Three ways auto dealers can bypass consumer lawsuits

Pennsylvania's Unfair Trade Practices and Consumer Protection Law can easily result in stiff penalties for unwary car dealerships. But there are some proactive steps dealers can take to stay safe.

At issue are the law's particularly broad scope and especially sharp teeth, containing a catch-all clause defining deceptive trade practices as "engaging in any other fraud or deceptive conduct that creates a likelihood of confusion or misunderstanding" on the part of the consumer.

Used-car dealers can be especially vulnerable, and getting on the wrong side of the law can be expensive: Treble damages are allowed for behavior found to be egregious. This means car dealerships could get hit with paying three times the damages, along with attorney fees for the plaintiff and their own legal defense. A $10,000 sale suddenly turns into a $60,000 legal bill.

Part of my practice at Scaringi Law focuses on representing dealerships, and I frequently advise them that three common-sense and proactive steps can help avoid trouble and improve relationships with prospective customers. The following advice is especially important for used-car dealerships that can't fall back on manufacturer warranties.

Changing the sales pitch

One of the first things I tell my auto dealer clients is to focus on the sales pitches of their staff.

In representing auto dealerships, I'm happy to be a part of this proactive training. Once salespeople understand that what they say and don't say about the vehicle they're selling can make all the difference under the law, future pitches are far more likely to stay within the guiderails.

When it comes to used-car sales pitches, there are two types of claims that can run dealerships off the road. The first are flat-out untrue statements - claims that the salesperson knows to be false but says to close a deal. The second type is just as bad: assertions that a salesperson makes despite having no way of knowing whether they are accurate.

Let's consider a used car with a transmission problem. If it becomes clear that the dealership knew there were issues but gave the car a clean bill of health in a smooth-talking sales pitch, this can become a real problem should the burned buyer sue.

But even if the car in question is fresh from the auto auction and new to the lot, if the salesperson touts the vehicle's road-worthiness without first checking to see whether the claims are true, the dealership can be legally liable.

Of course, such lawsuits can be difficult for the plaintiff to prove. Often, it comes down to the timing of the problem with the car. If the transmission quits eight months after the sale, the legal action might be easier to defend. If the transmission conks out only a week or two after the purchase, it's a far different story.

Protecting yourself from legal liability is about ensuring that your salespeople know where to draw the line with their sales pitches.

Simply put, the days of selling used cars with a fresh coat of wax and a gushing sales pitch while glossing over the truth have gone the way of the Edsel.

Checking under the hood

Because avoiding a claim for unfair and deceptive trade practice is all about knowing and sticking to the facts, why not find out more about the used car you're selling? Developing a standardized mechanical inspection system and using it for every vehicle on the lot will save a lot of headaches down the road.

It can even be a good marketing tool: Vehicles that pass inspection with flying colors can be sold at a premium; those that don't can be repaired or sold at a discount, as long as the problems are disclosed to the buyer.

These inspection records and mechanical reports are also useful in fending off legal claims. The records will help establish the state of the vehicle at the time of the sale. As long as the issues in question were properly disclosed, the dealership is indemnified.

While implementing a standardized inspection system might cost a bit more of a mechanic's time, it can help a dealership save thousands in legal bills. You might even be able to price your inspected vehicles a bit higher, as your customers are purchasing peace of mind.

Either way, it's a win-win in terms of customer relations and complying with consumer protection laws. How's that for a sales pitch?

Disclose everything

The best legal protection against a lawsuit or action based on a claim of false disclosure, unfair trade or deception is also the simplest: Disclose everything - in writing.

I often assist my dealership clients in drafting standardized disclosure documents that work for them as well as for the law. But the basics of the disclosure are these: Make it as complete as possible, and list everything that was checked and the results, as well as what wasn't checked.

Then have the buyer sign and date the document before the sale is finalized. This allows you to prove what the buyer knew at the time of the purchase, eliminating any "he-said" finger-pointing.

Yes, some used cars with issues might be harder to sell or to sell at a lower price. But by becoming an honest broker, your dealership is differentiating itself from the competition. And by being upfront with your customers about the vehicle, you're taking the guesswork out of purchasing used cars.

In other words, it's good business, effective marketing and great customer relations. All this on top of being an effective legal strategy against unwanted consumer protection claims.


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