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STREET SMART MAGAZINE

OCTOBER/NOVEMBER 2013

GETTING TO KNOW YOU I N D U S T RY L E A D E R S P O T L I G H T PA G E 6

I N L O V I N G M E M O RY O F

SCOTT FRANK

1962-2013

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V isit us at w w w.iowaiada.com

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I N L O V I N G M E M O RY O F

SCOTT FRANK Page 6

RETAIL INSTALLMENT CONTRACTS

IIADA has two distributors who will provide the Wolters Kluwer Financial Services retail installment contracts for Iowa dealers. These retail installment contracts have a compliance warranty. In some cases, you will need to have your software provider reprogram for you. You may order by phone or online and these will be shipped directly to the dealership. Thank you for working with these distributors. PLEASE CONTACT:

WILSON DISTRIBUTOR SERVICE • 1-800-634-0974 • WWW.WDS-USA.COM or ADG - AUTOMOTIVE DEVELOPMENT GROUP • 952·937·9222 • WWW AUTOMOTIVEDEVELOPMENTGROUP.COM

IN MEMORY OF SCOTT FRANK INSIDE 06 08 12 18

Getting to Know Scott Frank CarLawyer® Performance Finance Compliance Overdrive

WHAT’S NEW

No time to train your staff on compliance? NIADA has the solution.

• Get 24/7 access to training videos and quizzes for your entire staff • Download industry-specific policy documents and agreements • Track and report on training to satisfy federal requirements Train. Document. Track. Visit www.niadadealercompliance.com to get started today!

ADVERTISERS INDEX

ADESA, Inc........................ Inside Front Cover Ally...................................................................7 Chase.............................................................11 Manheim Minneapolis...... Inside Back Cover. Manheim.........................................................5 Protective........................................................9 VAuto ............................................ Back Cover

IIADA OFFICE

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT JUDY WILSON IIADA • 409 EAST MARKET • PANORA, IA 50216 (641) 755-4177 • IIADA@NETINS.NET

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV NIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR TROY@NIADA.COM.

Street Smart is published 6 times per year by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of Street Smart or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an edorsement of the products or services featured. Copyright© 2013 by NIADA Services, Inc. All rights reserved.

STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com

EDITORS

Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com

ART DIRECTOR

Christy Haynes • christy@niada.com

PRINTING

Nieman Printing

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1962-2013

Judy Wilson interviewed Scott in August for this article and we were all saddened when Scott passed recently. He was born July 22, 1962 and passed on September 17, 2013. His parents, Glynn and Dagmar Frank, of Ames, his adopted family and his brother, and two sisters held a visitation in celebration of Scott’s life on Sunday, September 22nd. Many friends and family members came to honor him and we are happy to share the article on page six of the magazine with so many others in Iowa who knew Scott. Rest in peace, dear Scott. We will miss you very much. You will live on in our hearts and our minds forever.

INVESTIGATIONS INFORMATION LINE TOLL FREE: 1-866-908-4636

THIS TELEPHONE LINE RECEIVES NUMEROUS CALLS DURING THE DAY, SO AN EMAIL ADDRESS HAS BEEN ESTABLISHED WHERE QUESTIONS CAN BE SENT. THE EMAIL ADDRESS IS: invmve@dot.iowa.gov. The motor vehicle investigations information line provides a way for the public to request information, ask questions or file a complaint related to investigative duties and responsibilities. This line is the primary point of contact to reach an investigator who is responsible for investigations in a specific area of the state of Iowa. To ensure accurate information is provided, the motor vehicle investigations information line is answered by a motor vehicle enforcement investigator. The hours of operation are Monday through Friday 8:30 a.m. to 3:30 p.m. This phone line receives numerous calls so the IDOT encourages the use of the email address invmve@dot. iowa.gov if the line is busy.

