Deceptive sales practices are nothing new in the security industry. From the trunk slammers of the 1970s to today, a few bad apples in the industry are spoiling the bunch by deceiving another company’s customers into signing up for expensive, hard-to-break contracts.
SDM sat down with David Smail, chief legal officer at ADT, to discuss what deceptive sales practices look like and how to prevent them.
SDM: What do modern deceptive sales practices look like?
David Smail: What we've seen in the last 10 to 20 years is a shift to the institutionalization of deceptive sales practices, where companies are actually instructing their salespeople in deceptive sales practices and tactics and making them part of the core of their business models. These bad actors lie to prospective customers, scamming them into believing that their incumbent security company has gone out of business and been bought by their company, that their equipment is outdated, or that they're there to offer a free upgrade. Those are some of the things that we see in the modern practices.
SDM: How do deceptive sales practices hinder the credibility of the industry as a whole?
DS: These practices undermine the deep trust that consumers place in their security provider. When you bring in a security company, you're helping protect your family, your pets and your irreplaceable possessions. And that trust is entirely undermined by the fraudulent behavior of these few bad actors. As a result, it really hurts the reputation of the industry as a whole, and a major reason why our industry is sadly still among the most complained about at the Better Business Bureau.
SDM: What kinds of dealer companies are the target of deceptive sales practices? And what kinds of companies partake in these deceptive sales practices?
DS: Our industry is really fragmented. There's over 10,000 companies in this space, and there's really no one type for the few companies that practice these fraudulent behaviors, other than they often use door-to-door sales as an important part of their business. If you'll pardon the pun, I'm not knocking door knocking, because that can be a really highly effective and convenient sales channel when practiced with integrity. Sadly, that's not always the case, though. We do see that often, these companies target [customers] that they can see have existing security providers, so those that have stickers or yard signs. It tends to be the houses or the residences that are targeted by these companies.
SDM: When ADT is the target of deceptive sales practices, what are some of the steps it takes to determine if the matter needs to go to court? How does ADT react to each level of escalation?
DS: Here at ADT we started years ago, as a policy matter, an approach of doing everything in our power to drive these practices out of the industry entirely. Our goal, at the end of the day, is that these practices are never occurring. That's been a multifaceted effort, but just to answer your specific question, we’ve trained our customer care agents to know what to spot in customers who have sadly experienced these deceptive sales practices. And they've been trained in the questions to ask to get some basic information, and we collect all that information in a database. We have hired extra staff on our legal team whose sole job is to follow up on each and every one of those complaints, oftentimes involving further conversations with the customer, and [determining] who are the worst offenders in companies that are deploying these types of fraudulent, unscrupulous practices on our customers. Once we get to a point where we think it is appropriate to bring legal action, legal action is extremely costly. It's just one tool among many that we use.
SDM: Is legal action always the route that is being taken in these deceptive sales cases?
DS: The short answer is no, it's just one tool that we use in our multifaceted approach to trying to root this type of behavior out of the industry entirely. But we use customer awareness campaigns, we work with industry associations. You mentioned the code of ethics, that's one fruit of that effort. We’ve helped the Better Business Bureau with tips on what customers should be aware of and what they should do when somebody shows up on their doorstep. These public awareness campaigns are designed to stop the practice at the doorstep. We keep track of the customer complaints we receive related to [door knocking], or the customers who tell us they've been the victim of deceptive sales practices. Five years ago, we had over 5000 [complaints] of these come from our customers. We’re now under 500 in a year. We're still not where we need to be, which is zero, but that's a 90-91 percent reduction over that period, as a result of our concerted long-term effort to route this practice out of the industry.
SDM: What can dealers do to prevent their company from becoming the target of deceptive sales practices? And sort of on the other side, what can dealers do to ensure that their sales people are being ethical and not partaking in some of these deceptive sales practices?
DS: It starts with education. Getting your customers educated to know where to find resources, so that the deceptive sales practices fail on the doorstep. At the same time, what can companies do to prevent salespeople from engaging in these efforts? Are these deceptive sales practices? It starts with training and repeated training. We believe it starts with having everybody read, understand and sign the ESA code of ethics policy, like we have here at ADT.