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The Credit Card Surge: How Dealerships Can Save Thousands | Amberly Allen, Dealer Merchant Services

• CBT News • Season 1 • Episode 1

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Ever wonder why some dealerships are saving $10,000+ monthly while others get hit with compliance violations for their credit card practices? The answer lies in understanding the complex web of federal laws, state regulations, and card brand rules governing credit card surcharging in automotive retail.

Amberlee Allen, founder and managing partner of Dealer Merchant Services, reveals how her company grew from serving a single dealership to over 1,000 stores in just five years by specializing exclusively in automotive-compliant surcharging programs. This remarkable growth stems from a deep understanding of dealership operations and the unique compliance challenges faced by auto retailers when implementing surcharges.

The compliance landscape is intricate - surcharging remains illegal in three states (Connecticut, Massachusetts, and Maine), while others like Colorado cap rates at 2%. California dealers face special restrictions in F&I, and New York requires explicit price disclosures. The universal rule? Surcharges cannot exceed 3%, dealers cannot profit from them, proper signage is mandatory, and surcharging debit cards is strictly prohibited. Without specialized technology that automatically identifies card types, dealerships risk significant violations.

What separates successful implementations from problematic ones? Dealer-specific training, controller-friendly reporting with RO numbers and employee IDs, and support staff comprised of former dealership controllers who understand automotive accounting. As economic headwinds approach in 2025, including potential tariff impacts, implementing a properly structured surcharge program represents low-hanging fruit for dealers looking to protect their margins. The question isn't whether you can afford to implement compliant surcharging - it's whether you can afford not to.

Announcer:

This is Driving Solutions exclusively on CPTNews. com.

Jim Fitzpatrick:

Hey everyone. Jim Fitzpatrick with CBT News, thanks so much for joining us on another edition of Driving Solutions exclusively right here at the CBT Automotive Network. We have got Amberly Allen, founder and managing partner of Dealer Merchant Services, back in our studio once again. That has grown incredible over the last five years. Talk to us about that.

Amberly Allen:

Well, it's so exciting, Jim, Thanks for having me. We started with one dealer and now we have 1,000.

Jim Fitzpatrick:

Oh, my gosh.

Amberly Allen:

And I anticipate another 1,000 over the next 12 to 18 months. Oh my gosh, so it's growing very quickly and we're bracing ourselves for that for sure.

Jim Fitzpatrick:

So for some of the dealers that missed the last show, talk to us about understanding the legal compliance requirements when it comes to surcharging.

Amberly Allen:

Sure. So you've got federal laws, you've got state laws, and then you have card brand compliance, and so it currently is legal in 47 states to do a compliant surcharge program. It's still illegal in Connecticut, Massachusetts and Maine. There's also very specific rules in Colorado. 2% is the max that you can charge a surcharge in the state of Colorado. In the state of California, the CNCDA has advised that you do not charge a surcharge in finance. And New York has very specific rules as well. They want you to be very explicit in communicating both prices up front and off into the customers. So we have the technology to help our New York dealers on those things.

Jim Fitzpatrick:

And when you say in finance, you mean in F&I. That's correct. So if somebody comes in and wants to put $5,000 down on their credit card, that's.

Amberly Allen:

Well, not in California, and it's interesting because a lot of stores have said well, I just started charging customers a flat three and a half percent if they put $3,000 on their credit card. And so it's important, Jim, to note that 3% is the max that you can charge a surcharge anywhere.

Jim Fitzpatrick:

Anywhere.

Announcer:

Okay, and so that's the max.

Amberly Allen:

So if a dealer is doing anything more than 3%, that needs to change right away.

Jim Fitzpatrick:

And that can't be one of those things that a sales manager hits somebody at 5% and the guy or the woman says okay, and you go.

Amberly Allen:

Hey, I just made you know, right, that's right and to your point, there's compliance regulations, so a dealer cannot profit in any way from the additional surcharge. So, 3% is the max. They cannot profit in any way from the additional surcharge. So 3% is the max. They cannot profit in any way from the surcharge. They have to have signage at the cashier and the entry point of the dealership. They also have to use a third-party processor, so a partner like us that can ensure that those first two things are happening.

Amberly Allen:

So the audits unfortunately are coming and we want to make sure dealers are doing it the right way.