Board of Directors

PRESIDENT Jeff Schneider Pocahontas Sales & Service 205 E. Elm Avenue PO Box 66 Pocahontas, Iowa 50574 712-335-4470 CHAIRMAN OF THE BOARD Douglas Livy, Jr. Quality Motors of Ames, Ltd. PO Box 7 Ames, Iowa 50010 515-290-2673 VICE PRESIDENT Louise Cordes Jim Cordes Motors, Inc. 205 E. Cleveland PO Box 68 New London, Iowa 52645 319-367-2271

TREASURER Judy Wilson 409 E. Market Street PO Box 337 Panora, Iowa 50216 641-755-4177

Robert Pippert Pippert Cars & Trucks 2047 Highway T-47 P.O. Box B Gladbrook, Iowa 50635 641-473-3121

Kim Nelson Nelson Automotive LLC 300 Sandpiper Court P.O. Box 466 Polk City, IA 50226 515-984-9600

REGIONAL REPRESENTATIVES David A. Farmer David A. Farmer, Inc. 1613 Franklin Center Point, Iowa 52213 1-319-849-2432

Clay Winterboer Carroll Car Credit Co. 409 E. 6th St., Box 805 Carroll, Ia. 51401 Ph: 712-792-0140

Administrative Offices 409 East Market Street P.O. Box 337 Panora, Iowa 50216 Ph: 641-755-4177 Fax: 641-755-3247 Email: iiada@netins.net Toll Free: 866-962-9202

Merrill Hitchcock Merrill’s Garage 317 N. 8th Street Winterset, Ia. 50273 Ph: 515-462-1683 Roger Poulsen The Car Guys 1301 S.W. 7th Street Atlantic, Ia. 50022 Ph: 712-243-6915

Doug Wilson Lake Country Auto 409 East Market St. P.O. Box 341 Panora, Iowa 50216 641-755-3048

Linda Kilgore Kilgore’s Enterprises Inc. 501 E. Townline Creston, IA 50801 641-782-5512

OCTOBER / NOVEMBER 2013

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President’s Letter

Updated Rule for Disposal of SolventContaminated Wipes

LEGAL NEWS

C E R TA I N S O LV E N T - C O N TA M I N AT E D W I P E S E X E M P T F R O M H A Z A R D O U S WA S T E R E G U L AT I O N S

On July 31, the rule that governs the disposal of solvent-contaminated wipes was finalized to exempt spent solventcontaminated wipes from hazardous waste regulations if the waste meets certain criteria. Effective Jan. 31, 2014, spent shop rags and paper towels used with parts cleaning solvent are no longer subject to a hazardous waste regulation if managed appropriately (and not otherwise governed by state or local rules). The new management standard streamlines the handling of spent wipes. To implement the exemption criteria, an automotive shop using either launderable shop rags or disposable towels must assure that the spent wipes are stored in properly labeled, leak-proof containers until disposal to the laundry facility or the landfill via trash collection. The container can be any closed container labeled “Excluded Solvent-Contaminated Wipes” and does not have to be sealed, only closed, during accumulation. On disposal, the container must be sealed for transport (any free liquid solvent found in the container at time of disposal must be managed as hazardous waste). The good news is that a garbage bag can be tied off and considered a sealed container STREET

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and placed in the regular municipal trash for collection, as long as the state or local authority does not ban such waste. A label printed from a desktop printer and affixed to the container or bag will suffice. The bad news is that the spent wipes must be segregated from other wastes until such time as sent for laundering or disposal. The frequency at which the laundry and/or trash is picked up must also be well documented to prove that the spent wipes have been disposed within 180 days of generation. The updated rule and subsequent exclusion has been a long time coming, with inquiries and studies dating to 1994. The rule is based on a thorough investigation that found spent solvent-contaminated wipes do not pose a risk of pollution when handled in this manner. A particular solvent, trichloroethylene, which is not generally used in automotive work, is not included in the exemption. For more information, visit www.epa.gov/ epawaste/hazard/wastetypes/ wasteid/solvents/wipes.htm.

BY SUE SCHAULS

SUE SCHAULS IS AN INDEPENDENT ENVIRONMENTAL CONSULTANT WHO SERVES AS THE IOWA AUTOMOTIVE RECYCLERS EXECUTIVE DIRECTOR, THE I-CARE PROGRAM MANAGER AND THE CCAR-GREENLINK ENVIRONMENTAL AND SAFETY CONSULTANT. SHE CAN BE CONTACTED AT WWW.SUESCHAULS.COM OR WWW.CCAR-GREENLINK.ORG.

