E A R S O F S E R V I C E E A R S O F S E R V I C E page 14 I N G 2 5 Y I N G 2 5 Y C E L E BRAT C E L E BRAT OFFICIAL VOICE OF THE INDEPENDENT CAR DEALER IN INDIANA PAID PAID • MAKE THE RIGHT COMPLIANCE MOVES • THE CARLAWYER • NIADA HEALTH PLANS Visit us at www.iiada.com 1987-2012 APRIL 2012 PRSRT Standard U.S. Postage PRSRT Standard U.S. Postage DALLAS, TEXAS Permit No. 2079 DALLAS, TEXAS Permit No. 2079
PRSRT Standard U.S. Postage PAID DALLAS, TEXAS Permit No. 2079 GO ES MOBILE Auto Shopping page 14 inside PRSRT Standard U.S. Postage PAID DALLAS, TEXAS Permit No. 2079 Visit us at www.iiada.com APRIL 2012 CAR LINES INDIANA APRIL IS Member-Get-A-Member Month Membership in IIADA is a secret you don’t want to keep. Take every opportunity to spread the good news about being a member with all the dealers you meet. After all, it is simply following a basic principle of IIADA – put more good dealers in the world. Dealers who receive our support are better informed about dealer regulations and are wise to successful business practices. Call the IIADA office at 800.310.3112 or visit our website at www.iiada.com for membership information. • MAKE THE RIGHT COMPLIANCE MOVES • THE CARLAWYER • NIADA HEALTH PLANS 1987-2012 OFFICIAL VOICE OF THE INDEPENDENT CAR DEALER IN INDIANA
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PRSRT StandardU.S. Postage
PAIDDALLAS, TEXASPermit No. 2079
GOES MOBILEAuto Shopping
page
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PRSRT StandardU.S. Postage
PAIDDALLAS, TEXASPermit No. 2079
V i s i t u s a t w w w . i i a d a . c o m
APRIL 2012
CAR LINESINDIANA
APRIL ISMember-Get-A-Member Month
Membership in IIADA is a secret you don’t want to keep. Take every opportunity to spread the good news about being a member with all the dealers you meet. After all, it is simply following a basic principle of IIADA – put more good dealers in the world.
Dealers who receive our support are better informed about dealer regulations and are wise to successful business practices. Call the IIADA office at 800.310.3112 or visit our website at www.iiada.com for membership information.
• MAKE THE RIGHT COMPLIANCE MOVES• THE CARLAWYER• NIADA HEALTH PLANS
25CELEBRATING
25
YE
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O F F I C I A L V O I C E O F T H E I N D E P E N D E N T C A R D E A L E R I N I N D I A N A
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Four Things to Know About Bartering IRS TAX TIP 2012-33
In today’s economy, small business owners sometimes save money by bartering to get products or services they need. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market
value of the goods and services exchanged must be reported as income by both parties.
Here are four facts about bartering:Organized barter exchanges: A barter
exchange functions primarily as the organizer of a marketplace in which members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is Internet-based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.
Barter income: Barter dollars or trade dollars are identical to real dollars for tax reporting purposes. If you conduct any direct barter – barter for another’s products or services – you must report the fair market value of the products or services you received on your tax return.
Tax implications of bartering: Income
from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
How to report: The rules for reporting barter transactions can vary depending on which form of bartering takes place. Generally, you report that type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations or Form 1120-S for Small Business Corporations.
FOR MORE INFORMATION, SEE THE BARTERING TAX CENTER IN THE BUSINESS SECTION AT WWW.IRS.GOV.
APPLICATIONS ARE NOW BEING ACCEPTED FOR INDIANA’S 2012 QUALITY DEALER OF THE YEAR.
The winner will represent Indiana at the 2013 NIADA Convention & Expo in Las Vegas and compete for the coveted NIADA Quality Dealer of the Year Award. The public recognition and prestige associated with the award can produce many benefits for your dealership.
Our 2012 Indiana Quality Dealer of the Year will be named and recognized at our 25th Anniversary Golf Tournament and Awards Day on Sept. 9.
Eligibility: Dealers must be nominated by an IIADA member or sponsor.
NOMINATE A DEALER FOR IIADA’S 2012 QUALITY DEALER OF THE YEAR
TO REQUEST AN APPLICATION, EMAIL [email protected] OR CALL 800.310.3112
06 Make the Right Compliance Moves12 The CARLAWYER14 Auto Shopping Goes Mobile
ADESA ................................................... Inside Front CoverAlly ....................................................................................7AutoTrader.com .................................................Back CoverDyer Auto Auction ...........................................................18Indiana Auto Auction .......................................................10Kesler-Schaefer Auto Auction ...........................................9Manheim.com ...................................... Inside Back CoverManheim Indianapolis ....................................................13Nowcom ............................................................................5United Acceptance .........................................................11
R A2Z EDUCATION SERIES - AutoZoneEducating the independent dealer to deliver the highest
quality service levels to your customers, manage your shop efficiently, train your technicians and maximize profits.niada.tv
R NATIONAL TIRE SAFETY WEEK: June 3-9National Tire Safety Week is a nationwide event
sponsored by the Rubber Manufacturers Association to raise consumer awareness about tire safety, help consumers keep their tires safe and demonstrate the industry’s commitment to motorist safety.
Visit www.betiresmart.org and fill out the form to receive your free National Tire Safety Week kit that includes brochures and other materials.
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25CELEBRATING
25
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Rise Above the CrowdBecome a Certified Master DealerBe on the lookout for your next chance to
become an NIADA Certified Master Dealer. The association holds CMD classes at various times during the year, giving dealers nationwide the opportunity to learn in one of the auto industry’s most respected training programs.
The course, taught by Joe Lescota, former chairman of Northwood University’s Automotive Marketing Department, focuses on areas such as business management, merchandising, financial management, business planning and human resources. Lescota is a former retail automotive executive with more than 25 years of frontline dealership, sales, management and training experience.
Dealership associates whose employer is already a Certified Master Dealer or has been approved for CMD training can also attend the training session.
