IN THIS ISSUE Page MAY 6, 2003

FTC SAFEGUARDS RULE

________

Effective May 23, 2003

IDENTITY THEFT

ATTORNEY GENERAL OF TEXASGoing Out of Business SalesMV Registration Fees May Not FundTrauma Facilities

DPS Inspections of Vehicles With ATexas Salvage Certificate

TxDOT VTR DIVISIONLienholders and Release of Lien“Manufacturer Buyback” TitlesNewly Affected Emission InspectionCounties

Revisions to Supporting DocumentationRequired for Trusts

Title Transaction Supported by JP orMunicipal Order Not Acceptable 8

Registration of Fleet Vehicles 8Specialty License Plates 9Electronic Lien Title Program 10

MOTOR VEHICLE DIVISIONRULINGSInternational Truck and Engine

Corporation vs. Brett Bray 10“Blue Oval” Agreed Final Order 10Settlement Agreement With VolvoCars of North America, Inc. 11

Metal Dealer License Plates 11

4 JIejaI i1uUetin

111212

13

13

13

1415

1515

2 REMINDERS

1. Door Ding Protection Products4 2. MVD Licensing Section

3. Obtaining a Consumer Report4. Record Retention of Credit

5 Applications5. Family & Medical Leave Act;

5 Americans with Disabilities Act;Title VII

6 6. Selling a Vehicle to a CaliforniaResident

7. Uniformed Services Employment6 and Re-employment Act of 1994

(USERRA)8. OSHCON

7 9. “Understanding Vehicle Financing”Brochure

8 10. List of SDNs

ENCLOSURE

“The New CARFAX Report”

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Texas Automobile Dealers Association • P.O. Box 1028/1108 Lavaca • Austin, Texas 78767-1028 • (512) 476-2686 • (800) 749-8232

Legal Bulletin May 6, 2003

FEC SAFEGUARDS RULEEffective May 23, 2003See also “Legal Bulletin,” November 21, 2002

The Federal Trade Commission (FTC)issued its final Safeguards Rule requiring theestablishment ofstandards by your dealership asto the administrative, technical and physicalinformation that you attain on customers.

This new rule is in addition to thePrivacy Rule under the Gramm-Leach-BlileyAct, which became effective July 1, 2001 (See“Legal Bulletin,” April 23, 2001;“Memorandum,” July 16, 2001). The PrivacyRule requires the dealership to disclose tofinance, lease, and insurance customers how ituses and shares customer information.

The Safeguards Rule requires thedealership to develop, implement, and maintaina written information security program as wellas ensure that affiliates maintain appropriatesafeguards.

“Customer information” is any recordthat contains nonpublic personal informationabout a customer, whether in paper, electronic,or other form, that is handled or maintained bythe dealership or on behalf of the dealership orits affiliates.

“Nonpublic personal information” ispersonally identifiable financial informationincluding any information a consumer providesin order to obtain a financial product or servicefrom the dealership, such as information from aconsumer report.

Standards for Safeguarding CustomerIn formation—Develop, implement, andmaintain a written information security programfor the dealership that contains administrative,

technical, and physical safeguards.1. Insure the security and confidentiality

of customer information.2. Protect against any anticipated threats

or hazards to the security or integrity of suchinformation.

3. Protect against unauthorized access toor use of such information that could result insubstantial harm or inconvenience to anycustomer.Elements

•Designate an employee(s) to coordinatethe security program. Have them periodicallyreport to the owner(s) regarding the status of theprogram.

•Identify risks to the security,confidentiality, and integrity of customerinformation that could result in unauthorizeddisclosure, misuse, alteration, destruction, orother compromise and assess the sufficiency ofthe safeguards in place to control these risks.

The risk assessment should include thefollowing areas:

1 .Employee training and management.2.AlI information systems, including

network and software design, informationprocessing, storage, transmission, retrieval anddisposal.

3 .Detection, prevention and responsemeasures for intrusions or other systems failures.

4.Vendor and service providers if thesethird-parties allow access to customerinformation.

Employee Training and ManagementCheck references and employment history

before hiring. Train and require employees tofollow the dealership’s confidentiality andsecurity standards. Limit access to customerinformation only to those employees who have a

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business reason for seeing the information.Refer calls or other requests for customerinformation to designated employees who havesafeguards training. Discipline employees whoviolate the dealership security standards.

Information Systems, Including Network andSoftware Design, Information Processing,Storage, Transmission, Retrieval andDisposal

Lock rooms and file cabinets wherecustomer information is kept. Use strongpasswords (18 characters long). Consider theuse of encryption. Limit access to customerinformation to those employees with a businessreason for seeing it. Ensure that storage areas,including off-site storage, is protected againstdestruction or potential damage from physicalhazards, like fire or floods.

It is recommended that sensitivecustomer data should not be on a machine withan internet connection. Store electroniccustomer information on a secure server that isaccessible only with a password or othersecurity protection and is kept in a secure area.Prohibit the use of passwords by anyone otherthan the individual to whom it belongs. Closedown access to customer information foremployees who no longer work for thedealership, including deleting their passwords.Maintain a secure backup.