Jim Fitzpatrick:

Dealers, are you listening to this? Because I'm telling you as a former dealer, you have maybe a hundred or 200 people in your company. They might not know this. So just some of the things that you talked about. Now, with the proper signage and making sure that you're compliant, the last thing that you need as a dealer is to have somebody knock on your door from an agency that goes, ah, we're here to check out some things, and if they're not checking all the boxes and you're hit, guess what they go. How many stores do you own, mr Dealer, or Mrs Dealer? Oh, we own 20. Okay, oh, great. What are those addresses of those other stores? Because if you're not doing it in this one, you're probably not doing it in the others properly.

Amberly Allen:

That's right, right, absolutely. And we also want to make sure dealers are not charging a surcharge on debit cards. Okay, okay, so we have technology with our credit card machines. It actually knows the difference between a credit card and a debit card.

Jim Fitzpatrick:

Okay.

Amberly Allen:

And it's the technology that reads the first eight digits on your credit card. Okay, it's called a bin range identifier, so it actually identifies if the customer is using credit or debit.

Jim Fitzpatrick:

Okay.

Amberly Allen:

If they use a debit card, whether they use their PIN or not, the machine will know that it's debit and a surcharge will not be added.

Jim Fitzpatrick:

Oh, that's great. It's automatically covered. It's not up to the cashier or the F&I manager or what have you, which is a really big plus.

Amberly Allen:

That's right. And of course we will train all of the staff on not only the new technology, but we'll also train them on the word tracking, how to communicate it the right way to their customers to ensure that they mitigate any CSI issues. And then from there we'll also make sure the accounting department is fully trained. You've got some additional change in reporting and reconciliation. We also have some integrations involved, so we integrate typically with their DMS. So we've got lots of bells and whistles because we focus specifically on car dealerships.

Jim Fitzpatrick:

And how long does that take? Somebody gives you a call and says, amberlee, I've seen you on CBT News, I'm ready to. Let's do this. Okay, I heard about you at my dealer 20. I know you've got some of the largest companies out there. We talked a little bit. You've got a huge number of the top 150 dealer groups out there that are on the list.

Amberly Allen:

Very proud of that.

Jim Fitzpatrick:

It just came out.

Amberly Allen:

Want these guys. Want these guys, that's right. Might be one of you out there that she wants.

Jim Fitzpatrick:

But talk to me about that. I mean, you've got so many large dealer groups. If they give you a call and say, hey, we're ready to go, we're ready to pull this lever and be compliant and understand this space, how long does that take?

Amberly Allen:

Well, first we want to look at their statements. We want to see what they're spending today. And we want to see what they're spending today and we want to see if there's any additional ways that and really show them what their exact savings could be. Right. We really drill down on finding out what their exact savings could be, and the cool thing is we look at it beforehand and then we cross-reference it after. So when we tell a dealer what they could anticipate saving, we're pretty close on the money after we launch.

Announcer:

That's impressive.

Jim Fitzpatrick:

So, yeah, we want to make sure that that's the case, right, so we're not under promising. Sure, in five years I think it's impressive that you've kind of become the gold standard, if you will, in this space. I mean, you were like five or 600 more stores than your closest competitor, right? That's very impressive.

Amberly Allen:

Well, thank you. Yeah, we've launched more dealerships on a compliance surcharge than any other company in the country, by a long shot, so we know it better than anybody. So, yes, we're very proud of that and we know that dealers are most influenced by their peers, and so they tell their friends, they tell their peers and colleagues, and so that's how we've grown is really by referral.

Jim Fitzpatrick:

Sure, sure, talk to me about the difference between a cash discount program versus a compliance surcharge program.

Amberly Allen:

So a cash discount program is simply just an increase to the customer's pricing on anything and everything but cash and checks.

Amberly Allen:

So, that means credit and debit cards, and so, frankly, it's not compliant in finance, right? How do you raise your price in your system and then lower it? Right, it changes the deal structure, and so we want to make sure that dealers are only launching a compliance surcharge, and so that means that their price only increases if they use their credit card, nothing additional on debit. So if you have $100 RO, it's 103 for a credit paying customer, credit card paying customer, and it remains at 100 for a debit card paying customer.

Jim Fitzpatrick:

Okay, gotcha, gotcha. And what if a deal is not really ready to pass along these fees? They're just not there yet.