The CMD program was developed in 2001 to provide dealers with the education and tools
to take their businesses to higher levels of service, efficiency and profitability. Dealers who attend the training are committed to our industry, support ethical business standards and are leaders in their communities. They bring a wide range of experience to each class and leave with new strategies for analyzing their business practices and increasing their bottom line. They make friends who share their interests and their challenges and who often become valuable professional resources.
The cost for the three-day course is $2,995 for dealers and $2,795 for associates. In addition, Certified Master Dealers seeking recertification – they must have 12 hours of NIADA-approved continuing education every three years to retain certification – can attend for $995.
IIADA EXECUTIVE DIRECTORDebbie AndersenP.O. Box 1393Crown Point, IN 46308Phone: (800) 310-3112Fax: (219) [email protected]
CHAIRMAN OF THE BOARDDave Allen (Crockett)
VICE PRESIDENT Fritz KreutzingerFritz AssociatesP.O. Box 168Fishers, IN 46038 Phone: (317) 842-2228Fax: (317) [email protected]
SECRETARYTricia TrentTrent Auto Sales1327 N 6th Street Vincennes, IN 47591 Phone: (812) 882-3772Fax: (812) [email protected]
TREASURERBruce NortonDrive1USA1512 W 96th Avenue, Suite C Crown Point, IN 46307Phone: (219) 661-1000Fax: (219) [email protected]
Jennifer CottonDyer Auto AuctionP.O. Box 115 Dyer, IN 46113-0115 Phone: (219) 865-2361Fax: (219) [email protected]
Kim GrahamKim Graham, Inc.1648 A US 31 SGreenwood, IN 46143Phone: (317) 888-0100Fax: (317) [email protected]
Ed WhiteWhite’s Auto Sales1105 McKinley Avenue Rensselaer, IN 47978Phone: (219) 866-7553Fax: (219) [email protected]
Tony HoukKesler-Schaefer Auto Auction, Inc. 5333 W. 46h StreetIndianapolis, IN 46253Phone: (317) 297-2300(800) [email protected]
Tyler TrentTrent Auto Sales1327 N 6th Street Vincennes, IN 47591Phone: (812) 882-3772Fax: (812) [email protected]
Harold DreesH.T.D., Inc.200 E Main StreetThorntown, IN 46071Phone: (317) 402-2312Fax: (765) [email protected]
Tony Del RealDel Real Auto Sales3857 State Road 38 ELafayette, IN 47905Phone: (765) 446-9204Fax: (765) [email protected]
John StumpfGreater Kalamazoo Auto AuctionP O Box 697Schoolcraft, MI 49087Phone: (574)876.6145
Doug AlveyFirst Class Auto Sales, Inc695 W 900SHebron, IN 46341Phone: (219) 996-2600Fax: (219) [email protected] Sharon BrennanFritz in Fishers8599 E 116th StreetFishers, IN 46038Phone: (317) 842-2228Fax: (317) [email protected]
Andrew J. InabnittApproval Auto Credit Inc.9825 Huggin Hollow Rd.Martinsville, IN 46151Phone: (317) 422-8001Fax: (317) 422-8020
David D. Baldwin IIBest Deal Auto Sales, Inc.1875 SR 8Auburn, IN 46706Phone: (260) [email protected]
Andy ZayZay Leasing & Rentals4957 N. BroadwayHuntington, IN 46750(260) [email protected]
Travis HuberThe Auto Store5474 US Hwy 6, Suite APortage, IN 46368Phone: [email protected]
Board of Directors
FOR APPLICATIONS AND INFORMATION ON YOUR NEXT CHANCE TO EARN THE TITLE OF CERTIFIED MASTER DEALER, VISIT WWW.NIADA.COM/CERTIFIED_MASTER_DEALER.PHP.
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Make All the Right Moves AS REGULATIONS INCREASE, STAYING INSIDE THE LINES BECOMES A BIGGER PRIORITY
Paul Taylor, chief economist for the National Automobile Dealers Association, recently predicted more than 13.9 million new cars and light trucks will be purchased or leased in the U.S. in 2012. With the influx of new car buyers to the market, it’s a safe bet that used car sales will also increase significantly this year.
While that’s good news for everyone, a dealer’s focus needs to be on more than just how many cars his store sells.
Getting back to the basics has always been a great tactic for boosting performance in the sales and fixed operations departments. Now it’s time to redefine what “the basics” means and focus on more than just strategies to create profit. Attention also needs to be given to basic legal compliance, an area that can have significant economic consequences if dealers are not focused on protecting their assets.
Thirty years ago, dealers had a lot less to worry about when it came to legal
compliance. A dealer could spend the majority of his time on advertising, marketing and merchandising, as well as on buying, selling and servicing cars, without any real worry about being sued.
Today, if dealers are not aware of every aspect of the business conducted in their store, they might have a lot to worry about. Even if a dealer has not been sued when an employee knowingly or unknowingly crossed the proverbial line, he most likely knows or has heard about a dealer who has been.
Dealers who aren’t as vigilant as they should be when it comes to compliance put themselves at risk every single day, and eventually the law can catch up with them. Though there are no specific statistics about exactly how many dealership lawsuits have occurred in the past decade, it’s safe to say there have been too many.
It’s not possible to cover every aspect of dealership legal compliance in limited space, but it is possible to highlight some important legal compliance areas for used car dealers to focus on.
The components that follow are basic items all used car dealerships need to make sure they are doing correctly in order to avoid potential legal issues down the road:
Privacy Laws
In recent years, the number of people who have become victims of identity theft has skyrocketed, which is why various laws have been created to protect consumers
from privacy violations. Businesses that don’t enact clear and solid practices to protect their customers’ private information can face tens of thousands of dollars in regulatory fines and potential civil liability.
General practices most dealerships use for protecting consumers’ private information (such as keeping customer information away from public view, having locks on the finance office doors and shredders at various work areas) might not be enough. Dealers may need to re-evaluate their practices when it comes to protecting consumer information and consider some basic privacy questions such as:
Do salespeople or finance managers work on computers in an area where others can easily glance over their shoulder? If so, it might be important to use privacy screens on those computers to prevent lurkers from seeing information they shouldn’t see.
