The car dealership industry is already feeling the pinch of high interest rates in 2023 and is being forced to change and adapt. As a result, car dealerships who offer loans are becoming more strict in their financial compliance practices in order to protect themselves against potential lawsuits as it’s becoming more difficult to provide vehicles to customers without facing legal repercussions.
In an attempt to prevent any liability from lawsuits, car dealerships should establish strict regulations regarding car loan fees, repayment terms, and interest rates. These regulations must be closely followed in order to ensure that car customers are not being taken advantage of financially.
Here are some strategies car dealerships should use to stay compliant and prevent legal repercussions:
- Clearly explain the terms of a loan before it is finalized. This includes providing a full documented explanation of the loan’s interest rate, repayment structure, and any applicable fees.
- Thoroughly review all loan documents to make sure that interest rates do not exceed applicable federal or state caps..
- Take steps to establish a clear paper trail that documents the car buyer’s loan process. This includes signing off on all loan documents as well as creating a record of any communications related to the car loan, including the signed documents. This type of documentation can provide car dealerships with valuable evidence if they are ever faced with legal action due to high interest rates.
- Make sure car buyers understand their right to dispute an illegal or unreasonable interest rate before finalizing the loan. Car dealerships should notify their car buyers’ regarding their rights, as required by law, and provide any documents or information needed to allow car buyers to properly dispute a high interest rate.
Taking these proactive steps will help car dealerships maximize their legal compliance and minimize the risk of costly lawsuits, while also providing car buyers with the transparency they need to make informed decisions.
