five years that they’re telling people, ‘We gave you the wrong financials,’”said Rosner. “That’s hardly an accident.” Rosner was able to get the lawsuit converted into a class-action in March 2007.


Prior to the class-action trial, Pearson Ford made a settlement offer of $500,000 which was accepted. After the settlement was approved, both sides asked for their attorney’s fees to be paid by the opposing party. The trial court awarded attorney’s fees to Mr. Nelson and denied them to Pearson Ford. Upon further review, the judgment was vacated and trial moved forward.


The initial trial court found no violation save for a “technical violation” and awarded restitution in the amount of $50 per class member ($75,000). Both parties disagreed with the ruling (for different reasons) and it was taken to the California State Court of Appeals. 


The California State Court of Appeals found that both actions described above were, in fact, violations of the Automomobile Sales Finance Act, the Unfair Competition Law and the Consumers Legal Remedies Act by backdating the contract and including the insurance in the cost of the vehicle, effectively costing Mr. Nelson an additional $27 in interest plus the sales tax on the $250 insurance binder wrapped into the vehicle purchase price (then approximately $19). This ruling effectively will give the 1,500 class members the right to have their contracts rescinded.


Keep in mind that these contracts are at least 7 years old, some much older. Assuming some of these vehicles were used at the time of purchase, this dealership will have to buy back contracts IN FULL for vehicles that could be 10+ years old.


I personally know that the practice of backdating contracts is common in Cailfornia, as is wrapping in insurance into the purchase price. In the past 3 years or so, dealers have slowly been changing those practices, but this ruling sets a dangerous precedent. I’m sure there are plenty of civil attorneys itching to get their hands on a consumer with a backdated contract right now.


This story started as a credit challenged consumer, with no car insurance, that wanted some rims for the 1998 Infiniti I30 that he bought from the dealer. This vehicle was already 6 years old when he purchased it. Had the dealer honored their promise to the consumer and given him his rims, legal action probably would never have happened. Once legal action happened, the dealer argued against paying the plaintiff’s attorney’s fees on top of an accepted settlement offer.


Those rims and $46 ultimately put the dealership on the hook for an estimated $30 million.


Those have got to be the most expensive rims in history.


Click here for ABC news 10 story: Pearson Ford Ordered to Buy Back Over 1,500 Vehicles


Click here for a  Copy of Appeal Court Ruling