Credit card information and othersensitive financial data needs a secureconnection so that the information is encryptedin transit.

Dispose of customer information in asecure manner—shred the information orsupervise its incineration. Erase all data whendisposing of computers, diskettes, magnetictapes, hard drives, or any other electronic media

that contains customer information. Effectivelydestroy hardware.

Detection, Prevention, and ResponseMeasures for Intrusions or Other SystemsFailures

Identify the dealership’s reasonablyforeseeable risks to your customer informationand the dealership’s safeguards.

Is the customer information vulnerable tofire, flood, or vermin? Is the computer systemequipped with firewall and anti-virusprotections? Is it password protected andencrypted? Are passwords kept private? Iscustomer information only accessed by necessaryemployees? Is customer information kept inlocked filing cabinets or locked rooms? Is therea process to report a security breach ormisappropriation of customer information?

After identifying the risks, determinewhether the dealership’s policies adequatelyaddress the risks. If they do not, implement anew policy to safeguard the customerinformation.

Regularly monitor the dealership’ssafeguards program.

Vendor and Service Providers ifThird PartiesAllowed Access to Customer Information

Select service providers that maintain theappropriate safeguards for customer information.Require service providers, by contract, toimplement and maintain safeguards.

A “service provider” is a person or entitythat receives, maintains, processes, or otherwiseis permitted access to the dealership’s customerinformation through its services.

Discuss the dealership’s security needswith your service providers and obtain writtenrepresentations and warranties from them that

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they will meet the dealership’s requirements.NADA has recommended the following

sample clauses and suggests, if used, that it bereviewed for applicability:

(1) “(Name ofservice provider) agrees toimplement and maintain physical, electronic,and procedural safeguards as may be required by(name of dealership) from time to time inDealership’s sole discretion in order to guard allinformation and data relating to the Dealership’scustomers to which (name of service provider)has access pursuant to the teñns of thisAgreement. Such safeguards shall, at aminimum, comply with applicable federal, state,and local laws and regulations.”; or,

(2) “(Name of service provider)represents and warrants to (name of dealership)that it presently maintains and will continue tomaintain and periodically test the efficacy ofappropriate information security programs andmeasures designed to ensure the security andconfidentiality of ‘customer information’ (asdefined in 16 C.F.R. § 314.2(b)). Suchinformation security programs and measuresshall include appropriate procedures designed to(a) protect the security and confidentiality ofsuch information; (b) protect against anticipatedthreats or hazards to the security or integrity ofsuch information, and (c) protect againstunauthorized access to or use of suchinformation that could result in substantial harmor inconvenience to any customer of thisDealership. (Name of dealership) or itsrepresentatives and applicable governmentalregulators may also audit the security programsand measures implemented by (name of serviceprovider) pursuant to this agreement and no feesor charges shall be imposed on the Dealer orDealership, its representatives or applicablegovernmental regulators in connection with any

such audit by (name of service provider).”

PenaltiesThe FTC can initiate an enforcement

action against the dealership for non-compliance(15 U.S.C. § 41 et seq.). Penalties may includemonetary fines, injunctive relief, and long-termconsent decrees.

IDENTITY THEFTSee also “Legal Bulletin,” November 21, 2002

Walking hand-in-hand with thedealership’s compliance with the FTC’sSafeguards Rule, see above, is the need toprevent the use of fraudulent information topurchase a motor vehicle, parts, or service.

According to the FTC’s 2001 report,fraudulent automobile loans were 25% of allidentity-theft based loans.

The FTC discusses some ways thatidentity thieves work:

The thief opens a new credit account,using your name, date of birth, and SocialSecurity number. When the thief uses the creditcard and does not pay the bill, the delinquentaccount is reported on your credit report.

The thief calls your credit card issuerand pretending to be you, changes the mailingaddress on your credit card account. Then thethief runs up charges on your account. Becauseyour bills are sent to the thief’s address, you maynot immediately realize there is a problem.

• The thief establishes cellular phoneservice in your name.

• The thief opens a bank account in yourname and writes bad checks on that account.

If an identity theft occurs on the purchase

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of a vehicle, the lienholder will likely recoursethe contract back to the dealership. In addition,the person’s identity and credit that was stolenmay look to the merchant for recourse.

It is suggested that the dealership shouldnot accept a copy, including a fax, of a driver’slicense or an insurance card. Verify acustomer’s consumer report along with theinformation within the report. If a customer’saddress has recently changed, verify the newaddress. Compare the addresses on the creditreport, credit application and driver’s license.Does the application give all of the numbers ona credit card or just partial numbers? Is thepurchaser willing to purchase the vehicle atMSRP and with many add-ons?

If the dealership falls victim to anidentity theft, please notify the local policedepartment immediately.