Is there a glass window in your finance office, allowing someone to look in and read customer information on the finance manager’s desk? Perhaps blinds need to be installed to help prevent that from happening. The blinds need to be kept closed. If they are left open, they serve no purpose.
Even though you have shredders for disposing of customers’ personal information, is there a shredder within easy access of every salesperson or the finance manager’s desk? If the salesperson or finance manager needs to get up and walk a few feet to dispose of confidential
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BACK TO BASICSinformation in a shredder or can simply toss it in an unsecure wastebasket right at his feet, which option do you think he will select at times? Adding additional shredders near each desk might be necessary to ensure all documents are properly shredded.
Who has access to all of the customer information stored in your computer’s DMS or CRM tool? Best practice is to limit access to customer information to those employees who truly need to have it.
Dealers need to make sure their people truly understand why all privacy rules are in place, and thoroughly explain what actions need to occur to protect their customers’ information. Dealers must also appoint a manager to oversee the actions being taken to protect customer information. Not only is this required by law, it is also an effective way to track the privacy program in the store.
FTC Used Car Buyer’s Guide RuleFederal Trade Commission Used Car
Buyer’s Guide compliance is a key part of doing business for used dealers. Yet this is also an area where it’s easy to skip steps or get lazy with regard to following all aspects of the law.
According to the rule, used vehicles must have a Buyer’s Guide clearly and prominently displayed in a position where both sides are readable as soon as the car is in a spot where it can be inspected by a potential customer. That means every used vehicle that is for sale and parked on a used vehicle lot must have a Used Car Buyer’s Guide displayed.
Does your dealership meet this standard? If you were to walk your lot today, would every car have a Buyer’s Guide properly displayed?
Often, dealerships delegate the responsibility for generating and hanging the Used Car Buyer’s Guides to an outside company that sends a representative to the dealership once or twice a week to update the vehicle inventory. While that seems like a good option, the reality is there are probably several days each week when vehicles are parked on the lot without the required documents. Each of those vehicles could cost the dealership thousands of dollars in legal penalties.
Focusing on basic legal compliance means spending a little time and energy to ensure everything is done correctly. For Used Car Buyer’s Guide compliance, that could mean requiring a specific manager to be responsible for creating stickers for every vehicle prior to putting it out on display. This same manager should walk the lot daily to verify that all vehicles on the lot meet the Used Car Buyer’s Guide standards.
Truth in Lending Act/Regulation ZThe days of providing broad payment
ranges and payment packing are over. However, some managers still work deals by quoting a payment without a proper term and interest rate.
That is asking for trouble. Consumer advocates, exposés on national television, books and Internet articles educate today’s consumer about disclosure laws. Best practices suggest when quoting a payment, salespeople should also disclose the rate, term, down payment and finance balance to the customer. Today’s customers don’t just expect this information – they demand it. By providing proper disclosures from the start, you’ll be able to meet and exceed your customers’ expectations and create more sales.
Office of Foreign Assets ControlUnder the premise of homeland security,
the U.S. Department of the Treasury enforces economic and trade sanctions against individuals and groups who potentially threaten the national security, foreign policy or the economy of the United States.
As part of that, laws require automobile dealers to screen every customer against the Specially Designated Nationals (SDN) list. The SDN list contains the names of individuals, groups and entities, such as terrorists and narcotics traffickers, who are controlled by, or acting for or on behalf of, targeted countries.
The government takes the list very seriously and dealership employees need to as well. The penalty for non-compliance can be up to $250,000 in fines and up to 10 years in prison. But screening a customer’s name against the SDN list can take a few minutes, so it might be tempting for a salesperson or finance manager to skip that step in the sale.
Getting back to the basics for legal compliance means taking the time to ensure all required steps are taken in order to protect your store and your assets. Make sure all of your employees are properly trained on how to check a customer’s name against the SDN list and what additional steps they need to take if they get a match or near match.
Real SignaturesSome salespeople and sales managers try
to “save time” by signing a customer’s name or initials on a document that might have been overlooked when the customer was in the store purchasing a vehicle. Do you know if this is happening in your store? If it is, your assets are at risk.
Not only is the practice obviously not compliant, but if discovered it can result in large regulatory fines and even punitive
damages. Never sign a customer’s name or initials, or sign a document “signature on file.”
It seems obvious that signing a document for a customer is wrong, but getting back to basics includes reminders even about the obvious. Communicating to your staff a zero-tolerance policy underscores that obtaining real customer signatures is vital to the health of your business.
Misrepresentation and FraudDuring the course of a vehicle sale, it is not
possible to constantly monitor every word that comes out of a salesperson’s mouth. Dealers need to be confident that when left to their own devices, employees will provide accurate and truthful information about the vehicles and services the store provides. Dealers also need to feel confident that employees are making proper disclosures when necessary.
Misrepresentation or fraud can not only come back to haunt the salesperson or manager, but it can come back to haunt the dealer and the dealership as well.
For that reason, many dealerships are requiring legal training for all store employees. It is also important for dealers themselves to stay abreast of the current laws and regulations. Dealers should proactively seek out information regarding new laws or regulations from sources such as their legal counsel, NIADA or their state and local governments.
In addition, the FTC’s website provides a substantial amount of compliance information, some of which is specifically tailored for automobile dealers. What better place to seek compliance advice than from the agency enforcing compliance?
By educating dealers and their staffs on the current laws and regulations, basic compliance training is helping dealers avoid many of the headaches and lawsuits that accompany legal issues.
In this day and age, dealers can no longer afford to think “it will never happen to me” with regard to legal compliance issues. Today’s rigid requirements and well-informed customers mean dealers need to take clear and conscious steps to protect their assets.
While there is no guarantee a dealer will never be sued, making legal compliance a priority and taking simple steps to ensure it becomes an everyday habit in the store can significantly lessen the likelihood he will become a victim of a compliance issue.
BY JAMES CAHN, JM&A GROUPJM&A GROUP (WWW.JMAGROUP.COM) IS ONE OF THE LARGEST INDEPENDENT PROVIDERS OF FINANCE AND INSURANCE PRODUCTS IN THE AUTOMOTIVE INDUSTRY AS WELL AS PROVIDING CONSULTING SERVICES AND F&I TRAINING FOR USED CAR SALES OPERATIONS AND SERVICE DEPARTMENTS.
