In 2017, General Motors created a furor by mandating that dealers use forms containing unprecedented and inflammatory disclosures on use of non-GM parts in repairs of vehicles and sales of extended service agreements not backed by GM. Dealers expressed concern that the language was so inflammatory it was designed to incentivize dealers to avoid making the disclosures by only using GM parts in all repairs (for example, used vehicle reconditioning and used vehicle repairs) and selling only GM extended service agreements.
One of the principal objections was that the GM form violated GM’s own dealer sales and service agreement because the DSSA required that any notice on non-GM parts and extended service agreements had to be “on the purchase order and bill of sale”.
GM has circulated its 2020 form DSSA. In the new form, Section 5.1.1 has been changed to now only require these disclosures be “in writing”. That contrasts with the 2015 form DSSA that required the disclosure directly on the transaction document. While that is apparently designed to remove one objection to use of the separate form mandated by GM, dealers using a disclosure both on their buyer’s order and by a separate form now have the flexibility to eliminate the disclosure on the buyer’s order.
Dealers should nevertheless be careful to ensure there is no confusion about the backer of an extended service agreement. There should be no room for confusion about whether the manufacturer is involved for two reasons.
- GM’s requirement that a customer be informed that a non-GM service contract is not backed by GM is not unusual. Many dealer sales and service agreements have similar provisions. Some franchisors follow GM’s practice and require disclosure that a third party extended service agreement is not backed by the franchisor. Others provide that non-franchisor products should not be disclosed to consumers as franchisor products. As a dealer, check and know the requirement in your dealer sales and service agreement about disclosures on sale of extended service agreements not backed by the franchisor and follow it to stay in compliance with your DSSA.
- The backer of the extended service agreement is critical. An employee should never tell or imply to a customer that a third party extended service agreement is backed by the manufacturer. Some consumers may not care, but there are consumers who may be swayed by a representation that an extended service agreement is backed by the manufacturer. A regulator will surely find failing to make a clear disclosure of the backer of an extended service contract to be an unfair and deceptive practice.
- Employees selling third-party extended service agreements must be clear about the identity of the backer.
- Explanatory materials should be provided that are clear about the backer.
- No representation should be made contrary to those facts.
- A certificate or other document representing the extended service agreement policy should be provided to the buyer and it should be clear as to the identity of the backer of the extended service agreement.