It's now clear that state and federal regulators are actively pursuing what they consider to be unlawful activity in dealerships' F&I departments.
The Federal Trade Commission and other enforcement agencies have cracked down on hundreds of dealerships in the U.S. and Canada for customer loan fraud, wrongful sales of add-on products and services, and deceptive advertising. And dozens of dealerships are under investigation by the New York attorney general's office for alleged unlawful sale of credit-repair services and identity-theft protection products.
Still, industry experts say that while wrongdoing happens in the F&I office, the number of incidents is falling as a result of better policing by dealers.
While no one keeps a formal count, anecdotal evidence suggests that illegal activity has dropped during the past 14 years, leaving either isolated cases of individual staffers committing petty fraud or big rings of employees making headlines.
"The number of dealers who are actually doing anything that wouldn't look good on the front page of Automotive News, that number is going down. It's gradual." said Ted Kraybill, president of ESI Trends in Largo, Fla., which collects data for the National Automobile Dealers Association's annual dealership work force studies.
Attorneys specializing in dealership law peg the drop in retail crime in part to dealers stepping up oversight of their stores.
When crime does happen, observes Mike Charapp, partner at Charapp & Weiss in McLean, Va., it often involves a ring of employees because "it takes that kind of system now to defeat compliance systems that have been put together."
Aaron Jacoby, automotive group practice leader at Arent Fox's Los Angeles office, agrees with Charapp and adds: "More dealers are auditing. More dealers are aware of the kinds of problems fraud can cause for the business, so they're looking harder."
Even so, he says, "At any given time, we have dealerships where rogue employees are accused of power booking, payment packing or a misrepresentation of an interest rate."
And that means dealerships still have work to do. In this special section on finance and insurance, Automotive News tackles the issues dealers face as they try to stay on the right side of regulators. Featured is advice from dealers and other experts on how to sell and price F&I add-on products, vet the vendors that provide them, keep advertising clean and beef up compliance.
As attorney Jacoby notes: "If a dealership unwinds, the dealer is left holding the bag."