ATTORNEY GENERAL OF TEXAS

Going Out of Business Sales in TexasThe Attorney General of Texas,

Consumer Protection Division, has advised thatit is unlawful to advertise a going-out-of-business (GOB) sale without complying withcertain state laws.

A person may not conduct a saleadvertised with the phrase “going out ofbusiness,” “closing out,” “shutting doorsforever,” or “bankruptcy,” or a similar phrase orword indicating that an enterprise is ceasingbusiness unless the business is closing all of itsoperations in a county and in all of the countiesimmediately adjacent to that county and followsthe procedures required by the Tex. Bus. &

Corn. Code Ann. Ch. 17, Subchapter F, § 171.81(Vernon 2002). Tn addition, the TMVCAdvertising Rules prohibit a licensee fromwillingly misrepresenting the ownership of abusiness for the purpose of holding a liquidationsale, auction sale, or other sale which representsthat the business is going out of business (16TAC § 105.30).

To conduct a GOB sale, a person mustfile an original inventory with the chief appraiserof the appraisal district in which the person’sprincipal place ofbusiness in the state is located.A filing fee of $20 is required.

After receiving the original inventory, thechief appraiser issues a permit for a GOB sale.The permit is valid for 120 days after the day it isissued and it is not renewable. The permit isrequired to be posted in a conspicuous place.Before advertising a GOB sale, a copy of thepermit must be given to the person publishing orbroadcasting the GOB advertisement.

An item may not be sold at a GOB sale ifit was ordered after the beginning date of thesale. Every 30 days during the GOB sale, aninventory of unsold goods is to be given to thechief appraiser. After the permit expires, thepermit holder may not sell, at retail, an itemcovered by the permit.

The AG may bring an action to enjoin aviolation as well as consider whether a violationof the DTPA has occurred.

Motor Vehicle Registration Fees May NotFund Trauma Facilities(GA-0023)

Under article Vifi, § 7-a of the TexasConstitution, revenues received from motorvehicle registration fees may be used only for adesignated purpose.

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“Subject to legislative appropriation,allocation and direction, all net revenuesremaining after payment of all refunds allowedby law and expenses of collection derived frommotor vehicle registration fees and all taxes,except gross production and ad valorem taxes,on motor fuels and lubricants used to propelmotor vehicles over public roadways, shall beused for the sole purpose of acquiring rights-ofway, constructing, maintaining, and policingsuch public roadways, and for the administrationof such laws as may be prescribed by theLegislature pertaining to the supervision oftraffic and safety on such roads; and for thepayment of the principal and interest on countyand road district bonds or warrants. .

Unless listed, motor vehicle registrationfee revenues may not be diverted to a purposethat is not listed; thus, article VIII, § 7-1 of theTexas Constitution does not permit the use ofmotor vehicle registration fees to fund traumafacilities.

DPS Inspections of Vehicles With a TexasSalvage Certificate(GA 0022)

A vehicle with either a non-repairablemotor vehicle certificate of title or a salvagemotor vehicle certificate of title may not beoperated on a public highway. A vehicle thathas been issued either of these certificates oftitle and that has been rebuilt may be issued anew regular certificate of title only if the ownerof the vehicle submits an application to TxDOTthat includes a statement from a DPS officerwho has inspected the vehicle.

The new certificate of title must (1) bearon its face the words “Rebuilt Salvage” and (2)describe or disclose the vehicle’s former

condition in a manner understandable to apotential purchaser.

A “non-repairable vehicle” is a late modelmotor vehicle that is damaged or missing a majorcomponent part to the extent that the totalestimated cost ofrepairs to rebuild or reconstructthe vehicle is equal to or greater than an amountequal to 95% of the ACV of the vehicle in itspre-damaged condition.

A “salvage motor vehicle” is a late modelmotor vehicle, other than a late model vehiclethat is a non-repairable motor vehicle, that isdamaged to the extent that the total estimatedcost of repairs is equal to or greater than anamount equal to 75% of the ACV of the vehiclein its pre-damaged condition (TexasTransportation Code Ann. § 501.091 l(a)(8)).

A “late model motor vehicle” is of thesame model year as the current calendar year orone of the 5 calendar years preceding thatcalendar year (Texas Transportation Code Ann.§ 501.0911(a)(6)).

TxDOT by rule, has provided for a thirdtype of title for a damaged vehicle, a “TexasSalvage Certificate.” These certificates areissued for vehicles that have sustained damagethat is less than 75% of the ACV and do notrequire a DPS inspection (43 TAC §17.8(b)(1)(C)). The new certificate of titleincludes the notation “Rebuilt Salvage” but neednot otherwise describe or disclose the vehicle’sformer condition.

TxDOT-VEHICLE TITLES ANDREGISTRATION DIVISION

Lienholders and Release of LienTo streamline requests for certified copies

of titles, TxDOT suggests that dealers have

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owners sign an Application for a Certified Copyof a Texas Certificate of Title for a MotorVehicle, Form VTR-34 in lieu ofthe lienholder.Upon receipt of the release of lien, the dealermay file for a certified copy of a title on behalfofthe customer. The required documentation is:

• Release of lien on lienholder’s originalletterhead;

• Form VTR-34 executed by the vehicleowner; and,

Copy of the vehicle owner’s photo ID.

