Thanks to the power of the Internet and regulatory zeal for them, consumer complaints boast a shelf life that’s more on par with red wine than red roses. Disagree? Consider this story Terry O’Loughlin shared earlier this year.
O’Loughlin, now the director of compliance at Reynolds and Reynolds, spent 16 years with the Florida attorney general’s office. His first trial was against a dealer, who eventually ended up with a prison term of eight years. O’Loughlin specialized in automotive cases before leaving the Sunshine State’s top prosecutorial department in 2006.
Then two years ago, O’Loughlin received a notice from his former employer to return to the attorney general’s office because a large FedEx package arrived for him. Turns out, it was a consumer complaint stemming from an incident nearly a decade old. O’Loughlin handed the material back to the Florida attorney general since the complaint still fell in its jurisdiction, and officials pursued the matter.
“Consumers, they’ll finally figure out where to file a complaint,” O’Loughlin told dealers gathered in Las Vegas earlier this year at the Compliance Academy hosted by the National Alliance of Buy-Here, Pay-Here Dealers.
“They might not send it to the right place initially, but they will, and it may affect you,” he added.
During his presentation, O’Loughlin mentioned research that indicated consumer complaints associated with the automotive industry — including vehicle performance and service by dealerships and finance companies — have been ranked No. 1 in volume for 19 of the past 20 years. As a result, he insisted that government agencies — especially the Federal Trade Commission, the Consumer Financial Protection Bureau and attorneys general — are watching for complaints and making them the basis for regulatory enforcement actions.
“Right now, you are under the gun,” O’Loughlin said to a ballroom full of buy-here, pay-here dealers.
With that situation in mind, O’Loughlin joined a host of other legal experts and consultants who all have reiterated to BHPH operators of all sizes — handle complaints quickly and with the most prudent strategy possible before they snowball into more significant problems.
“If a consumer files a complaint in writing, consider it a ransom note,” O’Loughlin said. “It could be to you because if you don’t correct that problem, somehow it might become very expensive.”
How Complaints Fuel Activity
During his presentation, O’Loughlin highlighted the most popular path consumers are using to lodge complaints again dealers — regulatory agency websites. He pointed out the prominent position complaint gateways have on the sites hosted by the CFPB and the FTC.
O’Loughlin didn’t have the time to go state by state, but he showed how the attorneys general in New York and Florida have followed the same strategy established by their federal brethren in terms of how to set up their online portals to funnel consumer complaints their way.
“An attorney general can enforce almost any law he wants. The CFPB and FTC have much stricter mandates. It all depends on consumer complaints,” O’Loughlin said.
“What does the CFPB promise to do? They promise to mediate, but what they’re really doing is collecting data against car dealers,” he continued. “The FTC does it a little differently because they say the FTC cannot resolve individual complaints but have tips to your money back.
“So why is the Federal Trade Commission asking for complaints if they’re not going to help that consumer? Once again, they’re trying to establish a pattern and practice to file charges,” O’Loughlin went on to say.
At this point, O’Loughlin implored BHPH dealers to rectify complaints as best as possible before their customers turn to federal or state online outlets to share their unhappy details.
“How do they get to these agencies? You let them get there. If you stop them, the government won’t ever hear about them,” he said.
O’Loughlin pointed out that dealers have the right to see any complaints that are submitted to federal or state regulators. If one is in the database, he suggested dealers remedy the situation, if possible.
Through various record search methods, O’Loughlin also mentioned that other individuals are scouring complaint databases looking for juicy details. One he referenced was consumer-supporting media outlets.
Back in the fall of 2011, the Los Angeles Times generated plenty of buzz with a series of reports titled, “Wheels of Fortune,” sharing stories of buyers allegedly mistreated by BHPH dealers throughout California. The stories sparked a significant legislative rise by Golden State lawmakers who put together a series of new regulations that dealer associations fought hard to keep off the books. Gov. Jerry Brown eventually signed two of the three most significant bills into law.
In light of all of those developments, O’Loughlin believes the Los Angeles Times and California lawmakers “wouldn’t have been able to do it without those consumer complaints.”
And newspaper researchers and reporters along with legislative assistants aren’t the only one combing through these complain databases. O’Loughlin highlighted another interested party — one that might make BHPH operators cringe.
“There are thousands of attorneys all across the country that do nothing but sue car dealers, and they’re looking for opportunities here,” O’Loughlin said. “Where do they get them? They get them from complaints.”
Another Observer with Same Perspective
Automotive Compliance Consultants general counsel David Missimer gave a strong warning to dealers stemming from what might be considered a small problem or incident blossoming into a significant issue that attracts the attention of federal regulators.
Missimer described many dealers’ attitude toward government laws regulating their business as unfortunate and likely to cost them dearly.
Why could such a stance hurt dealers badly? Missimer pointed to how easily it has become for consumers to register complaints against dealerships.
“The compliance approach of some in our industry is that the Consumer Financial Protection Bureau, the Federal Trade Commission nor the Occupational Safety and Health Administration will take much interest in a single dealership, so why make compliance a priority?” Missimer said.
“This approach works well until someone is injured in a shop accident, a disgruntled employee decides to take on the title of whistleblower or a consumer takes their complaint to the government,” he continued.
Missimer reminded dealers that the government has made it very easy for consumers to register complaints against them.
“Have you logged onto the CFPB or FTC website lately? These agencies are begging people to them and complain about your business,” he said.
Presently, Missimer noted that CFPB posted complaints do not provide a consumer narrative, but the bureau is strongly considering changing that policy.
Given the CFPB’s eye on dealerships, Missimer believes that it likely won’t be long before consumer report narratives will also focus on dealerships as well.
Missimer said haphazard compliance is not an option in today’s business environment.
“Not a single reward is associated with noncompliance unless you consider the discount in attorney fees you get from your lawyer for frequent use,” he said.
“For those dealers,” Missimer continued, “their business risk-reward analysis should consider how much can it afford to pay for fines, lawyers, settlements and judgments — and still make a profit.”
Missimer reminded dealers the CFPB is not going away, and the FTC has taken more dealer compliance action in the past six months than it has in the last 10 years.
He also noted federal and state agencies now share consumer complaint information.
“To test your risk, type into Google ‘car dealer suit’,” Missimer said. “When I did this, I got more than 1.2 million results in 0.34 seconds, with the very first result being, ‘How to sue a used-vehicle dealer in small claims court.’”
Plans of Action
While adding a disclaimer that BHPH operators should also seek recommendations from their own attorneys, O’Loughlin harkened back to his prosecutorial days when giving suggestions on how dealers should handle complaints and maintain compliance in connection with vehicle sales.
“Just making an attempt at complying with the law or an attempt on how to follow what the government wants you to do helps you defend yourself. Just because you can’t get it exactly right doesn’t mean you shouldn’t start,” O’Loughlin said.
At one junction of his Florida attorney general’s office time, O’Loughlin prosecuted a pair of dealers simultaneously. One operator made a concerted effort to follow state and federal regulations. The other one ignored rules.
O’Loughlin paused and asked dealers, “Guess which one felt the full brunt of the attorney general’s office?”
Before an operator ends up in a legal entanglement, O’Loughlin recommended that operators establish a dedicated phone line and protocol handled by an upper-level experienced manager to handle complaints and monitor regulatory and other consumer-based websites for activity.
“Don’t get noticed, but if you do, make sure you’re ready with some kind of protocol because you have to have a response strategy,” O’Loughlin said. “You used to be under the radar, but not anymore.”