auto dealer in black and red logo
MenuMENU
SearchSEARCH

‘This Lawyer Walks Into the F&I Office …’

The magazine’s legal expert found several common mistakes in the paperwork for his new car, each of which could cause trouble for the dealer.

by Tom Hudson
August 22, 2013
‘This Lawyer Walks Into the F&I Office …’
3 min to read


I broke down and bought a new car recently. Because I spend a little more than half of my time in South Carolina, I decided to do business with a dealer in Myrtle Beach. The sales guy, the F&I guy and I all did our little dance, and pretty soon it was time to sign on the dotted line.

The buyers order was the first document I looked at, and I instantly saw two problems with it. When you look at as many buyers orders as I do, you get a pretty good feel for the sorts of mistakes that the drafters of these forms make when they don’t do their homework. Sure enough, the drafter of this form made a couple of common mistakes.

Ad Loading...

I signed it anyway, because no one was paying me to fix the thing, and because both of the problems worked in my favor or could be used for leverage if I had problems with the deal, the dealer or the car. I won’t identify the dealer, by the way, because I’d just as soon not tip off some plaintiff’s lawyer to the dealer’s problems.

The first problem that jumped off the page was a violation of the Federal Trade Commission (FTC)’s Used Car Rule. That rule requires that a certain notice appear in the contract of sale. It also requires that the notice be “conspicuous.” The dealer’s form contained the required notice, but it appeared in the same type size and font that was used in most of the rest of the document. The failure to use a “conspicuous” notice violates the Used Car Rule, exposing the dealer to the FTC’s tender mercies.

The second jump-off-the-page problem was similar to the first. The Uniform Commercial Code (UCC) provides that a sale of goods (that includes vehicles) is subject to certain “implied warranties.” These warranties apply whether the buyer and seller expressly agree to them or not. The UCC, however, permits a seller of goods to “disclaim” any implied warranties, provided any such disclaimer is conspicuous. This dealer’s disclaimer, like his Used Car Notice, was not conspicuous. You can bet a car buyer would argue that the failure to use a conspicuous disclaimer results in the disclaimer being ineffective.

When I arrived home with my new ride, I sat down and perused the paperwork more closely. That turned up an additional issue: One of the documents I had signed was an arbitration agreement. I read through it and concluded that it wasn’t in bad shape, except for one little problem. The drafter had provided in the arbitration agreement that South Carolina’s arbitration law would apply, which is a bad idea.

When we draft arbitration agreements, we specifically state that arbitration under the agreement will be pursuant to the Federal Arbitration Act. The reason we reference the FAA is that there are a number of business-friendly published court decisions that say the FAA trumps, for the most part, state judicial and legislative attempts to prohibit or limit the ability of businesses to use arbitration agreements as a means of defending themselves against class action lawsuits and potentially large “runaway” jury verdicts. Electing the state’s arbitration law to govern the document deprives the dealership of the benefit of these favorable precedents.

Ad Loading...

After thinking some more, I decided that it would be a waste not to at least mention these problems to the dealer. So I called up the nice F&I man and explained what I’d found. I’m sure  he immediately alerted the owner of the dealership of the form’s deficiencies, and that they then immediately called the dealership’s lawyer to fix the problems.

Sure he did.

Subscribe to Our Newsletter

More Dealer Ops

Auto Dealer Today, Dealer Debrief, 07/15/2026, with Lauren Lawrence
Dealer Opsby Lauren LawrenceJuly 15, 2026

Dealer Debrief: Defection Data & EV Updates

In this week's debrief, host Lauren Lawrence discusses how to use defection data to your advantage and the latest on EV sales and charging infrastructure.

Read More →
Two professionals shake hands while exchanging a car key fob beside a vehicle, symbolizing a vehicle sale, lease agreement, or dealership transaction.
SponsoredJuly 8, 2026

How Defection Data is Bridging the Dealership Conversion Gap

Lead volume is flat, cross-shopping is up and brand loyalty is in retreat. As confident sales teams keep losing buyers they thought they had, daily industry sales data is showing dealers exactly where their funnel is breaking and how to fix it without buying a single new lead.

Read More →
Auto Dealer Today, Dealer Debrief, 07/02/2026 with Lauren Lawrence
Dealer Opsby Lauren LawrenceJuly 2, 2026

Dealer Debrief: Where are you losing customers?

In this week's debrief, host Lauren Lawrence discusses the hidden leaks in dealerships where you might be losing customers without even realizing it.

Read More →
Ad Loading...
Auto Dealer Today, Dealer Debrief, 06/25/2026, with Lauren Lawrence
Dealer Opsby Lauren LawrenceJune 26, 2026

Dealer Debrief: Improving Your Inventory Management

In this week's debrief, host Lauren Lawrence covers a new survey that shows what service technicians really want and two launches that could help improve your inventory and vehicle life cycle management.

Read More →
group of people standing in a circle holding puzzle pieces together
Dealer OpsJune 1, 2026

Ladies and Gentlemen, This Is a Dealership: Why the Fundamentals Still Decide Who Wins

A teaching moment by a legendary football coach happens to apply perfectly in the auto retail space. Learn what it is and how to use it to your store’s advantage.

Read More →
Cover image for a BOK Financial report titled “Timing the market: How avoiding volatility entirely can hurt long-term reinsurance program performance.” The image shows several road construction barricades with flashing amber warning lights lined up in a nighttime work zone. Beneath the image, red text explains that avoiding volatility can mean falling behind inflation and missing market rebounds that drive long-term surplus growth. The BOK Financial logo appears at the bottom right.
SponsoredMay 8, 2026

What Market Timing Mistakes Mean for Your Reinsurance Program

When volatility hits, dealer-owned reinsurance programs face a familiar temptation: pull back and wait for calmer waters. New data from BOK Financial shows why that instinct can quietly cost you years of surplus growth.

Read More →
Ad Loading...
two cars on a billboard, No Hidden Fees
ComplianceMay 1, 2026

Dealer Ads and the FTC

The agency has made it clear in recent enforcement actions and warnings, in auto retail and other industries, that advertised prices must include all nonoptional costs to the consumer.

Read More →
Closeup of white car's headlight, front end
Dealer Opsby Hannah MitchellApril 17, 2026

Used Autos Supply Dwindles

The March shopping surge, despite high prices, cut into inventory by the most since the thick of the pandemic, Cox Automotive analysts calculated.

Read More →
hands making protective frame over red car, Risk Reality Check, Be Proactive, Auto Dealer Today logo
Dealer OpsApril 1, 2026

Managing Risk Effectively Through Changing Times

The variables influencing risk pricing have changed significantly over the past five years. Being proactive and responsive to emerging trends is not optional but essential.

Read More →
Ad Loading...
Car key, stacks of coins, and a paper car cutout with AutoPayPlus logo, representing auto financing, loan terms, and vehicle affordability trends.
Dealer Opsby StaffMarch 31, 2026

Survey Reveals What Won't Fix What's Breaking Car Sales

AutoPayPlus says extra-long auto loans are trapping consumers and threatening the dealer trade-in cycle, and that the industry is leveraging the wrong tools to combat high MSRPs.

Read More →