For a time, F&I was legal battleground
Most of the salvos were aimed at the finance and insurance department - generally a dealership's biggest profit center. Many dealerships and groups found themselves accused of racial bias in their markups of wholesale interest rates on vehicle loans.
The scrutiny reached a peak in late 2003 and early 2004. Network TV investigations focused on two publicly held auto retailers.
A December 2003 report on "Dateline NBC" featured Sonic Automotive Inc. of Charlotte, N.C. The report suggested that unethical and illegal F&I practices are common at dealerships.
In April 2004, CBS' "60 Minutes" zeroed in on UnitedAuto Group Inc. of Bloomfield Hills, Mich. The report questioned markup practices at a UnitedAuto store in Memphis, Tenn.
At the same time, consumer advocates sought to instigate lawsuits against other large dealership groups. They often cited the accounts of former employees of the companies.
Plaintiffs' lawyers brought class-action suits against large vehicle lenders. The suits alleged that interest-rate markups were the result of racial discrimination. Dealers countered that the markups were an appropriate charge for the services they provided buyers.
Despite the political clout of statehouse dealer lobbies, legislatures in several states considered legal restrictions on rate markups.
The industry responded with voluntary disclosures. Many dealerships limited finance charges. They also introduced fixed-price menus for aftermarket finance and insurance products. Lenders, including automakers' captive finance companies, restricted dealers' finance income.
The National Automobile Dealers Association and several automakers endorsed the Association of Finance and Insurance Professionals' certification program, which trains dealership F&I managers in law and ethics. NADA also launched a public education campaign about vehicle finance.
The industry's moves curtailed the legal onslaught. Most of the lawsuits were settled. Legal challenges waned.
By 2006, only two states, California and Louisiana, had passed laws that limited interest-rate markups. And the Louisiana measure was promoted by that state's dealer association.
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