OCTOBER / NOVEMBER 2013

you will be skiing easily on top of the water and not halfway under it. A lot has happened in the last two months, but I think I’ll end this letter with a quick joke. What do Frosty the Snowman and Winnie the Pooh have in common? They have the same middle name. Sorry, but that was my son’s favorite joke when he was five. Thank you and best regards, Jeff Schneider President, IIADA

Black Book’s Entire Editorial Team Becomes Certified Auto Remarketers FIRST AUTO GUIDEBOOK TO HAVE ENTIRE EDITORIAL TEAM BECOME CAR CERTIFIED

Black Book’s entire team of vehicle value editors and data analysts has become Certified Auto Remarketers under the International Automotive Remarketers Alliance. There have been only 64 professionals in the industry to pass the 20-course module and this is the first time an entire guidebook’s editorial staff has become certified. Led by 30-year industry veteran Ricky Beggs, Black Book’s editorial staff reports the wholesale market as it happens, with a team of editors working with field survey personnel monitoring sales activity at more than 60 wholesale auctions daily throughout the country. “This significant accomplishment is just the latest example of our commitment to continuous improvement and learning,” Black Book president Tom Cross said. “The better our team of editors understands the industry, the more accurate we can report and interpret the market, ultimately helping our clients make the most profitable decisions possible.”

NEWS

finally figure out the proper method to plow yourself up onto the surface of the water. Now imagine going through all of this and doing everything right, but this time when you take off the boat is too heavy or the motor too small. Now, despite all of your efforts, you are still back there plowing water, choking and coughing. Some of us would let go of the rope after trying for a short while. Some of us are just stubborn enough to hang on until we are dragging behind the boat with our swimsuit hanging down by our ankles and nearly drowning. Now apply this scenario to your own business. As you fight through all of the daily tough decisions and work really hard only to get disappointed, or just go through the normal financial struggles that come with this business, remember to recharge your batteries. Get around like-minded people. Attend seminars and functions such as the IIADA convention. And use the tools that are available to you. I have found that being proactive and doing these simple things will ensure that your boat will have plenty of power so when that moment comes and you give that nod or yell,

INDUSTRY

ASSOCIATION NEWS

B E P R OAC T I V E & R E A DY

Fellow Dealers, I’m sitting in my office at 7:00 pm on Wednesday wondering how many other car warriors are doing the same. How many of you sit in silence wondering if you are doing things correctly? With all of the rapidly changing compliance laws and so many pitfalls in this business, it’s hard to keep up. And what about changing technology? We have all experienced it. We have to make a deliberate and conscious decision to get on the tech train or step to the side of the tracks and get left behind. The more I get along in my business, the more I find myself browsing through different magazines and websites looking for any small tips or gold nuggets that can help my business stay competitive with society’s changing paradigms. I am reminded of an illustration I heard from one of my business mentors. When learning to waterski, you are floating in the water with your skis pointed up and hanging on to the rope. The boat starts to idle forward until the rope becomes tight. Now you give a nod or yell “hit it!” and the boat takes off. After a couple of attempts, you

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GETTING TO KNOW YOU INDUSTRY

LEADER

SPOTLIGHT

SCOTT FRANK

Lots of people diversify their talents, but with great exception, Scott Frank of Zearing, Iowa is one of those people who is multi-talented and puts his skills to work every day of his life for his job and those he mentors. Scott was born in Athens, Georgia and moved to Ames when he was a young boy. He is a graduate of Ames High School and Iowa State University obtaining his Bachelor of Science Degree in mechanical engineering and business management. In the 1970’s he lived in East Africa, Kenya, for two years while his father taught veterinary medicine at the University of Nairobi. He attended school at the NIS – Nairobi International School. Scott said “this was a very impactful time for him as he learned a lot about other cultures”. He also became fluent in Swahili, a language he still gets to use occasionally. Both of Scott’s parents are veterinarians and have always been involved in research.