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Latest NMB Partner Provides Emissions Diagnostics
PH2 Solutions has joined NIADA’s National Member Benefit program, offering the association’s members its award-winning PH2 Validator emissions diagnostic technology for a $259 savings with multiple payment plan options.
The diagnostic software of choice for dealers and their on-site staff rapidly identifies emission-related issues on virtually all 1996 and newer vehicles, helping save time and resources on “Check Engine Light” maintenance and repairs, emission inspection compliance, fuel consumption, vehicle
acquisition and remarketing, and reducing customer “comebacks.”
”NIADA is delighted to be working with PH2 Solutions in assisting our members to resolve ‘Check Engine Light’ and vehicle emissions issues,” NIADA vice president of member services Scott Lilja said. “NIADA is confident PH2 Solutions will be a tremendous hit with our members who have vehicle service operations as well as those that outsource.”
The PH2Validator earned first place in SEMA’s Best New Tools and Equipment Products category for 2012, and Motor magazine named it one of its Top 20 Tools for 2011.
PH2 Validator’s easy-to-use application was developed specifically to address independent repair shop challenges such as OBDII false code problems, no code faults, costly long drive cycles and other emissions-related repairs. The diagnostic software redefines conventional factory drive cycles to 10 miles or less by engaging the on-board computer (PCM) with its patented automated repetitive requests of all supported monitors simultaneously, resulting in rapid monitor
completion if conditions are met.If readiness conditions are met, the
monitors complete. If they are not met, driving beyond 10 miles will not change the outcome, and the PH2Validator’s automated data stream analysis provides technicians with a real-time record of clues as to why by simultaneously and continuously capturing out-of-range operating values and prioritizing them by seriousness.
Exclusive NIADA member-only pricing is also available to repair shops handling member repairs.
“We are honored to partner with NIADA and even more excited to offer members this game-changing technology that truly makes life easier for dealers, technicians and service centers, affording them the ability to move inventory faster and more efficiently,” PH2 Solutions president and CEO Mark L. Scotland said.
FOR MORE INFORMATION, CONTACT [email protected], AND TO ORDER, VISIT WWW.PH2SOLUTIONS.COM/NIADA0818 OR CALL (973) 902-5517.
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J.D. Power: New Car Customer Satisfaction Rose in 2011
J.D. Power and Associates recently released its 2011 U.S. Sales Satisfaction Index (SSI) Study, a comprehensive analysis of the new-vehicle purchase experience that measures customer satisfaction among shoppers and buyers.
Overall sales satisfaction averaged 648 on a 1,000-point scale in 2011, up from an average of 635 in 2010. Though many of the measures (see list) could apply to finance & insurance departments, one measure at the top of everyone’s mind is how the average length of time a buyer spends at the dealership impacts satisfaction.
The average time at the dealership increased to 4.3 hours in 2011 from 4.1 hours in 2010. It has been theorized that customers don’t penalize dealerships for being thorough when it comes to paperwork as long as they feel their time isn’t being wasted.
In addition, J.D. Power and Associates said, the primary reason for the longer delivery process was the increasing proportion of buyers – 88 percent – who are receiving more in-depth demonstrations of technology in their new vehicles. The demonstrations can also lead to higher customer satisfaction, making the extra time worthwhile.
“Although technology demonstrations add time to the delivery process, those explanations substantially improve satisfaction, as well as customer loyalty and advocacy,” said Jim Gaz, J.D. Power’s director of automotive research. “It would intuitively seem that buyers are most satisfied when the sales process is completed in the shortest amount of time possible. However, buyers actually appreciate when the salesperson spends additional time with them, as long as that time provides added value.”
Among buyers, satisfaction is examined across four measures: working out the deal (17 percent), salesperson (13 percent), delivery process (11 percent) and dealership facility (10 percent). Among rejecters, satisfaction is examined across five measures: salesperson (20 percent), fairness of price (12 percent), facility (6 percent), inventory (6 percent) and experience negotiating (5 percent).
BY SAFE-GUARD PRODUCTS INTERNATIONAL, LLCFOR MORE INFORMATION, VISIT HTTP://AUTO JDPOWER.COM.
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February Sales Take a Leap Up
The used-car market got a nice bump from 2012 being a leap year. Otherwise, CNW Marketing Research suggested February’s used sales would have been rather static.
CNW forecast 1.95 million used sales for the month, an 8.1 percent hike from February 2011 on an unadjusted basis.
“Adjusted, however, sales would barely break even with last year,” CNW president Art Spinella said.
CNW expected franchise dealers to move 650,000 used units for the month for a 5 percent gain over February 2011, while independents were projected to fall 4.2 percent, with 640,000 used sales. The firm predicted a 27.8 percent spike in private-party sales, at 658,000 units.
January showed larger vehicles grabbing more attention from consumers, CNW said. The market shares for small pickups (10.84 percent) and full-size pickups (13.06 percent) were either at or close behind their highest levels in two years, while small car market share dropped dramatically.
But don’t count on those trends to last, Spinella said.
“Even under threat of higher fuel bills, consumers are still gravitating toward larger vehicles,” Spinella said. “Small cars, for example, took about 16 percent of the used market in January, down two full points from year ago and seven points lower than in September of last year. Expect that to change as gas prices move upward. … The true test will be in April.”
While February sales seemed strong, the number of buyers waiting to make a purchase has gone down. CNW projected pent-up demand for the month to be only 90.8 percent of its level a year ago. Meanwhile, in January, it was up 6.2 percent year-over-year.
“The average delay in making an
acquisition among those who have postponed a purchase is around 2.4 months, statistically no different than it was in January but down from February 2011’s three months,” Spinella said. “And while it’s too early to make much of the data, the share of postponers who still plan to buy a used car has dipped to 94.9 percent, compared to 95.17 percent in January.”
For franchise dealers, February transactions prices were up 4.28 percent from February 2011 at $11,090, a 2.17 percent rise from January. Asking prices were up 3.21 percent from last year at $11,652.
Independents’ transaction prices averaged $9,784, up 10.93 percent from 2011 and 0.72 percent from January. Asking prices for independent dealers averaged $10,516, an 11.07 percent hike from a year ago and a 0.31 percent rise from January.
