Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, October 22, 1995 TAG: 9510230057
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: MIKE HUDSON STAFF WRITER
DATELINE: LENGTH: Long
He says he noticed a couple of problems, though - a paint chip over a rear wheel and a fender that didn't line up right.
Anderson says he asked whether the car had been wrecked, but the salesman assured him it hadn't and that Bennett Ford had gotten it from another dealer. Anderson bought the car for $15,500.
Anderson later claimed he had been misled. He said in a lawsuit that Bennett Ford had actually bought the car - for about $11,000 - from a private owner who had told the dealership that it had been wrecked.
Bennett Ford calls Anderson's allegations "ridiculous," but agreed to settle the case for an undisclosed sum. Anderson, 24, says the whole thing left him with "a very bad taste."
So he was bemused to learn that Gov. George Allen had appointed the dealership's owner, Nelson Bennett, to a new state board that is supposed to license and investigate complaints against auto dealers.
"I guess he's got a lot of pull," Anderson says.
Critics say the setup of the state's new Motor Vehicle Dealer Board creates a fertile ground for conflicts of interest because 16 of the board's 19 members represent the car industry. The board is taking over regulatory power over dealers from the Department of Motor Vehicles.
Consumer advocates predict the board won't be as tough as it should be on the industry. And they wonder what will happen if board members' dealerships - or dealerships of close friends in the industry - become the subject of a consumer complaint to the board.
Jean Ann Fox of the Virginia Citizens Consumer Council in Richmond says the idea of a "self-regulating" dealer board "doesn't pass the laugh test."
But Nelson Bennett and other board members say auto dealers have a big incentive to keep the industry honest.
Leo Trenor, a board member who owns two small used-car lots in the Roanoke Valley, says the board will be under so much scrutiny from the public, media and legislators that it will be extra careful about avoiding conflicts of interest - and be aggressive about policing the industry.
"I think it'll have to - to keep its credibility," Trenor says.
The new board is part of Allen's efforts to reduce state bureaucracy. For car dealers, it's a case of an industry stepping up and volunteering to keep its own house clean - and save taxpayers money in the bargain. For critics, the new board is an example of a business lobby using political muscle to weaken law enforcement, a move that they say will make buying a car more risky and expensive for almost everyone who walks onto a sales lot.
Car dealers counter that fraud and slippery sales pitches are rare in their industry. They say they're ready to get rid of the bad apples.
Bennett says the board will do what's right for car buyers. "I for one don't want to do anything that would hurt the consumer," Bennett says.
As for the lawsuit involving his dealership, Bennett says he and his employees had no idea the car had been wrecked. After the lawsuit, Bennett says, they checked and found it had been in a minor parking-lot accident that caused $317 worth of body damage.
Anderson, who did not report his complaint to any government agency, contends the accident ruined the car's alignment. He says he settled the case for a small amount because it boiled down to his word against the salesman's.
Bennett says he offered to take back the car, but Anderson's attorney was holding out for a big-dollar settlement. "I feel like that's blackmail," Bennett says. "It was ridiculous."
Improving their image
Car dealers are a $10-billion-a-year industry in Virginia.
Until this year, the state Department of Motor Vehicles was in charge of licensing dealers and investigating consumers' complaints against them. Complaints totaled 426 in 1994.
This spring, the General Assembly created the dealer board as part of Allen's legislative package. The board will be taking over power for regulating dealers from the DMV between now and Jan. 1.
The new board will have the power to take away licenses or issue fines if dealers put out false advertisements, play "bait-and-switch" or otherwise break the law.
The board has 16 auto-industry representatives and one private citizen who serves as consumer representative, all appointed by Allen. The law also designates the heads of the DMV and the state Department of Agriculture and Consumer Services as members.
Last month the board hired another auto dealer, Daniel Wilkins, to serve as executive director. He was chief financial officer of a company that owns 12 dealerships.
State Sen. Kenneth Stolle, a Virginia Beach Republican who co-sponsored the law that created the board, says dealers genuinely want "to enforce their industry and improve their image. It would improve their ability to sell cars and to deal with the public."
Stolle says the law includes "safety checks" such as making the DMV commissioner the board's chairman. "We wanted to make sure we weren't losing control over it so the industry just wouldn't run wild if it chose to do so," Stolle says. "Not that we expected them to do that."
The law also says board members must excuse themselves from acting on cases in which they can't be "fair and impartial."
Allen appointed some of the largest dealers in the state to the board. Flip through board members' resumes and you'll see many good works and achievements: master's degrees, a law degree, memberships on bank boards, a national customer-service award from Ford Motor Co., a Better Business Bureau award. Bennett, for instance, has been active in the Jaycees and Lions Club.
Bennett, who has been in the car business 43 years, says he has always worked hard to please his customers. If a customer isn't satisfied with a car, Bennett says, he should "let me know and I'll take it back."
Fox, the consumer council president, says "I have no reason to think that the governor did not try to appoint reputable dealers to the board. I would have been shocked and amazed if he'd appointed fly-by-night folks. It's just that the structure of this - turning it over to the industry - isn't adequate to protect the public."
She believes conflicts are inevitable. Board members may excuse themselves from cases involving their own dealerships, Fox says, but they still create policies that will affect the entire industry and "have a direct bearing on their own profits and on their competitors down the street."
Currently, the board is involved in a dispute over whether dealers should disclose their processing fees - which typically range from $99 to $200 - in a car's advertised price. Fox and the attorney general's office say "yes." Dealers say "no," in part because competitors in nearby states don't do it that way. An informal survey by the Richmond Times-Dispatch showed some of the dealer-board members charge among the highest processing fees in the state.
