Today's Trends in Credit Regulation

Secret Agent Man (or Woman)
By Thomas B. Hudson

What if that next “up” is an undercover investigator working for the Consumer Financial Protection Bureau or the Federal Trade Commission and posing as a car buyer? An article in the August 12 issue of the Washington Times reported that the Consumer Financial Protection Bureau is recruiting investigators in ads that suggest the agency may go undercover to pursue cases against companies that fall within its broad jurisdiction. And last year, the Federal Trade Commission hired a mystery shopper company.

The ad said that investigators may have to arrange for and oversee contracts with private investigators. The ads said that these private investigators “may know the players, culture, history in a specific geographic area in which a case is centered.”

If that struggling single mother with marginal credit is in fact a Fed, maybe it’s a bad idea to tell her that you’ve got to increase the price of the car she’s landed on because you’ve found out that the only company that will buy the contract from you is a deep discounter.

If that young steelworker you are trying to get financed is really James Bond in disguise, maybe it would be a bad idea to tell him that he can’t get credit unless his wife co-signs with him.

If that mild-mannered and seemingly gullible schoolteacher is really one of Elliot Ness’s deputies, maybe telling her you can’t get her financed unless she buys a service contract isn’t a career-enhancing move.

Ditto telling the servicemember that you can’t find financing unless she agrees to pay by allotment.

Or maybe you’ve advertised for a new F&I manager, and the applicant across from you is wearing a wire because he’s really an undercover investigator. You probably don’t want to describe for him the various not-quite-legal ways that he can get rich in your dealership by ripping customers’ heads off.

You should be getting the idea by now.

If your dealership engages in these or other illegal or sleazy practices, every word in every encounter with someone who seems to be a customer or a potential employee could end up appearing in Exhibit One to the complaint the Bureau files against you. And, “encounter” includes face-to-face meetings, phone conversations, email chats, tweets, messaging, and any other form of communication.

And if, on top of those bad practices, you’re training your sales and F&I employees to do things that violate the law, remember that the Consumer Financial Protection Bureau announced last fall that it wanted to hear from employees who were willing to “blow the whistle” on employers engaged in bad acts.

The lesson here? For the first time in a long time, the federal cops are on the dealership beat. If you’re an independent dealer without a service department, or if you are a dealer and you or your related finance company hold and collect the retail installment sales contracts resulting from your sales, the Consumer Financial Protection Bureau is the enforcement agency you need to worry about. If you are a dealer with a servicing department and you don’t hold your own contracts, your cop is the FTC.

Not that it matters which one you answer to – either one could ruin your entire day.

By the way, if you’re looking for a really interesting job, the Bureau said the investigators would earn $98,000 to $149,000 per year.

Thomas B. Hudson is a partner in the Maryland office of Hudson Cook, LLP. Tom can be reached at 410-865-5411 or by email at

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