In addition, the dealer may sign the FormVTR-34 for the owner as Power of Attorney(POA) in lieu of the lienholder. The requireddocumentation is:

• Release of lien on lienholder’s originalletterhead;

‘Form VTR-34 executed by the dealeras POA for the owner;

• Copy of the vehicle owner’s photo ID;• Copy of Form VTR-271-A;• Letter ofsignature authority on original

letterhead from the dealer, a business card, or acopy of an employee ID for the person signingas POA for the owner; and,

Copy of photo ID for the personsigning Form VTR-34 as POA for the owner.(VTR Letter from Stephen Palmer, Manager,Operations Branch, VTR Division, February 7,2003).

“Manufacturer Buyback” Title Remark(Registration and Title Bulletin #140-02)

VTR is now placing “Legal Restraint”remarks indicating a “90000 CR file numberseries” on all motor vehicle records whichinvolve a vehicle reacquired by a manufacturerto resolve a lemon law complaint or warranty

claim. In addition, a letter advising ofthe remarkis being sent to the current owner and lienholder,if applicable. If a vehicle is transferred and themotor vehicle record reflects the “Legal RestraintCR90000” remark, VTR will manually place theremark on the new motor vehicle record.

The title transaction consists of acompleted Application for Texas Certificate ofTitle (Form 130-U), a Request to IssueNegotiable Certificate of Title withoutRegistration (Form VTR-13 1), the properlyassigned certificate of title, and $13.00 title fee.No sales tax is due. In order to distinguish thesetypes of title transactions, the box for“Exemption Claimed Under the Motor VehicleSales and Use Tax Law because” (Form 130-U,block number 21) must be checked and thenindicate “Manufacturer Buyback.”

Newly Affected Emissions Inspection Counties(Registration and Title Bulletin #046-03)

Effective May 1, 2003, four counties inthe Houston area and five counties in NorthTexas join those counties currently requiring amotor vehicle emissions inspection andmaintenance program (JIM).

Current JIM counties are: Collin, Dallas,Denton, El Paso, Harris, and Tarrant. On May 1,2003, Brazoria, Ellis, Fort Bend, Galveston,Kaufman, Johnson, Montgomery, Parker, andRockwall become JIM counties.

According to DPS, the test-on-resaleprovisions do not apply to vehicles currentlyregistered or titled in an affected county andsubject to a retail sale.

If a vehicle is subject to a retail sale andis currently titled or registered in one of thesecounties, even if the county became an JIMcounty May 1, 2003, the vehicle is not required

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to be emissions tested before a retail sale andsubsequent title application (TexasTransportation Code § 548.301).

VTR Revisions to Supporting Documentation,çquired for Trusts(Registration and Title Bulletin #047-03)

A copy of a Trust Agreement is nolonger required as supporting documentationwhen the title applicant/recorded owner is atrust.

One of the following must support anapplication for title, request for a certified copyof title, or transfer of title when the titleapplicant/recorded owner is a trust:

1. A properly completed Affidavit ofTrust; or,

2. A Statement of Fact signed by thetrustee(s) which includes the name of theperson(s) who appointed the trustee(s); stateswhether or not the Trust Agreement is on filewith the county clerk and if so, the numberunder which it is recorded.

Title Transaction Supported by JP orMunicpl Judge Order Not Acceptable(Registration and Title Bulletin 128-02)

According to VTR, when a Justice ofthePeace (JP) or a Municipal Judge holds anexamining trial to determine the properdisposition ofproperty which has been allegedlystolen, the JP or Municipal Judge may issue anorder to release the property to the persondetermined to be the rightful owner. However,a JP or Municipal Judge order in this instance isnot acceptable to support an application for amotor vehicle certificate of title.

County tax assessor collectors are

advised not to accept a motor vehicle titletransaction supported by a JP or MunicipalJudge’s order. The following options areavailable:

1. A tax collector’s hearing;2. A bonded title; or,3. File a petition in county court. The

department, as well as any other interestedparties, must be made a party to the proceedings.

Registration of Fleet Vehicles(43 TAC § 17.49; 27 TexReg 10766)

Registration ofmultiple motor vehicles ina fleet is available under the followingconditions:

as a fleet.1. No fewer than 5 vehicles are registered

2. All vehicles in a fleet must beregistered to the same person.

3. Each vehicle must currently be titledin Texas or be issued a registration receipt, or theregistrant must submit an application for acertificate oftitle or registration for each vehicle.

Application for fleet registration must beon a form prescribed by TxDOT, VTR andaccompanied by required documentation andfees.

The registration period for a fleet willexpire on the same date. The department willissue distinguishing insignia for each vehicle ina fleet which may not be transferred betweenvehicles, owners, or registrants.

