Question:  Keith: In your Car Counselors TARP presentation at the 2010 NIADA Convention you discussed some suggestions for a successful Dealer – Lender/Vendor relationship, would you please summarize them for me?

Answer:  Sure thing, here they are:

Get each parties expectations on the table

žUnderstand each other’s business

žKnow what “correct paperwork” looks like

žDecide what a “complete deal” means

žEstablish a framework for handling “stips”

žCommunicate loan/deal criteria and how to handle changes

žBe consistent (understand look to book and debt to income)

žRemember it’s a partnership!

A quick thought about determining whether a dealership advertisement is unfair or deceptive: Often times, what an advertisement does NOT say is as important as what it does!

Keith, we watched your recent Car Counselor’s TARP Program on Auttr and heard you speak of a document that you would use instead of a “we owe” to list items owed to the customer that would better protect the dealer.  Can you explain this a little further for me?

The document I was referring to is a Delivery Confirmation, which is used to bring closure to a motor vehicle transaction.  Remembering that State Unfair and Deceptive Acts and Practices (UDAP) Statutes generally require that all material statements, representations or promises must be integrated into the written sales or lease agreement, the Delivery Confirmation provides the dealership with a final opportunity to record any promises made to the customer and to confirm that no other promises were made other than those set forth in the Retail Purchase Agreement or Retail Lease Agreement and the Delivery Confirmation. Read the rest of this entry →

FTC Used Car Rule Compliance Made Easy

While there are many aspects to a motor vehicle sale, one area that continues to pose compliance challenges for dealerships is the correct way to offer a warranty. While the concepts in this area are relatively straightforward, the issue becomes complicated because of the various federal and state regulations that often have an overlapping effect on the subject matter. The Uniform Commercial Code, the Magnuson-Moss Warranty Act, and the FTC Used Car Rule each impose specific requirements on dealerships when offering or disclaiming warranties. In addition, state UDAP statutes generally require that every retail sale of a motor vehicle be preceded by a written contract that contains all of the agreements of the parties, including all material statements, oral or written, made prior to obtaining the customer’s signature on the contract. With respect to the sale of a used motor vehicle, the Buyers Guide is perhaps the key document concerning warranty issues and can provide the dealer with a roadmap to the other warranty related disclosures and documents that must be used in the transaction. Despite the fact that the Federal Trade Commission has issued a publication, A Dealer’s Guide To The Used Car Rule, which provides a copy of the proper format for the Buyers Guide and covers in detail many of the issues pertaining to proper completion of the Buyers Guide, our review of Buyers Guides submitted from motor vehicle dealerships across the Country indicates that dealers are still having numerous compliance problems. Read the rest of this entry →

Considering Using An Electronic Starter Interrupt Device? Be Sure To Modify Your Paperwork First!

Over the last few years as I have traveled across the country speaking at TARP Conferences and NIADA conventions, I have frequently been asked about the proper way to disclose the use of an electronic starter interrupt devices. Electronic starter interrupt devices are being installed by dealerships or finance companies on vehicles as a condition of extending credit to high credit risk consumers. While a device such as this has the potential to assist dealerships by increasing the likelihood of payment from credit impaired consumers and, thus, decreasing defaults and charge-offs, use of these devices also raises a number of legal and regulatory issues which the dealership must consider prior to installing or using the devices. Read the rest of this entry →

Dealership Compliance Can Be Complex, Even For The Professionals That Advise Them

The motor vehicle industry is one of the most heavily regulated industries in America today. Often overlooked is the fact that motor vehicle dealerships have to be licensed, can only sell vehicles at a licensed location and can only use licensed salespeople. To complicate matters even more, there are a whole host of state and federal laws that impact a motor vehicle sales transaction, including State Unfair and Deceptive Acts and Practices (UDAP) Statutes, State Motor Vehicle, Titling and Retail Installment Sales Acts, the Uniform Commercial Code, the Magnuson Moss Warranty Act, the Fair Credit Reporting Act, the Truth in Lending and Leasing Acts, the FTC Used Car Rule and the new Federal Privacy and Anti-Terrorism Laws and their implementing Regulations, to name a few. Not only do these laws often overlap, but also regulators and the courts are continually modifying interpretations of these laws. Putting all of this together, achieving compliance for a motor vehicle dealership can be extremely difficult and keeping current with legal, regulatory and legislative developments can be extremely challenging. Read the rest of this entry →

Dealership Legal Compliance Can Be A Challenge, But It Is Not Impossible

The motor vehicle industry is one of the most heavily regulated industries in America today. There are a whole host of state and federal laws which impact a motor vehicle transaction, including State Unfair and Deceptive Acts and Practices (UDAP) Statutes, State Titling and Retail Installment Sales Acts, the Uniform Commercial Code, the Magnuson Moss Warranty Act, the Fair Credit Reporting Act, the Truth in Lending and Leasing Acts, the FTC Used Car Rule and the new Federal Privacy Laws and implementing Regulations, to name a few. The large number of overlapping state and federal legal and regulatory requirements makes compliance extremely challenging for the typical motor vehicle dealership. Additionally, as long as these laws require a motor vehicle transaction to be conducted in ink on paper, forms compliance is the logical starting point of any analysis of legal exposure within the dealership. Read the rest of this entry →

Compliance Benchmarks For The Dealership Service Department

If you are like most dealers, you have spent a fair amount of time establishing compliance related benchmarks pertaining to the advertisement and sale of motor vehicles by your dealership. With the recent recalls of a number of vehicles in the news, many dealers are proactively taking a look at your their department. It likely has been some time since you had the paperwork and signage in your service department reviewed and updated. This area of the dealership is often overlooked from a compliance perspective. Inconsistent disclosures in service paperwork, missing information and contradictory signage posted in the service department are common errors and easy targets for state regulators and consumer attorneys alike. The following is a list of suggestions to help you set legal and regulatory compliance benchmarks for your service department: Read the rest of this entry →

F & I PRACTICES AND MENU MISHAPS THAT CAN SINK YOUR DEALERSHIP

Motor vehicle dealers are increasingly becoming targets for disputes about improper disclosures and deceptive trade practices and, in particular, dealership F & I practices. The negative reputation continues to get fuel from media programs that foster the consumers’ perception that misrepresentation is rampant in the motor vehicle industry. This is occurring even as many dealers are working diligently to make their sales and F & I practices more disclosure and consumer friendly.

The goal is to ensure that all of the Dealership’s products and services are offered to all of the customers all of the time. Claims frequently raised by consumers are related to allegations that the dealership’s representatives failed to make disclosures or made inconsistent disclosures. Examples of these claims include that the dealership included the cost of optional products or services that the consumer did not know he was purchasing in the price of the vehicle (commonly referred to as “payment packing”) or was told that he had to purchase them in order to complete the transaction.

A popular F & I trend geared toward avoiding consumer claims regarding deceptive F & I practices is “menu selling”. Read the rest of this entry →

When dealers think about benchmarks, financial and numerical items such as profitability, expenses, inventory turn, and F & I penetration come to mind.  Often overlooked are benchmarks for legal and regulatory compliance, which can have a significant impact on a dealership’s bottom line.  We frequently receive inquiries requesting advice on what a motor vehicle dealer should be doing in this area.  The following list of suggestions will help you set legal and regulatory compliance benchmarks for various areas within your Dealership: Read the rest of this entry →