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His grandfather was one of the first vets to go to Ames and start the USDA National Animal Disease Center. His father traveled all over the globe working with research centers abroad. Scott discovered that if he took a dog apart and put it back together it wouldn’t run quite right, but he could reassemble a car and make it run like it should so he broke with becoming a vet. Scott’s brother Todd and his family live in Vinton where he works with schools mainstreaming handicapped children into schools. His sister Tracy and her husband live in Lincoln, Nebraska and both are professors in the geology department and Tracy’s husband is the Dean of the Geology Department. Scott’s youngest sister, Susan, lives in Ames and is a hair stylist. Scott has worked at Sam’s Riverside Auto & Truck Parts of Des Moines with the Galinsky family since 1996. He serves as the general manager and is the only person who works with all of their divisions: auto parts, heavy truck parts, tires/glass, rebuildables, Kars, Inc., Metro Salvage Pool and the Des Moines Auto Auction. Scott said “ this is a challenging position that keeps him very, very busy”. He drives approximately 60 miles one way, each and every day, to get to work and that just spells enormous dedication. Prior to going to work for the Galinsky family, Scott was self-employed with Scott’s Auto in Zearing. For many years he exported vehicles to Kuwait to replace the ones that Iraq stole in 1992. During this time he was one of the top ten of police car buyers in the country. When the market softened up, Gary Galinsky, asked Scott to work for him. At first Scott said no, but as you can see, Scott gave in and the rest is history. Prior to exporting police cars Scott specialized in Volkswagens. As is if his life isn’t busy enough, Scott has served on the City Council of Zearing for a number of years. Zearing has a population of 550 and Scott feels it is important to keep the town moving ahead and viable. Zearing is the

OCTOBER / NOVEMBER 2013

only city in Iowa that incorporated the Iowa Automotive Recyclers I-Care program into their code. The Iowa Certified Automotive Recyclers Environmental (I-Care) Program was established by the industry to set a standard of excellence for automotive recycling in Iowa. The certification program is sponsored by the Iowa Automotive Recyclers Association and has established standards in four categories: general business practices, environmental compliance and stewardship, occupational health and safety practices and licensing and regulatory requirements. Scott has been a foster parent and has guided 20 young men through high school and he adopted three children. In July one of his boys received his Ph.D in psychology from Florida State University. Scott said “people used to ask me why I became a foster parent” and he responds “I like to see them grow and succeed and this has more than made it worth it”. Scott’s hobbies include a very diverse antique car collection as old as a 1925 model T, and includes Fords, Porsches, Mercedes, VW’s, a Packard and Kaiser. He likes to go to car shows and take car cruises. He also has an antique tractor collection consisting of the Minneapolis Moline models and he enjoys attending tractor pulls and plow days. His talent just never ends – not only does he collect antique cars and tractors he restores them mechanically and body wise. Having traveled far and wide he has become a big fan of foreign foods and curry is one of his favorite foods to cook and eat. He has traveled to almost all of the 48 contiguous states, Europe, Mexico, Africa and Canada. Scott works with the Zearing Days Committee on their annual celebration, is a member of the Iowa Auto Recyclers Association and served as the president of IAR in 2007-2008 and is a member of several car clubs. He is the legislative liaison for IAR as well. He has one small 13 year-old dog Tacita and she, Scott says “is loyal to a fault”. Scott Frank is a very unique individual and in wearing the many hats that he does one brings about intrigue. He is the head of arbitration for the Des Moines Auto Auction. Many dealers have learned they can depend on Scott for a fair and honest assessment of a vehicle sold on an “IF.”They simply say “have Scott drive it and if he thinks it will work for us - just mark it sold”. So we can call him the arbitrator – but in actuality he is a gentle giant. Dealers looking for recycled parts for their inventory know that Scott will have the answer and help them find it . A politician, car enthusiast, automotive industry legislative historian, foster parent, seasoned traveler, exceptional and extremely talented employee, fair and honest human being all describe Scott Frank. A person of much capacity – someone who helps make our world a better place, and a friend and confidante to many. Scott,thank you for all that you do – it is indeed a pleasure to know you. w w w. i o w a i a d a . c o m 9/23/13 2:36 PM

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The CARLAWYER

KEEPING YOU INFORMED WITH THE LATES T GOVERNMENTAL ISSUES AND ACTIVIT Y IN THE USED CAR INDUS TRY

Here’s our monthly collection of selected 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 does not capture every recent development. We select those we think should be important or interesting to car dealers. Note that this column does not offer legal advice. We also 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 state’s laws – if Attorneys General or plaintiffs’ lawyers are pursuing particular types of claims in other states, those laws and claims might soon appear in your state. As always, though, there is no substitute for checking with your own lawyer to learn how what we report might apply to you or answer any questions you might have.

