Packing payments? …it’s still illegal

In deference to one of my oldest friends in the car business, Jim Ziegler, payment packing is illegal. And not just in California, where it’s prohibited by statute. The practice qualifies as an “unfair or deceptive act or practice” at the state level and an “unfair, deceptive or abusive act or practice” at the federal level – subject to UDAP and UDAAP claims, respectively. It is addressed on point in the AFIP Certification curriculum.

In 1999, the National Association of Attorneys General defined and denounced payment packing with a resolution:


WHEREAS, “packing” is the deceptive practice of misrepresenting monthly payments to consumers during auto sales and lease negotiations in order to facilitate the sale of automobile related products and services; and …

The key word being “deceptive.” In a 2015 article in P&A Magazine titled, “The Return of the Leg,” by Terry O’Loughlin, Director of Compliance for Reynolds & Reynolds, he asks, “Does anyone in the car business not know that payment packing is illegal? 

So why are dealers still doing it? Enforcement action is being taken by both state AGs and the FTC:

  • In 2015, “Three jointly owned dealerships, which claim to be the largest combined Honda dealerships in the country, …agreed to pay $13.5 million to settle charges that they not only sold F&I products that violated state and federal laws, but also allegations that they payment packed, or ‘jammed,’ the questionable products into customer deals.” Read the article here.
  • “Since 2015, [New York AG] Schneiderman has obtained more than $17 million in restitution and penalties as part of his office’s crackdown on the practice of ‘jamming,’ or payment packing.” Read the article here.
  • Nine-Store Los Angeles Group Charged with Payment Packing, Yo-Yo Financing [Sept. 2016] “The dealerships were also charged with violating the FTC Act’s prohibition on deceptive and unfair acts or practices for including F&I products like service contracts and GAP in customers’ deals without their knowledge. In some cases, car buyers were told the products were free.” Read the article here.
  • Los Angeles-Based Sage Auto Group Will Pay $3.6 Million to Settle FTC Charges [Mar. 2017] Allegedly used deceptive and unfair sales and financing tactics. Read the FTC press release here.

Now that the FTC and state AGs have joined forces to crack down on violations in several areas, including dealership financial services practices, it’s time for dealers to take a hard look at their payment quoting practices.

I’ve learned in my service as an expert witness that some dealerships are using archaic quoting methods that might be construed as “payment packing,” without that being the intention. A dealership in Texas, for example, was using an old average APR of 12-15% to quote monthly payments if it didn’t have the consumer’s credit tier in hand.

A simple solution to avoid being accused of payment packing is to implement a method for providing “first-pencil” quotes – before you have the consumer’s credit report – based on the store’s actual transaction experience over the two to three months prior. It is statistically verifiable and commensurate with the store’s current clientele and cost of money.

AFIP best practice:

  • Each store should maintain a running average of the new- and used-vehicle APRs recorded over the past 60 or 90 days, not including promotional factory APRs.
  • If the dealer caters to credit-challenged buyers, also calculate the average APR for the special finance deals for the past 60 or 90 days.
  • Tell the customer the estimate is based on the store’s average and that the actual payment will be higher or lower depending on his or her credit worthiness.

In addition, in quoting the trade-difference amount, cash price or monthly payments, the quote must be:

  • based on the actual or negotiated agreed-to price for the vehicle
  • limited to any equipment, products or services that have been requested by the prospective buyer (the cost of which has been disclosed), and
  • based on a payment term commensurate with the transaction.

by Dave Robertson


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This article is intended for informational and educational purposes only. It should not be considered legal advice. Readers are responsible for obtaining legal advice from their counsel.