A registrant may add a vehicle to a fleetat any time during the registration period. Anadded vehicle will be given the same registrationperiod as the fleet and will be issued fleetregistration insignia. A vehicle may be removedfrom a fleet at any time during the registrationperiod and the registrant shall return the fleet

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registration insignia for that vehicle to thedepartment at the time the vehicle is removedfrom the fleet.

If the number of vehicles in a fleet fallsbelow five during the registration period, fleetregistration will remain in effect. If the numberof vehicles in a fleet is below five at the end ofthe registration period, fleet registration may becanceled. In the event of cancellation, eachvehicle shall be registered separately and theregistrant shall immediately return all fleetregistration insignia to the department.

When a fleet is first established, thedepartment will charge a registration fee foreach vehicle for 12 months. A currentlyregistered vehicle will be given credit for anyremaining time on its separate registration.

When a vehicle is added to an existingfleet, the department will charge a registrationfee that is prorated based on the number ofmonths of fleet registration remaining.

When a vehicle is removed from fleetregistration, it will be considered to beregistered separately. The vehicle’s separateregistration will expire on the date that the fleetregistration would have expired. The registrantmust pay the statutory replacement fee to obtainregular registration insignia before the vehiclemay be operated on a public highway.

Specialty License Plates(43 TAC § 17.20, 17.24, 17.28, 17.50; 28 TexReg 1522)

The department is now permitting thelocal tax assessor-collector to issue specialtyand exempt license plates. Plates that must stillbe applied for directly to the departmentinclude: Congressional Medal of Honor; StateJudge; State Official; U. S. Congress—House; U.

S. Congress—Senate; and, U. S. Judge.The application must be accompanied by

the prescribed fees as well as any necessaryevidence for the specialty plate.

If the vehicle for which the specialtylicense plates, symbols, tabs, or other devices areissued is currently registered, the owner mustsurrender the license plates currently displayedon the vehicle, along with the correspondinglicense receipt, before the specialty license plateswill issue.

Ifthe vehicle is titled in a name other thanthat of the applicant, the applicant must provideevidence of having the legal right of possessionand control of the vehicle.

In the case of a leased vehicle, theapplicant must provide a copy of the leaseagreement verifying that the applicant currentlyleases the vehicle.

The owner of a vehicle with specialtylicense plates, symbols, tabs, or other devices,may transfer the specialty plates betweenvehicles by filing an application through thecounty tax assessor-collector if the vehicle towhich the plates are transferred is titled or leasedin the owner’s name and meets the vehicleclassification requirements for that particularspecialty license plate, symbol, tab, or otherdevice.

The following specialty plates are non-transferable between vehicles:

1. Antique Vehicle and AntiqueMotorcycle license plates and Antique tabs;

2. Former Military Vehicle license platesand registration numbers;

3. Classic Auto, Classic Truck, andClassic Motorcycle license plates and TexasClassic validation stickers;

4. Parade license plates;5. Forestry Vehicle license plates; and,

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6. Log Loader license plates.

Electronic Lien Title (ELT) Program(43 TAC § 17.11; 27 TexReg 10764)

The ELT Program provides a voluntaryelectronic method for the department toexchange lien and title infonnation withlienholders.

‘To participate, a lienholder must enterinto a contract with the department. Anapplication for title recording an electronic lienis filed in the usual manner with a county taxassessor-collector. The department notifies thelienholder electronically of the date the lien isrecorded which is then verified by thelienholder.

When a lien is satisfied, the lienholderelectronically notifies the department within 10days. The ELT remark and the lien is removedfrom the record and a title is printed in the nameof the owner ofrecord and mailed to the addressspecified by the lienholder.

A lienholder may also request removalof the ELT remark and provide the lienholderwith a paper title.

When requested by a lienholder, thedepartment will reassign a lien electronically toa new lienholder if the new lienholder meets allrequirements for participation in the ELTprogram.

The department will not issue a certifiedcopy of a title with an ELT remark.

Judge Nowlin, Chief United StatesDistrict Judge, Western District, issued an Orderon March 28, 2003, in the above-styled cause ofaction.

International Truck, a manufacturer ofmedium and heavy duty trucks and mid-rangediesel engines, has sold used trucks at facilities itowns in Dallas and Houston since the mid-i 970s.Effective September 1, 1999, § 5.02C(c) of theTMVC Code prohibits a manufacturer ordistributor of motor vehicles from acting in thecapacity of a dealer in Texas.

Mr. Bray, as Division Director of theTMVC, declined to renew International’s generaldistinguishing numbers.

International brought this cause of actionseeking a declaratory judgment that the statutedoes not apply to the sale ofused vehicles or thatthe provision violates the United StatesConstitution.

The Order holds that § 5.02C(c), appliesto manufacturers selling used vehicles as well asnew vehicles and the provision “bears areasonable relationship to the State’s legitimatepurpose in controlling the automobile retailmarket. Control over the supply, whether director indirect, allows a manufacturer potentialleverage over dealers of used cars that presents avertical integration issue within the State’s powerto regulate.”

