[author: Peter Bauer]
Numerous state agencies watch over dealerships, including PennDOT, Banking, the Dealer Board and the State Police. While these various agencies have their issues to watch out for when auditing or reviewing dealership activities, one of the more unfair reviews was to ensure a dealership was not marking up service contracts, GAP products and other aftermarket products more than 100% in financing situations. The law came on the heels of abusive home financing practices occurring in the early 2000s. It was believed that abusive practices in the home financing world were also occurring in the vehicle financing arena. The mark up restriction was put in place to limit the perceived abuses that were occurring. However, in early 2012 the law was revised (thanks to the efforts of PAA) and 100% mark up restriction was eliminated.
So what will Banking focus on now that the 100% mark up restriction has been eliminated from the law as of May 2012? There is plenty for Banking and the other state agencies to look at to ensure dealers are keeping their operations compliant. Banking will continue to review the form finance contracts dealers receive and use from their finance sources. Banking has also been following up to make sure a dealer’s separate disclosure form is being provided to customers before the financing contract is entered into. This disclosure reminds the customer that they do not have to purchase aftermarket products in order to secure financing. Additionally, Banking is also looking at privacy protection programs and documentation. After many years in place, and even though privacy notice forms changed and were simplified in January 2011, some dealers still do not get these privacy notices right. Dealers need to review their privacy and identity theft safeguards and make updates to their programs. These government agencies will continue to look at financing related activities and documents, PennDOT titlework and customer sales documents to ensure compliance with the various laws regulating dealerships.