Amberly Allen:

Well, a lot of times, if they're trepidatious about moving forward with an initiative like this, they'll sometimes start in finance. That's where you see the least amount of pushback, outside of California, of course. And then also making sure that they know their numbers. We want to arm them. We see what is called interchange padding a lot. So they might not be able to see it in their 26 pages of their statement, but we can use our proprietary software and see if there's hidden fees and things like that. So at a bare minimum, we want dealers to know their numbers.

Jim Fitzpatrick:

Sure, sure. I bet you've got a few calls of people where the compliance police have already been there, right? Oh yeah and said, hey, you've got to help me out quick, absolutely. You probably can't do much about the past, but you can about the future, right?

Amberly Allen:

Absolutely. We want to make sure that they're doing it the right way and if there's any bad apples and if they're doing a noncompliant program we've unwound a lot of those noncompliant programs and help them clean it up, help them make sure everything's going smoothly. And a lot of times too, if they've launched a surcharge, maybe with another company, and it hasn't gone successfully, we want to make sure they understand in the accounting department how to do this right. We have a saying if the controller's not happy, nobody's happy, that's right.

Amberly Allen:

And so if the amount of transactions that come in blow up the store right, then it's all for naught. And then we also have a process for extended warranties and wholesale parts. A lot of times in those business-to-business relationships there's not a surcharge to be added there.

Jim Fitzpatrick:

Right, right. How are you guys different from maybe a dealer's current provider if they're not currently with you? Sure, and you've got 1,000 dealers now, of course, there's 18,000 dealers out there, that's right. So you've got to roll your shirt sleeves up and get going here, that's right. But how are you different from some of the other providers in this space?

Amberly Allen:

Well, we focus just on automotive and it's complex.

Amberly Allen:

That's a big plus it is. It is, and so all of our customer reporting has been built for the dealership and dealership accounting, some of those integration components. But this is not a taco shop or a sandwich shop. This is very, very complex, and so you have to think about CSI, you have to think about your accounting department, you have to think about your service advisors and how they can communicate it the right way to your customers. You also have to think about the technology and making sure that, like, our IT team works directly with their IT team and make sure all the security is in place and the machine is in place and all of those pieces of it. So there's 93 items on our checklist for a reason because we know how to launch this in a way that it doesn't blow up the store.

Jim Fitzpatrick:

Sure. And when it comes to training, who typically is in that training when you kick off or launch a store? What positions?

Amberly Allen:

Almost every department is touched by payments at some point in the process, and so we have a two-fold training process. We start with what we call our Dealer Merchant Services University. That's our online training platform. We train and certify 16,000 dealership employees across the country, specific to a compliance surcharge on the word tracking and the compliance, but we're also going to make sure they understand it from an accounting perspective. But from there we start with that online training, simply to breed familiarity.

Amberly Allen:

We're not trying to stop there and just send them to an online portal to train them it's more complex than that. So we start with online training and then from there we launch in their stores. So our team actually physically goes to each of our stores and launches their program.

Jim Fitzpatrick:

And, on the support side, that you did say in the last time that you were in the studio that you're stateside with your support.

Announcer:

We are.

Jim Fitzpatrick:

You're not calling to some other country. That that's right. And not only are we stateside and we answer but our accounting team is comprised of former controllers.

Announcer:

So when you get a controller on the other end of the line, they know how, that we have to run at the speed of business.

Amberly Allen:

We understand their business, we know what they're looking for. All of our technology too. Every single time somebody puts in a transaction, it's got the RO number, the employee number, and so you don't have the controller scrambling to try to find transactions. We've got custom reporting, specific for automotive.

Jim Fitzpatrick:

Yeah, that's a huge plus it is. You know dealers. They feel as though they're in this separate space, outside of any other retailer out there. Maybe they're not, but they feel that way. But certainly the individual that's charged with running a dealership's finances, the controller. It makes it so much easier if they've got somebody on the other end of that line that knows what they're going through. Sure.

Amberly Allen:

And we take a lot of pride in that. We really call it world-class support on purpose, because we want to make sure that they feel supported on the back end as well.

Jim Fitzpatrick:

Right, right. What should dealers be concerned with most when considering a surcharge program?