International Truck has filed a Notice ofAppeal.

“Blue Oval” Agreed Final Order

MOTOR VEHICLE DIVISION RULINGS An Agreed Final Order In the Matter ofthe License ofFordMotor Company, Docket No.00-0772-ENF is before the Board at the June,2003, meeting.

Without admitting any violation and

International Truck and Engine Corporationvs. Brett Bray

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continuing to deny that Ford Motor Companycommitted a violation ofthe TMVC Code, Fordagrees to cease and desist no later than March31, 2005, those activities in the Blue Ovalprogram that allegedly violate § 5.02(b)(20)and (21).

Ford also agrees to reimburse TxDOT$40,000 for litigation and investigativeexpenses.

a dealer owns, operates, or permits to be operatedon a public street or highway.

The Board’s rules provide that metaldealer license plates “shall be attached to the rearlicense plate holder of vehicles on which suchplates are to be displayed” (16 TAC § 111.9).

REMINDERS

Settlement Agreement with Volvo Cars ofNorth America, Inc.

A Settlement Agreement has beenreached with Volvo Cars of North America,lic., and Star Motor Cars, Hoy-Fox AutomotiveMarket, and James Mears Motors, Inc., wherebyVolvo agrees to discontinue their 2002 VolvoMargin Structure and Added Value Bonusprogram.

The new agreed-upon program is notdiscriminatory between Texas Volvo dealers nordoes it result in a disparity in marginpercentages available to Texas Volvo dealers.

Volvo is, to the best of its ability,structuring and implementing its 2003 programin compliance with TMVC Code §5.02(b)(20)(A), 5.02(b)(20)(B) and 5 .02(b)(2 1).In addition, Volvo agrees, to the best of itsability, to structure and implement any futuremargin structures in compliance with the TMVCCode.

Metal Dealer License Plates

Only one metal dealer license plate isdisplayed on a vehicle since only one plate foreach tag number is manufactured in Huntsvilleand issued to a dealer. It is not required that twometal dealer tags be displayed on a vehicle that

1. Door Ding Protection ProductsCertain door ding protection products

have been reviewed by the Office of ConsumerCredit Commissioner (OCCC). If making theproduct available at the dealership, pleaseconsider the following information.

According to the OCCC, in order to beincluded as an itemized charge in the amountfinanced on a motor vehicle installment salescontract, the product should be insurance, aservice contract, or a warranty [as authorized bySubchapter C, Finance Code § 348.005) or anaccessory or service related to the sale and thusable to be included in the cash price (Id., §348.004).

Certain door ding or dent protectionproducts do not satisfy the insurance or warrantycategories. With respect to the service contractstandards under the Service Contract RegulatoryAct, Art. 9034, the Act requires that a provider ofa service contract must be registered and complywith certain other provisions ofthe Act as well asprovide for the repair of a product for operationalor structural failure caused by a defect inmaterials or workmanship or by normal wear.

If the product is not insurance, awarranty, or a service contract, then it may not beincluded on the motor vehicle retail installmentcontract and financed as an itemized charge.

Whether the product is an accessory or a

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service related to the sale and thus an item thatcan be included within the cash price of thevehicle is another issue and would need to bereviewed on a product specific basis.

The product can also be available forsale, but not financed on the motor vehicle retailinstallment contract if it does not meet thestatutory criteria.

If you have any questions, contact theOCCC, local counsel, or the TADA legaldepartment.

2. MVD Licensing SectionThe Licensing Section of the Motor

Vehicle Division (TxDOT) processes over20,000 applications each year. With only 12licensing clerks, the processing time for bothnew applications and license renewals may takeover four weeks.

In order timely to receive thedealership’s new license, license amendment, orrenewal license and renewal dealer platestickers, submit the application and requiredinformation as soon as possible.

All applications with money attachedshould be submitted to the P.O. Box on theapplication form. The United States PostalService will deliver overnight mail to P. 0.Boxes. Delivering the form with moneyattached to the Motor Vehicle Division willdelay processing time because all money mustfirst be sent to the Comptroller of Texas forprocessing and deposit.

The Motor Vehicle Division has recentlybegun accepting credit cards for payment oflicensing fees and other moneys owed. Creditcard forms are sent with the license applicationand contain pertinent instructions.

All license applications are processed inthe order received. In order to allow adequate

time for mailing, monetary deposit, applicationreview, protest check, if applicable, and licenseprinting before the opening of a new dealershipor the expiration of a current license, pleasesubmit the application or renewal andinformation at least 30 days in advance.

It is also recommended that the dealershipsubmit amendment applications for the additionof a line-make 30 days prior to the anticipatedfirst day of sale.

A failure to include all requiredattachments will also delay the issuance of alicense. However, it is understood that certaindocuments are not available until the closing onthe property or the sale of the dealership and soin this instance, submit the application with allother available attachments as soon as possiblebefore closing.