“After concerns that the used-car market price slide among dealers would continue into 2012, February’s pricing has taken a dramatic turn to the positive,” Spinella said.
legislative and regulatory highlights, and a recap of some of the many auto sale and financing lawsuits we follow each month.
Remember – what we report here is not every recent development. We select those we think are important to car dealers. Note that this column does not offer legal advice. You should consult your dealership lawyer with any legal questions.
We include items from other states. Why? We want you to be able to see new legal developments and trends. Also, another state’s laws might be a lot like your own state’s laws – if AGs or plaintiffs’ lawyers are pursuing particular types of claims, those laws and claims might soon appear in your state. As always, though, there is no substitute for checking with your own lawyer before you rely on anything we report or if you have any questions.
FEDERAL LAWAll the federal news this month deals with the
new Consumer Financial Protection Bureau.Full head of steam: Or was that full steam
ahead? By now you probably know President Obama appointed Richard Cordray on Jan. 4 as the bureau’s first director. The appointment was characterized as a recess appointment, an action the president has the constitutional authority to take when Congress is not in session. Except Congress was in session on Jan. 4, or at least was not in recess. Lawsuits have already been filed challenging the constitutionality of the appointment.
Notwithstanding, the CFPB is forging ahead, exercising powers previously held in abeyance pending the appointment of a director. It has issued a spate of announcements.
ROAM database: On Jan. 25, the CFPB, the Department of Defense, the Federal Trade Commission and the New York Attorney General announced a “repeat offenders against military” (ROAM) database that will track and report completed civil and criminal enforcement actions against companies and individuals who repeatedly target military members, veterans and their families for financial scams.
Law enforcement officials across the country, including state attorneys general, U.S. attorneys and Judge Advocates, are encouraged to contribute information to the database in order to improve communication between state and federal agencies regarding financial fraud against the military community. The database will complement the Consumer Sentinel Network, operated by the FTC, which tracks consumer complaints from the military but does not report on completed enforcement actions.
The bureau partners with the FTC: On Jan. 23, the CFPB and the FTC announced they signed a memorandum of understanding (MOU) to coordinate efforts to protect consumers and avoid duplication of federal law enforcement and regulatory efforts. The Dodd-Frank Act requires the CFPB and the FTC to work together to coordinate their enforcement activities and promote consistent regulatory treatment of consumer financial products and services.
In the MOU, the agencies have supplemented the Dodd-Frank Act requirements to create a framework for coordination and cooperation. The agencies agreed to meet regularly to coordinate upcoming law enforcement, rulemaking and other activities; to inform the other agency, absent exigent circumstances, before starting an investigation or bringing an enforcement action; to consult on rulemaking and guidance initiatives to promote consistency and reflect the experience and expertise of both agencies; to cooperate on consumer education efforts to promote consistency of messages and maximum use of resources; and to share consumer complaints.
The bureau, minorities and women: On Jan. 20, the CFPB established its Office of Minority and Women Inclusion. Among other requirements, the OMWI is charged with developing standards for equal employment opportunity, workforce diversity and inclusion at all levels of the agency; for increased participation of minority-owned and women-owned businesses in the CFPB’s programs and contracts; and for assessing the diversity policies and practices of the CFPB’s regulated entities.
Is your dealership a “nonbank?” On Jan. 5, the bureau announced the launch of the nation’s first federal nonbank supervision program, one of the central new authorities it putatively acquired on Cordray’s recess appointment. A “nonbank,” in fedspeak, is a company that offers consumer financial services but does not accept deposits.
The nonbank program is an extension of the CFPB’s bank supervision program, which began last July and ensures that banks and nonbanks follow federal consumer financial laws.
Under the law, the CFPB has the authority to oversee nonbanks, regardless of size, in certain specific markets: mortgage companies (originators, brokers and servicers, including loan modification or foreclosure relief services), payday lenders and private education lenders. For other markets, the CFPB can also supervise the larger players, or “larger participants” – look for a proposed rule defining “larger participants” in the weeks to come. The CFPB also has authority to supervise any nonbank it determines is posing a risk to consumers.
Looking for Information: On Jan. 4, the CFPB issued Bulletin 12-01 to chief executive officers of depository institutions, credit unions and their affiliates subject to the bureau’s supervision authority to provide guidance regarding its collection of information through the supervisory process and the confidentiality protections that process provides to supervised institutions.
STATE REGULATORY ACTIONSOn Dec. 29, the Massachusetts Division of
Banks issued an industry letter to clarify under what circumstances a so-called motor vehicle lease agreement would be, in fact, a retail installment contract that would subject the holder to licensing as a motor vehicle sales finance company under General Laws Chapter 255B.
On Jan. 10, the Oklahoma Motor Vehicle Commission amended the required criteria for spot delivery agreements or forms. Prior to being used by a dealer, any spot delivery agreement or form must first be approved by the OMVC. Does your state have such a requirement?
The Texas Office of The Consumer Credit Commissioner adopted rules governing disclosures and notices for credit access businesses that engage in payday or auto title loans, and adopted a provisional license procedure for those businesses. The Texas Office of the Consumer Credit Commissioner continues to review debt cancellation agreements for compliance with amendments to Chapter 348 of the Texas Finance Code, allowing debt cancellation agreements on motor vehicle installment sale contracts when a creditor requires that a buyer maintain insurance on the motor vehicle securing the transaction.
LITIGATIONService contract may run concurrently
with express warranty if it provides additional benefits: A car owner sued claiming the service contract she bought violated California’s Song-Beverly Consumer Warranty Act. The trial court granted summary judgment for the defendants and the U.S. Court of Appeals for the Ninth Circuit affirmed. Under the Song-Beverly Act, a service contract may run concurrently with a manufacturer’s express warranty if “the contract covers items or costs not covered by the express warranty or … the contract provides relief to the purchaser not available under the express warranty.”
