Tips for Dealers Facing Consumer Law Challenges
Paul R. Norman , Sarah J. Horner | 06.09.21
Dealers focus on enhancing the customer experience, but sometimes even the most cautious dealers can be faced with complaints from customers who think they got it wrong. Provisions of the Wisconsin Consumer Act and Motor Vehicle Dealer Law applicable to motor vehicle advertising and sales cast a wide net over dealer actions and can potentially subject dealers to forfeitures, damages, and hefty attorney fees. This article provides tips for dealers to proactively avoid litigation and outlines suggestions for resolving disputes when they get there.
Verify Your Advertising and Sales Practices
One of the most common claims we see customers bring against dealers is for deceptive advertising or sales – i.e. the dealer’s advertisement was misleading or a salesperson told them something that turned out to be incorrect. If successful, a customer could recover damages and require the dealer to pay their attorney’s fees. Even if a dealer thought its ad was accurate or a salesperson thought they were telling the truth, the dealer can still be liable if they led the customer to a wrong belief about the vehicle or transaction.
The Wisconsin prize notice statute, Wis. Stat. § 100.171, also continues to plague dealers who do not carefully review their prize mailers. The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) enforces this statute strictly and continues to demand forfeitures from dealers who do not comply with each provision of Wis. Stat. § 100.171. For example, court orders could require dealers to pay thousands for failing to list the total prizes to be given away or the total number of prize notices to be delivered.
To avoid penalties for noncompliant prize mailers, dealers should conduct compliance reviews of each flyer before sending them to Wisconsin residents to ensure that they contain the appropriate language and sufficient notice. To avoid risk of liability for misleading a customer or deceptive advertising, dealers should be careful to not make any assurances about a vehicle that they have no way of knowing to be true. Perhaps the most egregious example would be advertising a used vehicle as new, but even small details of a fresh paint job or replaced bumper matter. Salespeople should be trained to know where to draw the line when it comes to making promises to customers about features of a vehicle that they have not verified.
Disclose Everything in Writing
Clearly disclosing everything in writing to a customer and making sure the customer understands the motor vehicle purchase contract before signing can significantly weaken a customer’s claim that the dealer allegedly took advantage of them. Some of the most important details to disclose to a customer are the applicable warranties (or lack thereof), insurance obligations, and financing arrangements relevant to the vehicle. While there might be a desire to fast-track a sales transaction to ease the customer’s patience, proper disclosures are a time-worthy investment. Walking through the motor vehicle purchase contract disclosures with a customer on the front end can avoid much longer business interruptions caused by litigation.
Resolve Customer Complaints Early
Dealers would benefit from establishing a customer complaint alert system that notifies management of each complaint received through any method. From small complaints through the dealer’s online chat feature to more serious complaints filed with DATCP, these early signs of customer dissatisfaction can foreshadow a lawsuit. Immediately after the complaint comes through, dealers should do everything they can to resolve it before attorneys get involved and fees begin to rise.
Usually the biggest risk once a complaint goes “legal” is not the customer’s damages, but the attorney fees. Most consumer laws have fee-shifting provisions that allow a successful plaintiff to recover their legal fees from the other side. While there is a presumption that a plaintiff’s attorney fee award cannot exceed 3 times their damages, the court has discretion to award more. Resolving complaints early can avoid legal fees entirely.
Have a Litigation Game Plan
In the event that a customer complaint cannot be resolved early, dealers should fully understand the scope of their insurance coverage to start defending as soon as possible. It can take a while for insurance providers to process claims and appoint an attorney to represent the dealer. All too often dealers are late to the game when faced with a customer lawsuit because they notified their provider too late or were unaware that they had insurance to cover it. By the time an attorney gets involved to defend, the answer deadline may have passed and outstanding discovery could be lingering.
Dealers should have an organized process to notify their insurer immediately when a summons and complaint is served, retain and gather relevant documents, and be ready to discuss details with an attorney. Even if a dealer thinks it did nothing wrong, settling early is key and serving an offer of judgment might get a dealer there quickly. The longer a lawsuit drags on, the more expensive it gets as the customer’s attorney increases their legal fees.
Dealers should also weigh the pros and cons of repurchasing the customer’s retail installment sales contract from the lender if demanded. Customers who bring lawsuits against dealers frequently have defaulted on their vehicle loan based on an allegation that the transaction was unlawful in some way and therefore they have no obligation to pay. The lender will likely request the dealer to repurchase the retail installment sales contract as a result.
On one hand, the dealer could push back if the relevant assignment agreement requires the dealer to repurchase only where claims against the dealer are proven to be true. On the other hand, if the customer’s claims seem legitimate, the dealer might be better off biting the bullet and repurchasing the contract at the outset to avoid further expense that would result from indemnifying the lender throughout litigation.
Because many consumer law statutes permit customers to recover their attorney fees, they have nothing to lose in suing a dealer to contest the lawfulness of a motor vehicle purchase transaction. And those attorney fees can add up quickly. To avoid litigation entirely, dealers should train staff to verify sales practices, review advertisements, and process complaints effectively. When proactive practices cannot avoid a lawsuit, dealers should notify their insurer immediately and do whatever they can to resolve it as fast as possible.
The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.