Amberly Allen:

Well, we want to make sure they're not charging on debit. We want to make sure that they're training their staff accordingly. We want to make sure that they really understand all of the pieces from a legal side of things, that they're not trying to do this themselves. They have to use a partner that understands the space and can ensure that they're doing it the right way.

Jim Fitzpatrick:

Right, right, right, and that's going to be even more important as these agencies come knocking right. Oh for sure, yeah, yeah.

Amberly Allen:

For sure. The audits are coming, they want to make sure they're not charging on debit, and the technology has to be there to ensure that. Right, as I mentioned, our machines know the difference between credit and debit, so their employee doesn't have to know, right, right, so we'll make sure everything is covered.

Jim Fitzpatrick:

Yeah, that's huge. And then, of course, from the training standpoint, and from the time again tell me again from the time a dealer calls you, from the time that they're up and running with you. So we typically need three to five weeks. We move very quickly.

Amberly Allen:

Once a dealer wants to save $10,000 a month, they want to do it yesterday. So we really move quickly. We have a very structured process in which they go through our queue and make sure everything's handled, and so we will walk them through every piece of that. But some bigger groups, they will take a couple of weeks additional, right? You know we've launched 65 stores at one time, right? So in that you know it took us a couple of weeks, but we can make it happen. So three to five weeks is standard.

Jim Fitzpatrick:

That's great. Yeah, that's great. Are there any major problems that come up during those installations?

Amberly Allen:

no-transcript process. New system, new word tracking. And so we really wrap our arms around them, especially in the first 30 days.

Jim Fitzpatrick:

Because you've been down that road before. You kind of know.

Amberly Allen:

Absolutely.

Jim Fitzpatrick:

Here are the pain points that are going to come up.

Amberly Allen:

We even had a dealer group that launched with a different provider and they called us and they said we just didn't know what to ask, we just didn't know what we didn't know. And so we do have that advantage in numbers.

Jim Fitzpatrick:

We've learned it a thousand times yeah, exactly. So what should dealers when it comes to this, when they're in this space and obviously we're huge believers in what Amber Lee has got and her company, and certainly these are the kinds of solutions we want to be bringing you here at CBT News, and so we are huge fans of her company and dealer merchant services. However, if they are out there and they are hit up by some of these other companies in the space that want to be you as the gold standard, what should they be asking?

Amberly Allen:

Well, they need to be asking if they are doing a compliance surcharge program. They need to ask them how many dealerships they've actually launched on a compliance surcharge program, not how many dealerships do they have on traditional processing or a cash discount. If, if they're offering you a zero fee or cash discount, they definitely don't know your business. So that would be the first red flag. So, making sure that they work with a partner that understands automotive and ask how many times they've actually launched a program like this in a dealership live. That would be a big question that I would ask exactly, exactly so.

Jim Fitzpatrick:

So as the founding and managing partner of Dealer Merchant Services, where is the company in five years? Your growth is just unbelievable.

Amberly Allen:

Well, we really feel like we will navigate this space and get more state association endorsements. We're working on several right now and really making sure that they look to us as a resource and an expert as far as this goes, right, making sure that we understand them. We understand their issues and problems, and so world domination, that's great.

Jim Fitzpatrick:

Yeah, that's awesome and, as you probably already know, we have a great relationship with all of the state associations. I have many of the presidents on here at CBT News and so they're watching right now. So if you're not with her right now, your state association you probably want to be, so give Amberlee a call and set that up. But final thoughts that you want to share with the dealers.

Amberly Allen:

Well, it's such a privilege to work with dealers. They are some of the smartest, most hardworking entrepreneurs out there and we really, truly I think that when they start to work with us, they see how much we love being in and around the car business, so I hope I get to do it for a long time. Name dealers.

Jim Fitzpatrick:

right now we are going into the second quarter of 2025. As you know, there's some some headwinds out there called tariffs. We don't know where that's going to end up, but right now we need every single dollar that we can make and keep inside of the dealerships, so this is a great place to start. It's kind of a no-brainer, actually, so, amberly, thank you so much for coming in once again, really appreciate it.

Amberly Allen:

Thank you so much for coming in once again, Really appreciate it.

Announcer:

Thank you so much. Thanks Thanks for watching Driving Solutions exclusively on CPTNewscom.