In this case, the appellate court found that the service contract at issue provided three benefits not covered by the manufacturer’s warranty: emergency travel expense reimbursement up to $500, destination assistance of up to $75 in
Optional phone and Internet pay fees not prohibited by Wyoming Uniform Consumer Credit Code: The Wyoming Uniform Consumer Credit Code Administrator issued an order that a creditor violated the WUCCC by charging fees for optional payment services by phone or Internet (sometimes called “convenience fees”). The creditor sought court review of the order. The trial court reversed the order and the Wyoming Supreme Court affirmed.
The high court concluded that the charges were not credit service charges within the meaning of the statute because they were not imposed directly or indirectly by the seller as an incident to the extension of credit. The high court concluded even if there was an obligation to disclose the charges, it could not be imposed on the plaintiff as an assignee after the credit transaction occurred. See Vogel v. Onyx Acceptance Corporation, 2011 Wyo. LEXIS 169 (Wyo. December 19, 2011).
TILA’s limitation on assignee liability does not bar claims under FTC Holder Rule or New York law: An uneducated Spanish-speaking Honduran immigrant on disability and food stamps was contacted by phone and mail to go to a car dealership to collect a prize. Rather than receiving a prize, the individual ended up buying a car he could not afford by signing documents written in English.
Later, the dealership told him to return the car because it was damaged and sold him a second car. The dealership promised he could return later and refinance to lower payments. When he returned for the refinancing, the dealership refused. Instead, the dealership told him it would repossess the second car and sell him a third car and promised the transaction would not adversely affect his credit. However, after the assignee of the finance agreement from the second sale billed him for a $23,000 deficiency, he sued, claiming the assignee was liable under the FTC Holder Rule and New York law because the dealership engaged in a scheme to entice him to the dealership with false promises of cash prizes and free cruises.
The individual argued he could assert the dealership’s fraud as an offset to the assignee’s attempt to collect the deficiency under the FTC Holder Rule and the NY Personal Property Law. The assignee moved to dismiss, and the trial court granted the motion, finding that the Truth in Lending Act limits an assignee’s liability to matters that are apparent on the face of the credit disclosures assigned by the dealership and that the dealership’s bad acts were not apparent on the face of the credit disclosures. The Supreme Court of New York, Appellate Division, reversed, finding that the limitation on assignee liability in
TILA only applies to liability that arises under TILA and does not apply to liability that arises under the FTC Holder Rule or the New York law. See Ramirez v. National Cooperative Bank, 2011 N.Y. App. Div. LEXIS 8635 (N.Y. App. Div. December 6, 2011).
Failure to print first payment due date clearly and conspicuously was violation apparent on face of contract: On a retail installment sales contract a car buyer signed, the due date of the first payment was printed over preexisting text. The buyer filed a class action complaint against the dealership and the assignee of her contract under the Truth in Lending Act, claiming that the dealership failed to clearly disclose the first payment date and that the assignee accepted assignment of the contract when the TILA violations were apparent on the face of the contract.
The U.S. District Court for the District of Connecticut granted the buyer’s motion for partial summary judgment. After stating that the contracts issued to the class members ranged from “indistinct to indiscernible” and that an average reasonable person could not find any of the disclosures to be clear and conspicuous, the court found there was no genuine issue of material fact as to whether the dealership had failed to clearly and conspicuously disclose the first payment due date.
Likewise, after noting TILA provides for assignee liability only if the violation is apparent
on the face of the contract, the court summarily stated the violation was apparent on the face of the contract. See LeFoll v. Key Hyundai of Manchester LLC, 2011 U.S. Dist. LEXIS 142396 (D. Conn. December 12, 2011).
Spanish-speaking class members lacked commonality due to varying degrees of fluency with English: Spanish-speaking consumers sued various payday lenders for failing to provide notices to them in Spanish as required by California law. The court refused to certify a class for lack of commonality in which the consumers – and each potential class member – had a unique ability to speak both English and Spanish, and the degree of fluency varied with each individual. Thus, the potential class members did not have questions of law or fact common to them. See Stone v. Advance America, 2011 U.S. Dist. LEXIS 142464 (S.D. Cal. December 12, 2011).
So there you have it! Stay legal, and we’ll see you next time.
BY THOMAS B. HUDSON AND NICOLE FRUSH MUNROTOM ([email protected]) AND NIKKI ([email protected]) ARE PARTNERS IN THE LAW FIRM OF HUDSON COOK, LLC. TOM IS THE AUTHOR OF SEVERAL BOOKS, AVAILABLE AT WWW.COUNSELORLIBRARY.COM. TOM IS ALSO THE PUBLISHER OF SPOT DELIVERY®, A MONTHLY LEGAL NEWSLETTER FOR AUTO DEALERS, AND THE EDITOR IN CHIEF OF CARLAW®, A MONTHLY REPORT OF LEGAL DEVELOPMENTS IN ALL STATES FOR THE AUTO FINANCE AND LEASING INDUSTRY. NIKKI IS A CONTRIBUTING AUTHOR TO THE F&I LEGAL DESK BOOK AND FREQUENTLY WRITES FOR SPOT DELIVERY. SPOT DELIVERY, CARLAW AND THE BOOKS ARE PRODUCED BY COUNSELORLIBRARY.COM LLC. FOR INFORMATION, CALL 410-865-5411 OR VISIT WWW.COUNSELORLIBRARY.COM. COPYRIGHT COUNSELORLIBRARY.COM 2011, ALL RIGHTS RESERVED. SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (1/12) HC# 4829-1372-1870.
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BY DANI LUNSFORDDANI LUNSFORD IS A NATIONAL SALES AND MARKETING EXECUTIVE WITH SHOWCASE PUBLICATIONS, INC. SHE HAS BEEN IN THE RETAIL AUTOMOTIVE INDUSTRY FOR 14 YEARS, WORKING IN SALES, SERVICE, E-COMMERCE MANAGEMENT AND AS A CONSULTANT TO IT COMPANIES AND DEALER GROUPS. SHE CAN BE REACHED AT [email protected].
Smart Dealers Should Aim Their Ads at Smartphones
Did you know that men aged 30-49 do more mobile shopping than other age groups? That 50 percent of the popular Groupon’s business over the next couple of years will come from mobile devices? That Starbucks has taken more than 3 million micropayment transactions?
A Leger Marketing survey reported one in 10 respondents said they’d rather lose their mother-in-law than their cellphone.
