Best PracticesJul 1st, 2024

How Can Birds See When They Are Flying And It’s Raining?

Tom Kline 1 July-2

Am I the only one who thinks of these things? Seriously.

Ever wonder?

Well, I did.

According to www.ornithology.com “birds have a third eyelid, a translucent membrane, which allows them to face the rain with protected eyes.”[1]

Having a trackable risk and compliance program is like having a third eyelid because it protects you and gives you visibility into your operation when your view may otherwise skewed by what’s hidden. Visibility’s root is the Latin word “visio,” which means the “act of seeing.”

(Now, isn’t that the best analogy ever?)

Trackability is key here. If you can’t prove your compliance and auditing work, then it never happened. Consider having one source of truth where you can demonstrate your compliance work. Essentially there are two (2) solutions: software or a filing cabinet. Both work just fine, but you have to utilize them as central repositories.

When your practices come under scrutiny by a regulatory agency, they have many tools at their disposal depending on the nature of the violations. I want you to be prepared for and consider what happens in worst-case scenarios. I think it’s important for you to have insight and vision (there are those words again) into that possible outcome. You may feel it’s a low risk, but if it happens, there is high impact.

Importantly, regulators can close down your business. Here are two examples.

In 2018, the FTC closed Tate Automotive in Arizona “as part of a court-approved settlement resolving Federal Trade Commission charges that the dealerships deceived consumers and falsified information on vehicle financing applications.”[2]

More recently, in 2022, the California Attorney General’s Office closed Paul Blanco’s Good Car Company for 670,000 violations of California’s Unfair Competition and False Advertising Laws.[3] To resolve it, Putu and Paul Blanko agreed to the entry of a $20 million judgment against their companies (which were insolvent), and a $7.5 million judgment against them individually, which they could satisfy for $1.7 million. They are also banned from the auto industry in California for ten (10) years.

Regulators have other tools and I’d like to focus on the Consent Order (CO) which is more likely to occur than the shuttering of a business.

The CO is a record of an agreement which has been reached by the parties which has to be blessed by the presiding judge in the case. Let’s use a recent FTC action against Passport Automotive in Maryland as our example to further illustrate its potential damage to the dealership.

Passport Automotive agreed to a CO in September, 2022.[4] In this CO, they agreed to conduct their business, with very specific stipulations, for 20 years after entry of the Order, in addition to a $3,380,000 penalty. The laundry list of tasks and specifics are long and arduous. You wouldn’t want to have to comply with these provisions. (You can read the entire Order by clicking on the link in the footnotes.)

Passport is required to hire a compliance monitor to report back to the FTC about the dealership’s activities. This compliance monitor provision in a CO is not unusual.

Another example: in late 2022, the Attorney General in New Hampshire fined Dan O’Brien Kia in New Hampshire $1.25 million to resolve its allegations of unfair and deceptive acts, in addition to “strict injunctive terms over the next five years,” which includes a compliance monitor.[5]

I believe you will hear more and more about compliance monitoring in the years to come. I believe the FTC enforcement of dealers will focus on these four (4) items:

  • Consumer complaints
  • Deceptive advertising
  • Gramm Leach Bliley Act regulations which were supposed to be completed by June 9, 2023
  • Used vehicle/demonstrator Buyer’s Guides

If your customers complain to the FTC, they will come visit and enforce the other three (3) bullets listed above. I believe the FTC will utilize the penalty structure of $51,744 per violation as their first action. If they feel it’s warranted, the FTC will require you use a compliance monitor.

