TrueCar.com said today that it will change its fee structure in Virginia, after regulators there determined that dealerships using the Internet shopping service were violating state law. Hit the jump to read the rest of the story.
TrueCar’s announcement was the latest development in a growing regulatory controversy affecting auto dealers in half a dozen states. On Tuesday, regulators in Oklahoma asked TrueCar to suspend business there until legal concerns could be addressed.
In Virginia, TrueCar said it will drop fees that it charges participating dealers when they sell autos from TrueCar leads. The regulators ruled Monday that the fees violate Virginia’s ban on bird-dogging — paying fees to third parties for leads that turn into sales.
Instead, TrueCar will charge participating dealers a subscription fee not tied to sales. The company did not announce terms of the subscription plan.
TrueCar said in a statement today that the change will bring its dealers in “complete regulatory compliance” in Virginia.
Bruce Gould, executive director of the Virginia Motor Vehicle Dealer Board, said in an e-mail today that TrueCar “should be OK” as long as its new pricing model complies with Virginia’s payment guidelines for lead generators. The payment essentially has to be a flat amount, not tied to a sale or referral.
In the TrueCar statement, CEO Scott Painter said: “TrueCar is committed to never putting our dealer partners at risk, which means we will always work closely with regulators to identify a workable solution or … suspend service.”
Virginia is one of several states that is questioning whether TrueCar dealers are violating various state laws designed to protect the interests of dealers and consumers.
On Friday, Jan. 6, TrueCar suspended its service in Colorado, whose regulators on Dec. 15 issued an opinion that TrueCar’s materials and Web site violate the state’s advertising rules. The Colorado regulators also said they are concerned that TrueCar could be engaging in unlicensed sales.
According to Louisiana regulators, TrueCar also suspended service in Louisiana before Christmas.
Lessie House, executive director of the Louisiana Motor Vehicle Commission, said TrueCar suspended service in her state in mid-December because of advertising concerns and prohibitions against brokering and bird-dogging. Brokering is charging a fee to a retail customer to find and negotiate the purchase of vehicle.
“They knew my investigators were out there talking to dealers,” House said.
She said she expects TrueCar to propose changes but hasn’t heard back from the company. Dealers violating the Louisiana law can face penalties of $5,000 per violation and suspension or revocation of their licenses.
House said that some Louisiana dealers and Zag.com, the former name for some of TrueCar’s operations, paid fines for advertising violations in the late summer and fall of 2011.