Please remember that if a new dealershipor an amendment application is protested, alicense cannot be issued unless the protest isresolved in favor of the new or relocatingdealership’s favor.

3. Obtaining a Consumer ReportThe Fair Credit Reporting Act, §

604(a)(3)(F) permits a consumer reportingagency (CRA) to provide a consumer report toany party who has a “legitimate business need forthe information in connection with a businesstransaction that is initiated by the consumer.”

According to the Federal TradeCommission (FTC), this provision does not allowa dealership to obtain a consumer report on aperson who simply comes to an automobiledealership and requests information from asalesman about one or more automobiles. Arequest for general information about productsand prices offered does not, by itself, involve a“business transaction initiated by a consumer.”

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A consumer report may be obtained onlyin those circumstances in which the consumerclearly understands that he or she is initiating apurchase or lease of a vehicle and the seller hasa legitimate business need for the consumerreport information in order to complete thetransaction.

The dealership may obtain a consumerreport with the consumer’s written permissionand it is recommended that written permissionbe obtained prior to obtaining a consumerreport.

4. Record Retention of Credit AnplicationsUnder the Equal Credit Opportunity Act,

§ 202.12, applications for credit are to bepreserved for 25 months (12 months forbusiness credit). Retain an original or a copy ofany application, any information required to beobtained concerning characteristics of theapplicant, and any other written or recordedinformation used in evaluating the applicationand not returned to the applicant at theapplicant’s request.

5. Family and Medical Leave Act;Americans With Disabilities Act; Title VII

The Family and Medical Leave Act(FMLA) covers private employers with 50 ormore employees. The Americans withDisabilities Act (ADA) and Title VII coverprivate employers with 15 or more employees.

Under the FMLA, an eligible employeemay take up to 12 workweeks of leave duringany 12-month period for one or more of thefollowing reasons: (1) birth of a child, and tocare for the newborn child; (2) the placement ofa child with the employee through adoption orfoster care, and to care for the child; (3) to carefor the employee’s spouse, son, daughter, or

parent with a serious health condition; and, (4)because a serous health condition makes theemployee unable to perform one or more of theessential functions of the job.

During FMLA leave, an employermaintains the employee’s existing level ofcoverage under a group health plan. At the endof FMLA leave, an employer places theemployee into the same or an equivalent job.

An FMLA “serious health condition” isan illness, injury, impairment, or physical ormental condition that involves inpatient care orcontinuing treatment by a health care provider.An ADA “disability” is an impairment thatsubstantially limits one or more major lifeactivities, a record of such an impairment, orbeing regarded as having such an impairment.

Some FMLA serious health conditionsmay be an ADA disability; yet, a serous healthcondition may not be a disability because thecondition is not an impairment or because theimpairment is not substantially limiting.

Title VII does not allow a coveredemployer to discriminate on the basis of race,color, religion, sex, or national origin whenadministering family leave.

6. Selling a Vehicle to a California ResidentCalifornia adopted a law in 1976 which

provides that no California resident or businessshall import, deliver, purchase, rent, lease,acquire, or receive a new motor vehicle unlessthe motor vehicle has met Calfornia emissionstandards (California Health and Safety Code §43150 et seq.).

Under California’s statute, a vehicle isconsidered “new” if it has an odometer readingof less than 7,500 miles. This sale prohibitionalso extends to the importation or sale of newvehicle engines that are not certified to California

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Legal Bulletin May 6, 2003

emission standards.Anyperson who violates this prohibition

is liable for a civil penalty of $5,000 perviolation (Id., § 43154(a)). in addition, avehicle that is the subject of a violation will bedenied California DMV registration and will berequired to be removed from the state.

Exceptions to the 7,500 mile rule are: (1)when a California resident obtains the vehicle aspart of an inheritance or divorce settlement; (2)when a California resident purchases the vehicleto replace a California registered vehicle thatwas stolen while out-of-state; or, (3) when aCalifornia resident purchases the vehicle toreplace a California registered vehicle that wasdestroyed or if inoperative beyond reasonablerepair while out-of-state (Id., § 43151(b)). ACalifornia resident on active military dutyoutside of California may return to Californiawith a new vehicle that is not certified toCalifornia requirements if it was registered inthe state of last military service and certified tofederal emission standards. Finally, a personmoving to California from another state mayregister a new federally certified vehicle if itwas first registered by the owner in his homestate. When applying to register any vehicle thatmeets one of the exceptions, the applicant mustshow proof, such as a court order, police report,repair invoice, military transfer orders, etc., tothe California DMV to qualify for anexemption.

An emission control label indicatingwhether the vehicle is manufactured to meetCalifornia andlor U. S. standards is on all 1971and newer vehicles. The emission control labelshould be affixed to the engine compartment orunder the hood with the words “VEHICLEEMISSION CONTROL INFORMATION” andthe corporate name or trademark of the

manufacturer on the label.If the vehicle is California certified, the

label will state that the vehicle conforms toCalifornia regulations or that it is legal for sale inCalifornia.. If a vehicle is federally certified, thelabel states that the vehicle conforms to U.S.-EPA regulations, but no mention will be made ofmeeting California requirements.

