In the Media
FTC Cracks Down on Dealers Engaged in ‘Payment Packing’
Read Time: 1 minMember Jason Bichsel (Cleveland) was interviewed by Auto Finance News on August 23, 2024, in “FTC Cracks Down on Dealers Engaged in ‘Payment Packing.’” Jason discusses FTC complaints regarding deceptive aftermarket product sales.
The language in the two recent FTC complaints mirrors language used by the Consumer Financial Protection Bureau, particularly regarding payment packing, Jason Bichsel, an attorney in the Cleveland office of law firm McGlinchey, told AFN.
The FTC and CFPB typically monitor similar industry trends, which should encourage lenders to take a closer look at how dealers sell aftermarket products, said Bichsel, whose practice focuses on financial services compliance.
“Understanding how your dealers’ [finance and insurance] processes work is important,” he said. “What does the dealer’s training program say about how these products are disclosed? If the dealer doesn’t have an answer to that, then it’s fair to be skeptical of whether they’re obtaining the consumer’s express informed consent.”
“Substantively, they’re not going to bend,” he said.
The FTC has long looked at whether entities are getting proper express informed consent in the sale of aftermarket products, McGlinchey’s Bichsel said.
Under the Holder Rule, if a legal issue arises with the original seller of a contract, often the dealership and the auto lender that buys the contract are also held responsible, Bichsel said.
If a lender funds contracts or add-on products that were sold with misleading information or deceptive practices, it could also face consequences from regulators.
“The holder of that contract after assignment — the finance company — is going to be a valid defender, and in situations where the dealer has gone out of business, finance companies would be left holding the bag,” Bichsel said.