March 18, 2025
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
Customer complaints are at an all-time high, which often happens when there is economic uncertainty or downturn. There are many factors, including many customers who are upside down on their vehicles with very lengthy and costly monthly payments. However, many of the complaints that have come to our attention are due to selling practices and behavior of dealership personnel, which often violate laws and regulations (state, federal, and local).
Its time for dealers to go back to the basics and train dealership personnel, not just in the laws and regulations that apply to them, but the ethical standards of the dealership. Although its impossible to train personnel about every possible situation that can occur and the appropriate response to it, a dealer can inform employees about the conduct that the dealership expects of them. This will provide a solid base of ethical standards employees can use when dealing with a situation or making a decision.
Dealers should adopt an ethics code such as a Standard of Conduct policy that specifically informs employees that the company intends to conduct its business in compliance with all applicable laws, rules and regulations, with honesty and integrity and with a strong commitment to the highest standards of ethics. There is a sample in this newsletter.
Dealerships also should adopt a complaint handling process to ensure that all customer complaints, whether they are made directly, or through an agency, get handled and responded to in a timely manner. A customer complaint can and should be viewed as an opportunity to learn how to improve a dealership's processes. All too often we have seen that customers have turned to agencies such as state attorney generals to complain because their complaints were not handled by the dealership appropriately.
Dealership personnel should know that it’s a violation of your dealership policy (and law) that they cannot change the price of a vehicle on a consumer if the consumer does not know that the vehicle is advertised at a lower price. All negotiations for the vehicle price start at the vehicle’s advertised price – whether the consumer knows that price or not. It is also a violation of company policy and the law for dealership personnel to inform a consumer that they can purchase the advertised price of the vehicle only if they finance the vehicle through the dealership.
Each employee should sign the policy and commit to the company’s standards of ethical conduct. In addition to a general commitment, the code should make a number of critical points.
- It is the dealership’s policy to comply fully with the spirit and the letter of all laws and regulations governing its business.
- The conduct of each employee should reflect the highest standards of honesty, integrity and fairness.
- Each employee is responsible for the propriety and consequences of his or her actions. Employee misconduct will not be excused because an action was directed or requested by a manager or another person.
- Employees are expected to exercise good judgment in their work and business relationships to avoid violations of the code of ethical conduct – as well as laws and regulations.
- Practices and standards of other companies may not be used as justification for ignoring or modifying the intent of the dealership’s policy.
- Unethical or questionable practices, even in the belief that they will benefit the dealership, regardless of degree, will not be tolerated.
- Employees should operate in competition with other dealers vigorously, independently and ethically, but they must avoid any practice that could be characterized as unfair or deceptive.
The policy must make clear that a violation can lead to disciplinary action. It should also require employees to bring matters to management’s attention even if they are not directly involved. The company can generally only learn about problems if they are reported, and employees should commit to report a violation of any law, regulation or other regulatory requirement whether committed by a company officer, director or employee.
It is also very important that management make employees aware of the fact that the company will protect any employee who brings a matter to the attention of management. Employees should understand that while the company will not make a public broadcast of the employee’s report, confidentiality is necessarily limited. Once the management commences an investigation of a matter, the identity of the person who gave the information to management may become evident. For that reason, management must commit to protect employees against retaliation. When any investigation commences, a strong warning of non-retaliation must be delivered to those who are subject to an investigation.