This Month’s CARLAWYER© Compliance Tip Did you get a great idea from your last 20-group meeting? Perhaps one of the members of your group described an ad campaign, a sales technique or a pricing idea that you had not considered. Before you call your staff together to implement that great idea, remember that practices that are legal in one state can be illegal in other states. A quick call to your lawyer to make sure that the referring dealer’s “best practice” isn’t a felony in your state will keep you out of mischief. Federal Law Buy-here, pay-here dealers should pay particular attention to recent federal efforts to curb abuses in the debt collection arena. The Feds’ enforcement actions signal the sorts of collection practices they find objectionable. Payday Lenders Sanctioned. On July 22, the Federal Trade Commission announced that it reached a partial settlement with the principal defendants in its case against a payday lending operation, AMG Services, Inc., which alleged that the defendants violated federal law by threatening borrowers during collection calls, requiring borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit, and deceiving borrowers about the cost of their loans by charging undisclosed and inflated fees. Third-Party Debt Collectors Penalized. On July 9, the FTC announced that STREET

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it settled charges against Texasbased Expert Global Solutions and its subsidiaries for allegedly harassing consumers by placing debt collection calls that violated the Fair Debt Collection Practices Act and the FTC Act. The defendants also allegedly continued collection efforts after consumers disputed the validity or the amount of the debt without verifying the debt. The $3.2 million settlement is the largest civil penalty ever obtained by the FTC against a third-party debt collector. How Well Do You Know the “DoNot-Call” Rules? On June 27, the FTC announced that Mortgage Investors Corporation will pay a $7.5 million civil penalty, the largest fine the FTC has ever collected, to settle allegations of violations of the Do Not Call provisions of the Telemarketing Sales Rule. The case is the first action brought to enforce the Mortgage Acts and Practices Advertising Rule, which allows the FTC to collect civil penalties for deceptive mortgage advertisements. Mortgage Investors allegedly called more than 5.4 million numbers listed on the National Do Not Call Registry to offer home loan refinancing services to service members and failed to remove consumers from its call list when the consumers asked it to do so. The company also allegedly misrepresented the terms of loan products it offered during its telemarketing calls and misled consumers about its affiliation with the Department of Veterans Affairs. In addition to the settlement with Mortgage Investors, the FTC announced settlements with several other companies that allegedly made illegal pre-recorded calls offering debt relief services. CFPB Fires Debt Collection Warning Shots. On July 10, the CFPB published two bulletins advising companies about unlawful debt collection conduct. The first bulletin described certain acts or practices related to debt collection that could, depending on the facts and circumstances, be considered unfair, deceptive, or abusive under the DoddFrank Act. The bulletin provided examples of such UDAAPs, but noted that the examples were not exhaustive. The CFPB may closely review any covered person or service provider’s consumer debt collection efforts for potential violations of federal consumer financial laws. Some of the examples of UDAAPs listed in the bulletin are collecting or assessing a debt and/or any additional amounts in connection with a debt (including interest, fees, and charges) not expressly authorized by the agreement creating

