Earlier this month I had an email from one of my client’s asking me about the NADA’s Model Dealership Voluntary Protection Products Policy. This is the program that the NADA recently offered to complement their Fair Credit Compliance Policy and Program. If you are thinking that you have no intention of adopting either one of these and there is no reason to read any further, I would just ask that you at least become familiar with their effort to provide an answer to potential oversight.
The good news is that neither of these programs is mandatory. The Fair Credit Compliance Program is modeled on a consent order that the Department of Justice entered into with two automobile dealerships in 2007. The Voluntary Protection Products Policy is not modeled on a government consent order but is based in part on the federal prohibition on unfair and deceptive acts or practices (UDAP). You can go onto the NADA website and download the full policy, but here is a summary of the VPP Program:
The program is designed to ensure that voluntary protection products (VPP’s) are offered, sold, and administered in an ethical, lawful, transparent, professional, and consumer-friendly manner.
VPP’s are optional products that a dealership offers to its customers to protect their investment in vehicles being purchased or leased.
A framework for the policy is provided by way of a customizable template, which is intended to assist a dealership with the process.
The template states that the dealership will:
o Provide a poster informing customers of the optional nature of VPPs and the dealership’s commitment to informing the customer about each VPP before the customer makes a decision on them
o Commit to compliance, training and inter-department coordination to carry out the VPP policy
o Provide a list of duties the dealership will execute throughout the life cycle of VPPs including their pricing advertisement, presentation, sale, and if applicable, cancellation.
Like the Fair Credit Compliance Program, the VPP Policy provides a form to state the Standard Retail Price (SRP) that is charged for each VPP. Editor’s note: I don’t know how they will deal with Service Contracts whose pricing models are based on so many factors that one could not really state an actual price and always be correct.
There is then a second form that offers 5 pre-established reasons that reducing the price of the product. These are:
o A pricing cap imposed by the lender
o A customer’s monthly payment constraint
o A more competitive offer for the same or similar VPP
o Promotional pricing for which the customer qualifies
o Employee pricing for which the customer qualifies
The above limitations do not preclude the dealership from establishing a SRP for a bundle of VPPs that is less than the combined sum of the SRP of each individual VPP in the bundle.
The template also states that the dealership will establish procedures to record, review for corrective action, and retain determinations that a pre-established, legitimate business reason was used to discount the SRP.
There is additional information in the template that pertains to product advertisement, and product presentation and sale, product cancellations, and customer complaints.
Again, this is a voluntary program but I recommend that you review it by downloading it from the NADA site and speaking with dealer counsel or your state automobile association attorney.
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