Those trends and figures are not only interesting, they affect mobile shopping for cars and trucks as a whole. Understanding the upcoming trends will help car dealers see how important mobile sites, mobile applications and mobile marketing campaigns will be.
In 2011, mobile auto consumers climbed 60 percent. Used car sales are soaring, and more people are looking to buy thanks to a comfort level they have achieved with the state of the economy.
According to Google/Compete Research, 81 percent of smartphone users access the Internet on their mobile devices, and one of three searches has a local intent. Out of all the mobile shoppers in the world, 17 percent are looking at automotive websites and 53 percent of those end up at a dealership buying a car.
Because shoppers use their mobile phones to search for “stuff” in time of need, you have an opportunity to reach them when they are ready to buy or shop your dealership. According to Go Mobile, adding GPS capability to mobile phones has transformed the phone into a targeted weapon focused on the immediate surroundings.
According to the 2011 Auto Shopper Behavior Study by Google/Compete/R.L. Polk, today’s auto shoppers research and decide faster, use searches to navigate and compare, and expect dealer sites to be helpful.
The study also determined:• Mobile shoppers watch videos to discover
and compare brands. • Some 81 percent of mobile auto shoppers
make a decision within three months. • New car purchasers tend to search for
“Offers” first, followed closely by “Build Your Car,” “Locate a Dealer” and “Search Inventory. ”
• More shoppers than ever are searching inventory on third party sites – 42 percent of them searched “Inventory” first, then “Model Information” (32 percent) and “Trade-In” (29). “Request a Quote” and “Reviews” were next, cited by 22 percent.
• The most frequent research conducted on
mobile phones was comparing features at 55 percent, followed by price comparisons at 47 percent and reading general car and truck information at 44 percent.
• The advertisements cited as most useful by mobile users were online videos at 52 percent, sponsored or paid search engine listings (49 percent) and, surprisingly, newspaper ads at 45 percent.
All that data should speak loudly to car dealers. We must start following shoppers through this complex yet simple path to purchase rather than relying on traditional online destinations alone.
Car dealers need to examine their digital presence and understand navigation is the key to helping auto shoppers do research through many mobile portals.
So here are six things to take to the next level:
GPS-based marketing: Location-based services are mobile marketing platforms dealers can use to engage shoppers and develop promotions.
Dealer apps: A basic app, including inventory, costs about $300 per rooftop, but it’s worth its weight in gold. You can also allow users to accept notifications and send out weekly sales and alerts.
Mobile-friendly websites: A developer can easily add codes to your home page to adjust to tablet or cell sizes, allowing your website to display content quickly and optimize even on a very small screen.
Mobile ad campaigns: Target customers who are looking to fill an immediate need – oil changes, tire rotations, a special of the week, manager’s special or aged inventory on sale.
QR or 2D codes: Incorporate QR codes on all web pages and in newspaper or magazine ads. A QR code is a symbol with an embedded URL. When smartphone users scan it, it drives them to the URL. Some areas to advertise are: browse a website, send an email, make a phone call, Google maps, Foursquare venue, latest tweet, follow us on Facebook, Wi-Fi network inside dealership, or any text or message you want the customer to see.
YouTube channel: According Google/Compete, video ads drive initial interest – online videos ranked as the most useful ad format and a significant influence of brand choices. The last bombshell is that YouTube led two of three shoppers to the car/truck they ended up buying, indicating that YouTube is a leading driver to get
customers to notice your vehicles. The new iPhone has an assistant named Siri.
She finds answers to questions from the user.If a mobile phone user asks, “Where is the
closet dealership?” Siri will deliver a specific answer with directions. She will only deliver one answer.
The problem from a car dealer’s standpoint is she is not a search engine or a database. She will only deliver qualified filtered results. Siri reportedly uses Wikipedia and Yelp, among other websites, as information providers. Each of those sources work differently. Wikipedia provides encyclopedia-style information but can be modified by any user. Yelp is a national review community.
Dealers should make it a point to claim their information on those sources and keep watch on reviews and information regarding their dealership. Many believe Apple’s goal is to move completely away from Google – there are rumors about a partnership with Bing to help power Siri (so make sure your dealership is listed with Bing).
In a study by the Arora Report, 40 percent of Siri users reported no need to search Google. That provides evidence those users changed their habits, and as a result, Google searches could decline as Siri becomes widely available.
The latest trends and statistics indicate the mini-computers we call phones will be at the heart of any and all tasks in the near future, especially auto shopping. That makes a difference for advertising purposes, including the manner in which dealers reach potential customers.
Convenience is king, and phones are becoming the go-to resource in our everyday lives. Today’s users are looking for detailed vehicle information, interesting videos and compelling mobile ads to direct their search for a vehicle.
This is a once-in-a-lifetime generation changer. As smartphones get smarter and consumer expectations rise, the automobile industry needs to offer the services customers are expecting. All dealerships’ advertising needs to be geared toward the mobile phone war.
Surety Bonds.comMike Patzius1200 Rogers St., Suite CColumbia, MO [email protected]
Triumph ConsultingJack Haworth1606 N. Delaware St.Indianapolis, IN 46202800-875-3137www.triumphconsulting.net
Tri Vin Inc.Mike Audette115 Pohesanut Drive Suite 201Groton, CT [email protected]
Vehicle Acceptance Corp.Joyce Butler12800 N. Meridan St., Ste. 400Carmel, IN [email protected]
VideoTirekicker.comJohn Commorato2413 N. MeridanIndianapolis, IN 46208(317) [email protected]
Wingham & AssociatesGary WinghamP.O. Box 1723Richmond, IN 47375(765) [email protected]
WORKS24Mark Hersch3508 French Park Drive, Suite 1Edmond, OK [email protected]
Zurich Insurance Co.800-728-6049
ASSOCIATE MEMBERS IIADA Associate Membership is available to automotive related businesses. Please call 800-310-3112 for more information on Associate Memberships or see our Associate Membership Application in this issue.
The NIADA announced its 66th Annual Convention & Expo will be held June 11-14, 2012 – a week
earlier than previously scheduled – at Caesars Palace Hotel and Casino in Las Vegas.
