Sometimes the topics for these articles just come to me from out of the blue. Like this one, which hit me at 8:31 a.m. on Thursday, September 10, 2020…more on that below.
I’ve been asked, “Why comply?” more times than I care to admit over the course of my career as an automotive compliance attorney and consultant. It’s more than a rhetorical question. It cuts to the heart of who we are and who we want to be.
We live in an “Age of Compliance Awareness.” This is different from an “Age of Compliance,” but it is a step in the right direction. I am old enough to remember living in a time before the “Age of Compliance Awareness.” At that time, payment packing was as illegal as it is today, but the willingness to ignore that fact was widespread.
I knew an F&I manager who, back in the 1990s, was actually sent by his dealership to a school where he was taught how to pack payments. How to hide the true amount financed and distract customers from asking uncomfortable questions was drilled into this manager and countless others like him.
Years after he took the course, he could still show me how to use the point of his Montblanc pen to guide a customers’ eyes to the line items he wanted them to focus on and avoid the numbers he wanted them to ignore. “People will always follow the pen,” he told me. “Especially a nice one. We called it ‘the magic pen.’”
In a small concession to the truth, when presenting a packed payment, he was taught to refer to it as “a fully-protected payment.” That way, if a customer confronted him with the bogus math, he could plausibly state that he had disclosed that the payment included more than just the cost of financing the vehicle. After all, he disclosed that the payment was “fully-protected.” That protection just included GAP, credit life, and a service contract to pack the over-stated monthly payment.
Did he make a lot of money with that approach? Absolutely. Was he eventually caught, charged with felony fraud, and convicted? Again, absolutely. Decades after the event, he doesn’t need to pay much attention to politics — he lost his right to vote.
Then came the “Age of Compliance Awareness” in which we now live. I mark the start of that age around the year 2000. That was the year of the Gunderson Chevrolet exposé on a local CBS affiliate in Los Angeles. It documented, via concealed camera footage, the very practices the F&I manager I knew had learned on his dealership’s dime. It wasn’t an aberration — it was policy. And after the Gunderson Chevrolet exposé, everyone became aware of it.
How did a local station’s exposé get seen from coast-to-coast? It spread via a newfangled technology called the Internet. Sure, the Internet had been around for some time by 2000, but by the turn of the century it was becoming ubiquitous, and the capabilities of most computers was advanced to the point where sharing videos was possible.
Other news outlets and networks saw the ratings, and impact the Gunderson Chevrolet episode had, and set out to copy it. Similar exposés popped up across the country. It was a perfect storm. Payment packing — and consumer fraud of all stripes — was forced from the darkness and into the light.
Then came the plaintiffs’ lawyers, smelling blood. Class-action lawsuits proliferated, as did “car fraud experts” who once were corrupt F&I managers, but who had “seen the light” and gone over to the plaintiffs’ side (very profitably, I might add).
But there was one more factor that acted like a force multiplier to the cause of compliance: The Gramm-Leach-Bliley Act. GLBA, as it is commonly called, became law in 1999. Two of the rules it spawned — the FTC Privacy Rule and FTC Safeguards Rule — went into effect in 2001 and 2003, respectively. Against the backdrop described above, it made compliance a front-burner issue for most dealers.
Eventually, courts equated failure to follow those rules as a deceptive trade practice — more ammo for the plaintiffs’ lawyers. The cost of not complying became higher than most dealers were willing to pay. Slowly, things began to change. Some dealers embraced the changes. Others bemoaned even the most modest steps related to compliance. But change began, and continues 20 years later.
Between video exposés, the Internet, plaintiffs’ class action lawsuits, and heightened federal regulation, it was a perfect storm that tore through the dealership community and wrought change in its wake. It brought about the “Age of Compliance Awareness.”
So, to answer the question that inspired this particular article: It simply became too expensive not to comply. To paraphrase St. Thomas More, “If virtue were profitable, common sense would make us good and greed would make us saintly.” But is economic self-interest the best basis for ethical behavior? Can we do better?
I think we can. I tap out these words from my office desk, on which sits a framed picture of my grandfather, Alfred R. Ganther, Sr. The son of German immigrants, he became a mechanical engineer and took over the family construction business in the 1930s. By the time I came along in 1961, Alfie was a successful businessman and local philanthropist. Growing up, I wanted to succeed, in large measure, because I wanted to make him proud of me. He put a certain shine on the family name, and I didn’t want to tarnish it. Better still, I wanted to add something to the shine.
My grandfather died in 1976, but his influence on my life did not. That’s why his picture is on my desk.
All of which brings me to the lead sentence of this article and how its topic hit me at precisely 8:31 a.m., on Thursday, September 10, 2020. At that moment my wife and I received a text informing us that we had just become grandparents. Our son held a baby boy, Cam William, in the same hospital where I had held him as a newborn 30 years before.
The happy news hit me in ways I did not expect. It was not a surprise — we had known this day was coming for many months — but the emotional impact was. The grandfather looking across my desk at me is now me. Someday Cam is going to be looking at me as an example. What kind of example will it be?
At that human level, perhaps we can all find a reason to be ethical, compliant, and fair. Someone is always watching. We should care about what they see.
A grandchild can be as good as a conscience.