A compliance monitor’s job is:

  • To tailor review and auditing to meet the specific needs of the CO relating to business activities
  • To eliminate any possibility of misconduct
  • Install a compliance management system where there may not be one
  • To create a record of work performed
  • Proffer recommendations which will be helpful to the business
  • Clearly communicate to the business owner as well as the regulatory authority
  • To make recommendations to address any gaps in business practices which could lead to wrongdoing

In Dan O’Brien’s case, they are required to “hire an independent compliance monitor to review and report on its business practices for the next five years. The monitor will work closely with the Attorney General's Office to ensure (they) remain in full compliance with state consumer protection laws.”[6]

As a result of the various allegations of wrongdoing, this Kia store will have someone analyzing their transactions and reporting back to the Attorney General. Five years is a long time to have someone crawling around your books and records and recordings. Audio and video recording “all substantive financing discussions that occur between (dealership) employees and customers” are a requirement of the CO.[7]

Every case is different. As another example, here is how Passport has to comply with their Order:

  1. Within 14 days of receipt of a written request from a representative of the Commission, each Defendant must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; appear for depositions; and produce documents for inspection and copying. The Commission is also authorized to obtain discovery, without further leave of court, using any of the procedures prescribed by Federal Rules of Civil Procedure…
  2. For matters concerning this Order, the Commission is authorized to communicate· directly with each Defendant. Defendant must permit representatives of the Commission to interview any employee or other person affiliated with any Defendant who has agreed to such an interview. The person interviewed may have counsel present.
  3. The Commission may use all other lawful means, including posing, through its representatives as consumers, suppliers, or other individuals or entities, to Defendants or any individual or entity affiliated with Defendants, without the necessity of identification or prior notice.

In summary:

  • Passport must show the court and the FTC compliance reports, any documents requested, and must appear for depositions at any time.
  • The FTC may interview any employee.
  • The FTC may mystery shop (and act on) any information they find.

Once a business is on the FTC’s radar, they are going to ensure, to the maximum extent possible, that your dealership is being complaint.

The FTC’s COs and enforcement actions include many businesses and are not solely for automotive dealerships. A search on the FTC Legal Library lists 5444 cases, which includes Google, Wilson Sporting Goods, Amazon, Rite Aid, Intuit, and Kubota, to name a few.

What can you do to prevent the regulators and lawyers from interfering with your business? Here’s a simple and easy, 1,2,3:

  1. Set up a system, software or filing cabinet, (but preferably software) where you have “one source of truth,” for all of your policies and procedures.
  2. Either utilize employees or an outside company to set up, monitor, and document your enforcement of your policies and procedures. Without review and auditing, you do not know who is actually performing the tasks which you have asked employees to complete.
  3. Continually assess and document your compliance activities.

Technology can be your friend here. Compliance automation can enhance your efforts by generating “to dos” and specific responsibilities and accountability within your organization. This helps drive participation and monitoring at all levels.

Following these steps will reduce your overall risk and protect your team from being declared a birdbrain by the FTC.

Verification and monitoring help ensure you see what is actually happening at your store, versus what you might think is happening. I want you to be a free bird, and feel like a rockin’ robin each day knowing your nest egg is safe if/when regulatory storm clouds bring rain showers your direction.


  1. https://ornithology.com/birds-flying-in-the-rain/#:~:text=And%20birds%20have%20a%20third,the%20rain%20with%20protected%20eyes.

  2. https://www.ftc.gov/legal-library/browse/cases-proceedings/162-3207-x180041-tates-auto-center

  3. https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-settlement-banning-paul-blanco%E2%80%99s-good-car

  4. https://www.ftc.gov/system/files/ftc_gov/pdf/10%20Order%20Entered.pdf

  5. https://www.doj.nh.gov/news/2022/20221219-obrien-kia-settlement.htm

  6. https://www.doj.nh.gov/news/2022/20221219-obrien-kia-settlement.htm

  7. https://www.doj.nh.gov/news/2022/20221219-obrien-kia-settlement.htm

    A dealership franchise owner for thirty years, Tom is now the Lead Consultant & Founder of Better Vantage Point, providing Dealer Dispute, Compliance and Risk Mitigation Solutions.

    Tom also spearheads Tuck The Octopus which helps dealerships proactively manage governance, risk and compliance which has a direct impact on the customer experience.

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