Don’t look for the typical funny ending here, there is not one. This True Story is hard to write and I have resisted doing so because frankly, it was one of my darkest times. In the car business, you have triumphs and I had more than my share of them, but you have things happen that sometimes takes you to your knees.
Things were really tense for me when I was battling NBC Dateline, that was True Story #5
, but prior to that, I had trouble with the Texas Attorney General’s office.
I purchased my large Ford dealership in Dallas in 1996. Prior to my purchase of the dealership, we started selling coupon books in the finance office to whoever wanted to purchase them at $199. It was all very legitimate and straightforward. The coupons contained over $1500 in discounts in our service department, in parts, on tires, on vehicle details, etc.
We knew the majority of customers would not use every coupon in the book. If they did, we would go deep in the hole, but if most only used half of the coupons, it would work out to about a break even. The main thing was to marry the customer to our service department for oil changes and routine maintenance. We knew that people would continue to purchase cars if we satisfied them in service. Plus, many of our customers drove a long way to purchase, and it was hard to get them back for service. The coupon values really helped with that.
Every customer to whom we sold a car went through finance, and all were offered items such as extended warranties, GAP insurance, credit life, disability insurance, and the coupon books. Our highest take rate was the coupon books because it was easy to see the value in them.
Customers were using the coupons like crazy in the service department, and we tracked their usage very closely. The coupons were administered by a third party company who mailed them to the customers in a nice presentation box, and each coupon had the customer’s name and VIN on it.
All went well until 1999 when I got a registered letter from the Dallas office of Attorney General John Cornyn, who is now a United States Senator. The letter asserted that a lone customer had filed a complaint that he did not understand he was buying the coupon book, he thought it was free.
I was not too concerned, to be honest. The customer who complained signed a form acknowledging the purchase of the coupons, and he had initialed the buyer’s order where it showed the $199 charge for “Consumer Products and Benefits” which was the name of the company that administered the coupon books.
We had a small number of customers who weren’t happy with the coupon books once they got them. This was in spite of the fact that we showed them the book upon the purchase of it. I had one simple rule that everyone in the dealership got burned into their brains: If a customer is unhappy with any product sold in the finance office, refund their money, no questions asked.
I answered the A.G letter, expressing that I was sorry the consumer was upset, and that we had signed documentation from him, but I would happily refund the money AND he could continue to use the coupons. I figured that was the end of it, but I figured wrong.
The Assistant Attorney General who handled the case replied after some time that the office was opening a broader investigation. WHAT? WHY?
They requested a sampling of our files, which I told them I was happy to provide, and did. I had nothing to hide and nothing to fear. Look at the files, you’ll see two signatures where the customers signed for the coupons, let’s just get this over with I thought. I immediately ceased selling the product at that point.
Many months passed, and I got another letter saying the lady Assistant Attorney General was filing suit on behalf of people who bought cars from me. I honestly don’t remember the amount of the suit, but it was substantial.
I invited the lady A.G. to come out to the dealership to meet with me. She and an investigator came out, and I had my attorney present. I walked her around, I showed her all the customer satisfaction awards we had won, I showed her all the charities we supported and what we did for the community. I don’t think she ever came close to cracking a smile.
I asked for the basis of the suit, and she told me the Attorney General’s office called a small sampling of customers and asked them if they remembered purchasing a “Consumer Products and Benefits package”. A number of the sampling said no. That was not surprising to me because we did not market it under that name, we simply referred to it as our “coupon savings book.”
We, in turn, hired a third party company to call our customers, phrased the question as “do you recall when you purchased your car, agreeing to purchase a coupon savings book for $199 that had $1500 worth of coupons in it?” Asking the question that way, 97% of the customers remembered and many said they had already used many of the coupons.
The Attorney General was not swayed. She dug her heels in, and so did I. It seemed personal to me. Was it something I had done? Was it because we were the largest dealer in Texas regardless of brand? Was it because I was the Chairman of the Ford National Dealer Council and the Attorney General was looking to make an example of a high profile dealer? I could not tell, but being reasonable was not part of the equation.
The clock was ticking before the suit was actually filed, and I requested another meeting, this time at the downtown Dallas office of the Attorney General. I swallowed my pride, put personal and angry feelings aside, and asked humbly “what would you like me to do?” I was beat down.
My fear was the bad publicity, not the money. I said I would pay a reasonable fine, with a confidentiality clause, but no admission of wrongdoing because we had done nothing wrong. I was firm about the conditions and felt like it was a fair offer. She quickly declined, and then I knew for sure, this was about making an example of me. The fact that over 300 new car dealers in Texas used the same product, some charging twice as much for the books as we did, did not influence her.
I made one more offer to settle the matter, this one was accepted by the Attorney General. There was no getting a confidentiality clause, I accepted that, telling myself that whatever bad press we got would blow over. We had tens of thousands of customers who trusted us and loved us.
The Attorney General put out their press release in May 2001, as if they saved the world. They did include that I adamantly denied any wrongdoing, but of course, didn’t give my side of the story. It got less play in the press than I thought it would, thankfully. The Detroit press ran more articles than anywhere since I was the Ford Dealer Council President.
In an odd twist of fate, the day the press release was sent out, I got a call from Terry Box, the automotive & business writer for the Dallas Morning News. I asked if he had to do the story, and he said he did. I told my side of it and he presented it fairly. Yes, the same Terry Box who works for me today reviewing cars after retiring from the Dallas Morning News.
The final settlement, which I agreed to just to get past it and to start sleeping again, was a $75,000 payment to the Attorney General to cover their legal costs, and I had to send every customer who bought a coupon book a letter offering them an apology and a make-good offer.
That offer? A $250 coupon good for any service, part, or to go toward the purchase of a new or used vehicle.
The publicity was not nearly as bad as I had imagined it would be. In fact, we got a lot of customers who called and came to our defense. When the smoke cleared, fewer than 10% of the 3500 customers to whom we mailed the letter to actually used the $250 coupon, there was a two-year time limit. Most coupons were used to purchase vehicles.
Still, it was an embarrassment I did not want or deserve. There were many sleepless nights fretting over this, but finally, the nightmare was over.
On the positive side, this experience is one of the reasons I always stress to listeners to read everything they sign, so there are absolutely no misunderstandings.
This story ran in the Automotive News out of Detroit on May 7, 2001:
Texas Ford dealer settles in service coupon case
The Texas attorney general’s office alleged that Prestige Ford violated the Deceptive Trade Practices-Consumer Protection Act in 1997 and 1998. The dealership charged customers $199 for discount service coupons but did not disclose that the purchase was optional and not part of tax, title and license fees, the attorney general alleged.
Reynolds denies wrongdoing and said the settlement contains no language admitting wrongdoing. He said he settled in an effort to avoid publicity that would surround a court case. Reynolds is chairman of the Ford Division National Dealer Council, a group that has endorsed Ford Motor Co.’s Blue Oval dealership certification program.
The settlement includes the payment of $75,000 in penalties, investigative costs and attorneys fees to the state, Attorney General John Cornyn said in a statement.
‘We sold a product that over 300 other dealers in Texas sold and are still selling today,’ Reynolds said. ‘We feel that we were singled out because of our size.’
In 1999, Prestige ceased using the discount service coupons, sold by an outside company, Reynolds said. Prestige Ford is the largest dealership in Texas of any make and the fourth largest Ford Division dealership in the United States.
Recipients of the $250 vouchers may use the money for service work, parts and bodywork or toward the purchase of a new car, the settlement states.
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