Pub. 1 Issue 4

14 www.glancda.org  Indirect Auto — continued from page 13 Take proxies seriously In this modern day of political correctness, customers don’t have to give you information about cultural background, race, or sex. As a result, the government relies on something called proxies to make educated guesses about this very information. Using a proxy is obviously not as accurate a method as just asking people about their cultural, biological, or sexual backgrounds and then recording the results, but it is the current accepted method. As a result, proxies are more-or-less accurate, and the margin of error is sometimes a big one. You might think that the chance for making mistakes would invalidate the entire methodology. You would be wrong. Some auto dealers argued this exact point when the DOJ sued them for pricing violations, and they lost. In 2007, a couple of cases were settled when the DOJ allowed two Ford dealerships to of- fer favorable customer financing in specific situations. What do these results mean for you? They mean you are likely to lose if you challenge proxies in a court setting. If enforcement agencies think your dealership is discriminating and they use proxies to find significant differences for how you are treating minorities, you can settle and pay, or you can go to court. How deep are your pockets? How much of a gambler are you? Don’t assume that you will win if you go to court. You don’t know what the outcome will be; you do know that getting there is expensive. Instead, you should probably settle and pay. Cooperate with the CFPB about indirect auto loans You might think that the CFPB is powerless when it comes to your dealership because it does not have jurisdiction over deal- ers whose business involves a service department, most of which are franchise dealers. The exception, as far as jurisdiction is concerned, would be dealerships that hold financing contracts. If your dealership is outside the CFPB jurisdiction, you might decide to be uncooperative because you don’t think the CFPB can do anything about it. That approach could potentially work if the CFPB was the only agency to consider. It isn’t. The Federal Trade Commission (FTC), the U.S. Department of Justice (DOJ), and possibly even your state’s attorney general are also interested in these matters, and their ability to enforce rules could have a devastating effect on your dealership. For example, a dealership that violates the Equal Credit Opportunity Act and Regulation B can be fined by the FTC and can end up paying a civil penalty for every viola- tion that is found. The maximum amount is $16,000, and it can be imposed for every person in a protected group who pays a higher price than someone who is not protected. The protected groups include people such as older buyers, Hispanics, racial minorities, and women. How do other agencies get involved? The CFPB can choose to turn over any information from banks and finance companies