OCTOBER / NOVEMBER 2013

the debt or permitted by law; failing to post payments timely or properly or to credit a consumer’s account with payments that the consumer submitted on time and then charging late fees to that consumer; taking possession of property without the legal right to do so; revealing the consumer’s debt, without the consumer’s consent, to the consumer’s employer and/or co-workers; falsely representing the character, amount, or legal status of the debt; misrepresenting that a debt collection communication is from an attorney; and misrepresenting whether information about a payment or non-payment would be furnished to a credit reporting agency. The CFPB’s second bulletin warned companies to avoid deceptive statements concerning the impact of paying a debt on a consumer’s credit score, credit report, or creditworthiness and highlights examples of potentially deceptive claims debt collectors may be making to consumers about their credit report and credit scores. The CFPB also published five action letters for consumers to use when corresponding with debt collectors and announced that it is now accepting complaints from consumers experiencing debt collection problems. Litigation Merger Clause in Financing Agreement Did Not Void Contemporaneously Signed Arbitration Agreement: A car buyer sued the dealership where she bought her car after it informed her that she was no longer part of a promotional program in which customers could buy a new vehicle for less than $100 a month and then return the vehicle to the dealership within 10 to 12 months in exchange for a new vehicle at the same monthly rate. The dealership moved to compel arbitration based on an arbitration agreement the buyer signed. The trial court found that the arbitration agreement was unenforceable because the installment contract, signed at the same time as the arbitration agreement, did not refer to or incorporate the arbitration agreement, and the installment contract included a merger clause stating that it contained the parties’ entire agreement as to financing. The Supreme Court of Missouri reversed the trial court’s finding and remanded, stating that contemporaneously signed documents must be construed together and harmonized if possible. The Supreme Court noted that the merger clause merged prior oral agreements and prior oral or written commitments “to loan money, extend credit or to forbear from C O N T I N U E D O N PA G E 1 0

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The CARLAWYER

C O N T I N U E D F RO M PAG E 8

enforcing repayment of a debt including promises to extend or renew such debt.” Because the arbitration agreement was a dispute resolution agreement, not an additional financing document, the Supreme Court determined that the arbitration agreement was not voided by the merger clause and, therefore, was enforceable. See Johnson v. JF Enterprises, LLC, 2013 Mo. LEXIS 31 (Mo. June 11, 2013). Duty to Send Denial Letter within 30 Days of Receipt of Application Applies Only if Application is Complete: A homeowner sought a loan modification from a bank, submitting three credit applications. The bank orally notified her that her credit applications were incomplete because they were missing certain documents. The bank later sent her a denial letter for each of her credit applications, but the denial letters were sent more than 30 days after the bank received her credit applications. She sued the bank for violating the Equal Credit Opportunity Act, alleging that the bank violated Section 1691(d)(1) because it failed to provide written notice of denial of her credit applications within 30 days of receipt of the completed applications. The bank argued that it did not violate the ECOA because it never received a completed credit application and moved for partial summary judgment. The U.S. District Court for the District of Colorado concluded that a genuine issue of material fact existed as to whether the credit applications were complete. Although the homeowner submitted a declaration stating that she provided, on multiple occasions, all information the bank required to complete her credit applications, the bank offered a declaration by one of its employees that those credit applications were not complete. Secondly, the STREET

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court found that creditors are required to use reasonable diligence in obtaining information they ordinarily require to evaluate a loan and if the defendant has not used reasonable diligence in obtaining the information necessary to complete a plaintiff’s credit application, the court will not allow the defendant to use incompleteness to shield itself from ECOA liability. The court determined that a jury could find that the bank did not use reasonable diligence in obtaining the information necessary to complete the homeowner’s credit applications because the bank only called her to inform her of the incompleteness of her applications. Therefore, the court denied the bank’s motion for partial summary judgment. See King v. JP Morgan Chase Bank, 2013 U.S. Dist. LEXIS 93601 (D. Colo. July 3, 2013). Illinois Court Lacked Jurisdiction over Out-of-State Dealership that Sold Car Advertised on AutoTrader.com to Illinois Purchaser: An Illinois company bought a car that was located in Florida and advertised on AutoTrader.com. The negotiations were conducted by e-mail. The bill of sale was prepared in Florida and sent by e-mail to the buyer in Illinois. The buyer then wired money to Florida from an Illinois bank. The buyer instructed the defendants to send the title for the car to a company in New York and prepare to send the car to Japan via air freight from a New York airport. The buyer sued the New Jersey car dealership that sold the car and its CEO, who was a resident of New Jersey and a licensed car dealer in both New Jersey and Florida, claiming that the car did not work and needed major engine repairs. The court dismissed the case for lack of personal jurisdiction. The court explained that it could not assert personal jurisdiction over the defendants because they did not purposefully avail themselves of the privilege of conducting business in Illinois, nor did the alleged injury arise from the defendants’ activities relating to Illinois. The court rejected the plaintiff’s argument that its claims arose out of the defendants’ contacts with Illinois because the defendants advertised on a nationwide website. The court explained that merely using the AutoTrader. com website did not establish that the defendants targeted buyers in Illinois. The court also found that exchanging e-mails with the buyer located in Illinois did not establish that the defendants targeted an Illinois buyer. The court explained that the defendants would not have foreseen that they would be sued in Illinois court. The parties did not anticipate that the car

