Using Standardized Vehicle Protection Products Policy Encouraged

Due to increased attention on state and federal regulators on how dealers derive pricing for financing and particularly voluntary protection products, it is imperative that all dealers utilize a standardized policy for each of those transactions.  To wit, please review the article below, which has been reprinted in full from Automotive News, which demonstrates the importance of implementing these policies for your own protection.


The Jan. 17 settlement between Hometown Auto Framingham and the Massachusetts attorney general’s office appears to be a regulatory vote in favor of a model F&I product pricing policy NADA and other trade groups offered for industry use in 2019.

“To the best of our knowledge, this is the first time that our relatively recent [2019] Model Dealership Voluntary Protection Products Policy has been incorporated into a settlement between a state government and a dealership,” National Automobile Dealers Association regulatory affairs Senior Vice President Paul Metrey said in a statement Wednesday. “This demonstrates the broad recognition of the policy as an effective compliance template for dealers. And the policy’s effectiveness as a compliance template is the reason NADA identified it as a workable alternative for the FTC to adopt in place of the voluntary protection product provisions that are contained in the agency’s Proposed Vehicle Shopping Rule.”

NADA created the 2019 Vehicle Protection Products Policy template in conjunction with the American International Automobile Dealers and National Association of Minority Automobile Dealers.

The document offers a similar game plan to a Fair Credit Compliance Policy & Program the three trade groups provided as an industry resource in 2014. That 2014 policy is based off the language in 2007 federal consent decrees. Both NADA templates encourage dealerships to avoid risk of discrimination by adopting standardized revenue margins.

The Massachusetts attorney general’s office alleged Hometown’s North Shore Mazda in Danvers, Mass., and Wellesley Mazda in Wellesley, Mass., stores charged Black and Latino customers more for finance-and-insurance products than white customers.

The agency said an analysis of sales records between Jan. 1, 2016, and March 31, 2018, found Black customers of the two Mazda dealerships paid an average of $280 more than white customers for the same products. Latino customers paid an average of $197 more than white customers at the two locations, it said.

Hometown said it has “vehemently denied” for years any impropriety, and its law firm disputed the agency’s methodology in concluding discrimination had occurred. The dealership group says it agreed to the $350,000 settlement announced Tuesday by the agency to quit spending time on the case.

Dealerships adopting NADA’s 2019 F&I product pricing template would charge an identical product margin to every customer and reduce it only when confronted with one of five predefined business reasons. Any alterations and their rationale would be documented.

The Massachusetts attorney general’s office agreed Hometown could adopt the NADA policy to meet the settlement’s three-year requirement for fixed margins on F&I products.

The settlement permits Hometown to offer individual customers lower margins only “in instances where Hometown can substantiate the good faith basis for the deviation,” the settlement said.

The settlement states Hometown’s dealerships can only lower their margins for the reasons listed in the NADA policy: A cap imposed by a law or a finance company; a customer’s budget constraints; a better competing offer; and promotional pricing or employee pricing. As in the NADA policy, these individual price cuts must be documented, according to the settlement

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