Last year Department of Motor Vehicles investigators fanned out across Virginia Beach and Norfolk, raiding 16 car lots. The crackdown was sparked by complaints from U.S. Navy officials that some dealers were taking advantage of young, inexperienced sailors.
Over the years, the consumer council's Fox says, the DMV has never been known as overly aggressive in policing car dealers. Most car buyers who believed they had been wronged have had to rely on lawsuits - which may help some individuals get their money back but don't necessarily end patterns of misconduct.
For Fox, the DMV sweep was a welcome change, even though almost all of the DMV's charges turned out to be for minor record-keeping infractions or were thrown out of court.
Navy officials say they've heard fewer complaints from service men and women since then. And Fox contends the raid - and dealers' fears the DMV was getting tougher - was the impetus for the dealer-board legislation. She says some supporters of the dealer board told her "those bureaucrats over at DMV had gotten out of hand and this wasn't going to happen again."
Don Hall, the top lobbyist for the Virginia Automobile Dealers Association, says the DMV raid didn't have much to do with the industry push for the dealer board. But he says it did make dealers realize they needed to make sure they educate everyone in the industry about the right way of doing business.
In the end, the dealers' bill drew support from Republicans and most Democrats. It passed the Senate 40-0 and the House 83-17.
The DMV had 40 people working on licensing dealers and checking complaints against them. The new board plans to hire 19 full-time employees and six part-timers to perform the same job.
That will keep the board's budget under $1 million - all of which will be covered by fees from dealers. Board members say that will save taxpayers $1.5 million a year that once was spent on the larger staff.
Can 20 to 25 employees do all the licensing for 3,600 car dealers and keep an eye on nearly 700,000 new and used-car sales a year?
The dealers think so: They say the agency will be more efficient because it's going to be run "with a business philosophy."
Despite the optimism, there is some confusion about the board's new role.
Bennett, the Chesterfield Ford dealer, says the board won't handle customers' complaints against dealers.
"I don't think we're going to enter into looking at individual complaints for every complaint against a dealer," Bennett says. "I don't believe we will. If somebody buys a car and they have a problem with it and they have trouble getting service from the dealer, I don't think that's a function of the board."
He says that should be up to the Better Business Bureau, the state Department of Agriculture and Consumer Services or the car manufacturers.
That view does not seem to jibe with the new law. It specifically gives the dealer board responsibility for fielding complaints against dealers or sales people. It can revoke the licenses of dealers and sales people who violate the law and can issue civil fines up to $1,000.
Stolle, the law's sponsor, responds to criticism of the dealer board by saying that the DMV commissioner will still be able to suspend dealer licenses on his own without the board's approval.
"His authority is still the same as it has always been," Stolle says. With both the DMV and the board with disciplinary authority, Stolle says, "you have double the safety checks on this now."
That's news to DMV Commissioner Richard Holcomb. Holcomb says his agency will still investigate odometer tampering and other criminal acts, but it won't have the power to suspend dealer or sales people's licenses or fine them for false advertising or other noncriminal violations. In fact, Stolle's legislation wiped out the DMV's power to do that - in his bill the DMV's name was repeatedly crossed out with the dealer-board's name inserted in its place. With the new law, Holcomb says, "that authority clearly rests with the dealer board."
Richard Kern, a former Winchester vice mayor, has been in the car business almost 50 years. He says he and other dealer board members will exercise their authority with an even hand. He believes dealers need protection just as consumers do.
"We want a level playing field. We don't want to lean one way or the other," Kern says. "You have some unscrupulous people - I'm not referring to dealers, I'm referring to customers - who will try to benefit from the law. That's a no-no."
He says one customer has brought her car back to him four or five times, claiming there's something wrong with it. But he can't find anything wrong.
"The bottom line is the payments were too much or she didn't like the car. She was fabricating problems that didn't exist," Kern says. "So you have it on both sides. You don't have just bad dealers. You have bad customers who try to take advantage of the system."
At the same time, Kern says some dealers need to clean up their acts. "You see a lot of advertising that is really borderline. A lot of it is false advertising and should not be allowed. We as dealers know this."
That, he says, is what will make the new board effective. "Now you've got the experts who are making a living in the same business that you're policing."
POWERS AND DUTIES MOVED FROM THE DIVISION OF MOTOR VEHICLES TO THE NEW MOTOR VEHICLE DEALER BOARD.
The board will:
-- license dealers and sales people
-- take complaints against dealers and sales people and "take appropriate discliplinary action."
-- revoke or suspend licenses for fraudulent or deceptive sales techniques, false advertising, odometer tampering and other violations of law.
-- pass regulations to help it enforce prohibitions against false advertising or other rules governing dealers.
-- issue civil fines of up to $1,000 for violations of the law.
DEALER BOARD MAKEUP
The new law specifies19 members to include:
-- State Commissioner of Motor Vehicles
-- State Commissioner of Agriculture and Consumer Serivces
-- Nine franchise automobile dealers (who typically sell new and used vehicles).
-- Seven independent dealers. This includes at least five used-car dealers, one rental-car dealer and one auto-salvage dealer.
(The Roanoke Valley's representatives are Art Herberer of Import Auto Recycling in Salem and Leo Trenor of Anchor Sales and Service in Roanoke).
-- One individual "with no direct or indirect interest" in auto industry "other than as a consumer."
(This seat is currently held by Margo Clarke, who directs a senior citizens job program for the Urban League of Greater Richmond)
Memo: ***CORRECTION***