In the world of automotive sales, customer satisfaction is paramount — but not every customer relationship is worth preserving. Illinois’ new car dealers, like other businesses, have the right to refuse service under certain conditions. However, this must be done carefully and in compliance with both Illinois state law and federal regulations to avoid legal repercussions. A dealership must ensure that refusal of service does not violate anti-discrimination or consumer protection laws or breach a contractual obligation.

Legal Grounds for Refusing to Do Business

Illinois law does not require businesses to serve every customer. Dealers may refuse a sale or service or terminate a customer relationship as long as the decision is not discriminatory or retaliatory or misleading or harmful to the customer or constitute a breach by the dealership of a contractual duty or obligation to the customer or under the dealership’s franchise agreement with the manufacturer.

The following circumstances may comprise permissible reasons, among others, to refuse a sale or service:

• Abusive or threatening behavior by the customer toward dealership staff.
• Repeated attempts to defraud or manipulate financing or other aspects of the business transaction with the dealership.
• Failure to comply with dealership policies.
• Disruption of dealership business operations.

Notably, having a written policy is highly recommended for dealerships that may need to disengage from difficult customers. This helps to ensure consistency, provides some legal protection to the business and supports staff in professionally handling difficult situations with customers. A documented policy illustrates that decisions are based on best practices and business standards, not personal bias, thus helping to insulate and defend against claims of discrimination or unfair treatment. Moreover, a policy ensures all employees follow the same protocol when dealing with problematic customers, reducing the likelihood of confusion and the risk of escalation. It also helps demonstrate the dealership’s legal compliance with applicable Illinois and federal laws, particularly if the customer or state or federal regulators challenge the dealership’s decision. If a customer files a complaint or legal action, the written policy may serve as evidence that the dealership acted within its rights and established policies.

The dealership’s written policy should include a definition of unacceptable behavior (e.g., verbal abuse, threats, repeated contract violations) and should outline the steps to be followed by dealership staff for documenting incidents. The policy should also cover procedures to reduce escalation (e.g., warnings, management review) and the conditions under which a sale or service may be refused or terminated. Importantly, the policy should include a statement of compliance with anti-discrimination laws.

Prohibited Reasons for Refusing to Do Business

It is not permissible to refuse a sale or service or terminate a customer relationship if it is discriminatory or retaliatory or misleading or harmful to the customer, or if it constitutes a breach of a contractual duty or obligation to the customer or under the dealership’s franchise agreement with the manufacturer. For example, the following reasons to refuse to do business with the customer would be prohibited:

• Discrimination based on race, gender, religion, national origin, age, disability or other protected classes under the Illinois Human Rights Act and Title VII of the Federal Civil Rights Act of 1964.
• Retaliation for filing a complaint or asserting legal rights.

The foregoing examples are not exhaustive. There are other applicable state and federal laws that come into effect in the dealership’s decision and ability to refuse to do business with a customer.¹

Best Practices for Terminating a Customer Relationship

To minimize legal pitfalls, dealerships should:

• Have and implement a written policy and ensure that dealership staff follow the policy.
• Document all interactions with the customer, especially incidents of misconduct.
• Issue a written notice that is reviewed by legal counsel explaining the termination of service, citing specific behavior.
• Avoid public confrontation or defamatory statements.
• Consult legal counsel if the situation escalates or involves potential litigation.

Illinois new car dealers are not powerless when dealing with difficult customers. By understanding the legal boundaries and maintaining clear documentation, they can protect their businesses while staying compliant with state and federal laws. The key is to act professionally, consistently and lawfully — because firing a customer should not mean firing up a lawsuit.