General Motors dealerships that sell non-GM-branded service contracts without following GM's new disclosure process could be in hot water with the automaker, according to a letter sent to dealers this month.
The updated process, centered around the use of a new disclosure form, is designed to ensure that customers understand the sources of their products, GM said. The dealer penalty for failing to use the new form, attached to the letter, could go as far as termination, Alan Batey, president of GM North America, said in the letter.
Customers must acknowledge and sign the disclosure form during the sales process, and dealers must keep a copy in the deal jacket. Failure to disclose that the service contract is not endorsed by GM is a breach of the Dealer Sales and Service Agreement, the letter said. Dealerships that violate the new rule could also pay $500 per incident and become ineligible for GM dealership opportunities and sales programs.
The disclosure form makes clear to customers that GM "has no obligations to the customer under a non-GM service contract," according to the letter, dated Aug. 10.
A GM spokesman said dealers have been required to disclose when a service contract is a non-GM product for many years. Now dealers must use the standardized form and could be subject to the penalties if they refuse to do so.