dealership operations / compliance
Don't Get Caught in a UDAP Trap
Jim Radogna is the president of Dealer Compliance
Consultants Inc., a compliance resources and training firm
located in San Diego. Radogna has a strong background in
dealership operations, having spent more than 15 years in
diversified roles such as sales manager, F&I; director, general
manager and director of training.
JRadogna@AutoDealerMonthly.com
D
ealers have plenty to
worry about when it
comes to rules and
regulations governing the
industry, but perhaps the
most harrowing are known
as UDAPs.
Unfair and Deceptive Acts and
Practices statutes, or UDAPs,
are consumer protection laws
that address what lawmakers
consider "unethical" or otherwise "bad" business practices.
The Federal Trade Commission
(FTC) Act prohibits unfair or
32
deceptive acts or practices,
and each of the 50 states and
the District of Columbia have
also enacted consumer protection laws that prohibit
these practices. These
statutes have far-reaching
implications for auto dealers
because they typically provide
for both enforcement actions
against dealers and awards of
damages to individuals hurt by
the practices.
Dealers need to be aware that
these statutes are extremely
broad and not only prohibit
acts and practices that fall
directly under the purview of
specific laws, but also any
other practice that may be
determined to be unfair or
deceptive to the consumer.
A behavior can be found to
be unfair and deceptive, and
thusly actionable, even
though it does not constitute
fraud, breach of contract
or negligence under more
traditional law. As a result,
UDAP claims are a favorite
among consumer attorneys,
especially those seeking class
action lawsuits.
In many states, courts are
given the power to award
double or triple damages to
complainants, as well as punitive damages and attorney's
fees for UDAP violations.
Courts may also be able to
issue an injunction prohibiting
the defendant from taking part
in such practices in the future.
Under virtually every statute,
some arm of state government–typically the attorney
general–is permitted to pursue
the matter even if a consumer
does not choose to.
There are a wide variety of
dealer sales, F&I; and advertising practices that may be
considered to be unfair or
deceptive by regulators or
courts. Several of these are
well-known, while others may
surprise you. Here are
some examples of potential
UDAP violations:
• Drip pricing, which the FTC
defines as a pricing technique
in which firms advertise only
part of a product's price and
reveal other charges later as
the customer goes through the
buying process.