7. Uniformed Services Employment and Reemployment Act of 1994 (USERRA)

The USERRA protects and grants rightsto employees who are absent from work as aresult of “service in the uniformed services.”

“Uniformed services” includes activeduty or reserve service in the U. S. Army, Navy,I\4arine Corps, Air Force or Coast Guard; servicein the U. S. Army or Air National Guard, servicein the Commissioned Corps of the Public HealthService, and any other category of personsdesignated by the president of the United Statesin a time of war or emergency. Absences fortraining, weekend drills, summer camps andfitness-for-duty examinations are also included.

The provisions of the Act applyregardless ofthe length of time the employee hasworked for the employer. The USERRAprohibits an employer from discriminating orretaliating against an applicant or employeebecause of membership, application formembership, performance of service orobligation to perform service in a branch of theuniformed services.

A returning employee may not beterminated except for cause within one year afterthe date of re-employment if the military leaveperiod was 181 days or longer or within 180 daysafter the date of re-employment if the militaryleave period was between 31 and 180 days.

Returning active duty employees are to be

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given their former job or an equivalent positionas well as re-employed at the seniority, pay andbenefits level at which the employee would havebeen if he or she had not left for militaryservice.

During the employee’s absence, anemployer cannot require the employee to use ortake accrued vacation or other paid leave as partof their military leave.

received from the consultant for a minimum of 3days or until all hazards are corrected.Information on other hazards as well as proposedcorrection methods must also be made availableto employees.

To request a consultation from OSHCON,call 1-800-687-7080 or complete the onlinerequest form available at:www.twcc. state.tx.us/services/oshcon

8. OSHCONThe Occupational Safety and Health

Consultation (OSHCON) program is a free-non-regulatory service available to small, privateTexas employers. The consultants can evaluatean employer’s current safety and healthprograms and identify areas in the workplacethat do not meet OSHA safety and healthstandards.

OSHCON is a program ofthe Workers’Health and Safety Division of the TexasWorkers’ Compensation Commission and isavailable to a private business with less than 250employees at the consultation site and no morethan 500 employees at all sites controlled by theemployer.

The OSHCON program does not issuefines or citations; however, when a businessrequests and agrees to an OSHCONconsultation, the business agrees to correct anyserious hazards or imminently dangeroussituations that might be identified. Theabatement period to correct any serious hazardsis decided upon between the business and theOSHCON consultant. If a hazard cannot becorrected within the abatement period, then thebusiness should request an extension.

In addition, OSHA standard 1908.6(e)(8)requires the business to post the list of serioushazards and correction due dates when it is

9. “Understanding Vehicle Financing”Brochure

A new brochure intended to assistcustomers regarding the financing of theirvehicles is now complete. The brochure is ajointproject between NADA and the educational armofthe American Financial Services Associationsin cooperation with the Federal TradeCommission.

The dealership may want to laminate acopy and place a copy in every sales and F & Ioffice or distribute one to each customer. Thecost for 25 is $13.75, including shipping andhandling. The dealership may also obtain a pricebreak for 1000 copies or more.

Ordering is available online at:www.afsaef.çg and click “Publications;” call tollfree, 1-888-400-7577; or, send a written requestto AFSAEF, 919 l8” Street, N.W., Dept. UVF,Washington, D.C. 20006.

A Spanish edition is expected to beavailable later in the year.

10. List of SDNsA dealership should check the Office of

Foreign Assets Control (OFAC) List ofSpeciallyDesignated Nationals (SDN) before entering intoa transaction with a person or entity. The OFACrestrictions prohibit all U. S. persons fromengaging in transactions with certain sanctioned

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countries, governments, or specially designatedorganizations or individuals.

With respect to individuals and entitiesidentified as terrorists or supporters ofterrorism,the sanctions prohibit all U. S. persons fromtransacting or dealing in any property or interestin property, ofthe designated party. There is nominimum dollar threshold and a “transaction”includes the sale of an automobile as well as thesale of parts or service.

According to Executive Order 13224,signed by President Bush on September 23,2001: “any transaction or dealing by UnitedStates persons or within the United States inproperty or interests in property blockedpursuant to this order is prohibited, includingbut not limited to the making or receiving ofanycontribution of funds, goods, or services to orfor the benefit of those persons listed in theAnnex of this order or determined to be subjectto this order.”

The SDN list is available and updatedperiodically by accessing the Department ofTreasury on-line:www.ustreas. ov/offices/enforcement/ofac/sdn

Fines for violations can include criminalpenalties ranging from $50,000 to $10,000,000and imprisonment ranging from 10 to 30 yearsfor willful violations. Civil penalties can alsorange from $11,000 to $1,000,000.

U. S. persons are expected to exercise“due diligence” in determining whether aprohibited person is involved in’a proposedtransaction.

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