Under the Radar Terrence J. O’Loughlin, J.D., M.B.A. F or almost two decades, I prosecuted car dealers in the state of Florida on behalf of the Florida Attorney General’s Office. If I readily knew the name of a car dealer that was not good news for that dealer since it meant that consumers were complaining about him. If I wasn’t familiar with the name of a dealer it meant that he had stayed under the radar. Once a dealer is on the radar the Attorney General pays close attention to his business which is not a good result. It becomes fertile territory for legal action. If a dealer is ever sanctioned it will be freely sanctioned again should there be legal cause to do so. A case in point is a Midwestern dealer who was sued by his Attorney General’s Office recently. However, it wasn’t a typical lawsuit as this particular dealer had already signed a settlement agreement previously with this Attorney General, several years before. In other words, this dealer had violated the law previously, and had signed a Voluntary Assurance of Compliance (AVC). Violating an AVC brings down upon the perpetrator the wrath of the legal imperator. The Law that all Dealers Need to Fear In 1914, sixteen years after the very first dealership was opened in 1898, the Federal Trade Commission (FTC) was created. As part of this federal act, the FTC was charged with enforcing cases based upon unfair and deceptive acts and practices, or UDAP, to which it is commonly referred. All states have passed similar statutes that are called little FTC acts. UDAP in the Various States UDAP in the various jurisdictions generally have titles such as the “Consumer Fraud and Deceptive Business Practices Act” and these laws state that they are acts to protect consumers, borrowers, and merchants against fraud, unfair methods of competition, and unfair or deceptive acts or practices, in the conduct of any trade or commerce and to give the Attorney General certain powers and duties for enforcement. “The general standard for violating UDAP is engaging in business behaviors that have the tendency or capacity to mislead a consumer” The majority of cases are based upon deception (lying and cheating) versus unfairness (imbalanced or prejudicial transactions against the consumer). For a prosecutor, this is not a high standard to surmount. In other words, dealers can, without a high degree of effort, be sued on a UDAP basis. Dealers should be acutely aware that government regulators, private plaintiffs, and class action attorneys all might use the UDAP statute to sue them. AVC’s and AOD’s The UDAP statute provides attorneys general with numerous tools and settlement options, many of them quite expensive to the target. For example, damages may include statutory penalties, consumer restitution, as well as legal and investigative costs. The standard of proof is low for these damages. Depending upon the state, the attorney general can enter into an agreement with the target called an Assurance of Voluntary Compliance (AVC) or an Assurance of Discontinuance (AOD). These agreements generally are not filed in court but are between the state and the defendant where the defendant agrees to pay damages and may admit to various compliance infractions, promising never to engage in those practices again. Should the defendant be caught engaging in those practices again the damages can be severe. Typical Attorney General Allegations From my Attorney General career, I tabulated various dealer violations of the law. My current list includes 153 of these possible violations. Common violations include false advertising, not honoring agreed upon terms, payment packing, fraudulent spot deliveries, power booking, and misrepresenting contractual terms and conditions. If a dealer wishes to attract the attention of a state regulator, false advertising will accomplish this task. Advertising cases are the easiest cases to make for the state. Staying Under the Radar Dealers should plan on two strategies: Strategy 1-Avoid getting noticed. Strategy 2-If they get noticed, be prepared. The primary way to avoid being noticed is to know the law and follow it. In addition, if consumers ever complain, redress consumer complaints with dispatch, as they are radioactive. Dealers should attempt to resolve them before they are filed with a regulator. The majority of dealer prosecutions are the result of consumer complaints. This Midwestern dealer continued to have complaints filed against him after the AVC was signed which triggered the lawsuit. It could have been avoided. The second strategy entails having a written and active ethics and compliance program at the dealership. Some dealers employ rogue personnel from time to time who may place the dealership in legal peril. The affected dealer can defend himself by demonstrating that he is trying to observe the law by employing these programs. They are defenses and may just avoid further regulator action. efforts into account. If a dealer becomes proactive and employs these two strategies, he should avoid ever having to enter into an AVC or an AOD. The ultimate strategy, of course, is for all dealers to behave ethically. By doing so, dealers can avoid a lot of “legal hurt” and will not be on the radar. Prior to joining Reynolds in 2006, Terrence O’Loughlin worked for 16 years in the Economic Crimes Section of the Office of the Attorney General, State of Florida. Terry has routinely assisted numerous states’ agencies regarding motor vehicle fraud and written articles for Consumer’s Digest, F&I Magazine, Consumer’s Research, and more. He is also a regular columnist for P&A Magazine. 16 In my days of prosecuting dealers, I certainly took these
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