NIADA’s showcase event will offer an expanded dealer education program for 2012, including more sessions covering more topics than ever before, as well as an enhanced Expo featuring more companies representing all facets of the automotive industry. Expo exhibit dates are June 12, 13 and 14. The Convention, to be held for the third consecutive year at spectacular Caesars Palace, will kick off with activities beginning on Monday afternoon, June 11.
Online registration is now open at www.niada.com. Rooms at Caesars Palace will be available at the discounted rate of $154 per night.
NIADA’s Annual Convention & Expo provides its members with an opportunity to network with their peers, participate in quality education sessions and gather valuable information they can take back and apply toward their dealerships’ success. Educational offerings will cover topics for both retail and Buy Here-Pay Here dealers. The event is also a gateway for vendors to build and foster relationships with dealers through the Expo, an industry marketplace of top-notch vendors showcasing their products and services and the benefits they can provide to dealers.
NIADA has held its Annual Convention & Expo since 1947 and has continued to flourish as the most sought-after and reputable used motor vehicle industry event for automobile dealers.
NIADA ANNUAL CONVENTION & EXPO SET FOR JUNE 11-14, 2012
Smart Dealers Should Aim Their Ads at Smartphones
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For an annual membership investment of only $275, which includes an NIADA membership, you get a $2,300 Auto Auction Coupon Book and a whole lot more!
Recommended By ______________________________________________________________________________________
IIADA • PO Box 1393 • Crown Point, IN 46308Phone: (800)310-3112 • Fax: (219)663-5294 [email protected]
It is important to me to be recognized as a professional! Enclosed are my annual dues of $275 to make sure that my business has all the advantages IIADA/NIADA Inc., provides to put me at the forefront of my profession. By completing this form, I agree to abide by the Code of Ethics. Also, I am consenting to and giving IIADA/NIADA Inc., its affiliates and subsidiaries, my permission to (until I give written notice to discontinue) contact me and provide information to me at the mailing and email addresses, telephone and fax number(s) I have provided.
This is our personal invitation to you to join the State and NationalIndependent Automobile Dealers Professional Associations
Note: 25% of dues are non-deductible
Please include your email address, phone and fax numbers so that we can easily communicate with you. Membership dues are $275.00 for 12 months from the date you join, and your NationallADA dues are included. Please send application and check or credit card information to: IIADA, PO Box 1393,Crown Point, IN 46308
The IIADA Has the Independent Auto Dealer Covered!
The IIADA Has the Independent Auto Dealer Covered!
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2012 IIADA MEMBER auction couponsFor A Total Savings Of $2,300!
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Programs for Extra Profit• Dealer Bond at Member Rates• Dealer Insurance• Health Insurance• Forms• Financing• Software• IIADA Help Desk• National Dealer Network Skip Tracing Contacts• College Scholarships• Prescription Drug Card• National Dealer Network
Publications• Car Lines Publication• Used Car Dealer Magazine• Federally Required Safeguards Policy Document• Federally Required Red Flags Rules Policy Documents• IRS Audit Technique Guide For the Independent Used Car Dealer• Current Industry Information• Legislative Alerts• NIADA Annual Market Analysis
Professional Development• Certified Master Dealer Program• Free Access to NIADA.tv Training at Your Business• Access to IndependentDealer.com where dealers go for answers• NIADA Membership and Window Decal• IIADA “Symbol of Integrity” Logo and Window Decal • NIADA Annual Convention and Trade Show• Code of Ethics
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Anyone who had has the experience of shopping for health insurance knows it’s not an easy task. Figuring out ways to keep premiums affordable can be a major struggle. Shopping for apples-to-apples coverage with several carriers is nearly impossible and premiums for similar plans are vastly different from one carrier to the next.
So what’s a person to do?Purchasing health insurance requires a
“think outside the box” approach. Here are three simple tips to help you along the way:• Consider shopping for a much higher
deductible than you are accustomed to. Shop for plans that have a $10,000 deductible or more. It may shock you how drastically lower premiums will be. Too much risk for you? We will show you a way to combat that next. If you would like to see a rate for a higher deductible in comparison, visit www.NIADAHealthPlans.com for an instant online rate.
• To offset the high deductible, consider purchasing a critical illness rider, which attaches to your major medical policy.
Critical illness riders pay a cash benefit for conditions like cancer, heart disease, stroke, coma and kidney disease, and the benefit can be used to pay off your deductible and leave you with additional money for other expenses, such as loss of income. Riders can be purchased to cover your deductible or more – up to $100,000 in cash coverage. Believe it or not, the premiums are very affordable.
• Also to help offset risk, consider purchasing an accident rider to attach to your major medical policy. Like critical illness riders, accident riders pay a cash benefit for accidents or injuries such as cuts, burns, broken bones or strained and pulled muscles. Again the benefit can be used to pay your deductible in the event you or your family is injured. If you have children, especially ones in sports, this is a must-have rider. The premiums are even more affordable. So what types of claims will you then need
to worry about?Since health care reform passed,
additional benefits have now been added so you will not have to pay out of pocket for adult and child wellness exams, such as checkups, immunizations, lab work, mammograms, pap smears, PSAs and EKGs. They are all covered at 100 percent with no deductible. Why purchase a lower deductible when it’s covered regardless?
Additionally, there are no lifetime maximums. After your deductible, you are covered at 100 percent until infinity. There are no lifetime caps like $2 million, $3 million, etc. If you have a $20 million medical bill, your insurance must now cover it.
With a high-deductible policy you will have to pay for such claims as office calls for a cold/flu, asthma, skin disorders (other than cancer) and other forms of illness. However, most people would rather save $300, $400 or more per month and pay for the occasional office call themselves. And you will still receive the insurance company’s discounted rate for office calls.
Doing the same thing over and over again and expecting a different result … well, you know the rest. Thinking “outside the box” can not only save you money, but can also provide you with better coverage than you had before.
FOR MORE INFORMATION, PLEASE CALL THE NIADA HEALTH PROGRAM AT 1-888-308-9340 OR VISIT WWW.NIADAHEALTHPLANS.COM
Three “think outside the box” techniques when shopping for health insurance.