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would enter Illinois, and the car never did enter Illinois. See The Yokohama Trading, Inc. v. C&K Auto Imports, Inc., 2013 U.S. Dist. LEXIS 87409 (N.D. Ill. June 21, 2013). Car Buyer Who Made Untimely Demand Not Entitled to Rescission and Refund: A used car buyer sued the dealership where he bought the car after he had mechanical problems with the car. The trial court granted summary judgment for the buyer on some of his claims and denied his motion on other claims. The trial court also awarded the buyer $800 in statutory damages and approximately $18,000 in attorneys’ fees and costs. The buyer appealed, arguing that the trial court erred when it did not award him rescission and a refund of the full car price under R.C. 4505.181(B)(1). R.C. 4505.181(B)(1) provides, in part, that if a consumer buys a vehicle for which the dealer does not have a title certificate issued in the dealer’s name at the time of the sale, the consumer may rescind the transaction and is entitled to a refund of the full purchase price of the vehicle if the dealer fails, on or before the 40th day after the date of the sale, to obtain a title in the consumer’s name. The statute also requires the consumer to notify the dealer of his or her intent to rescind the contract no later than 60 days from the date the vehicle is titled in the consumer’s name. The trial court found that the buyer had waived his right to rescission of the transaction and a full refund because he did not act within the required time. The Court of Appeals of Ohio agreed, finding that the dealer provided title to the buyer 43 days after he bought the car. Although this was three days later than the statute allows, he did not demand rescission and a refund until six months later. Because he did not make his demand within 60 days of receiving title to the car, the appellate court affirmed. See Jones v. N&S Auto Sales, Inc., 2013 Ohio App. LEXIS 2405 (Ohio App. June 13, 2013). So there’s this month’s roundup! Stay legal, and we’ll see you next month.

BY THOMAS B. HUDSON AND NICOLE FRUSH MUNRO

TOM (THUDSON@HUDCO.COM) AND NIKKI (NMUNRO@HUDCO. COM) 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 410865-5411 OR VISIT WWW.COUNSELORLIBRARY.COM. COPYRIGHT COUNSELORLIBRARY.COM 2013, ALL RIGHTS RESERVED. SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (8/6/13) HC# 4820-4049-7173.

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REGUL ATORY UPDATE

FROM THE DESK OF MAJOR PAUL J. STEIER

CAN A WHOLESALE AUTO AUCTION LEGALLY SELL A VEHICLE WITHOUT HAVING A TITLE IN HAND?

In the last magazine I wrote about the buying and selling of vehicles at dealer wholesale auctions. I promised to continue discussing the concerns of dealers who purchase vehicles at a wholesale auction but don’t receive a title at time of sale due to the selling dealer submitting pay off to the lien holder. This is an issue that arises sometimes during dealer audits when we find a dealer is offering a vehicle for sale but doesn’t have a title. When asked to produce the title, the dealer says they purchased the car recently from a wholesale auction but was not provided a title due to the lien being paid off by the selling dealer. As I mentioned last time, since the dealer who purchased the vehicle from the auction is not the dealer who submitted pay off for the lien, they may not offer the vehicle for sale until a negotiable title is in hand. When these types of violations are found, we ask the dealer to park the vehicle away from the vehicles being offered for sale and note the vehicle is not for sale. A citation and fine may be issued in this situation to the dealer offering the vehicle for sale and the dealer

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who sold the vehicle at auction may also be in violation of law. The purpose of this law is to protect both the dealer and potential consumer from a vehicle transaction that may have title problems which could cause the ownership to not be transferred properly. When a dealer takes a vehicle to a wholesale auction, the selling dealer is using the auction to help them sell the vehicle; the selling dealer maintains ownership of the vehicle until sold. The wholesale auction is not the owner and therefore not required to take title to the vehicle. If a dealer takes the vehicle to auction, where it’s sold with the buying dealer paying for and taking possession of the vehicle, the selling dealer must deliver title at time of sale. In the case of a selling dealer submitting a lien pay off and not having the title at time of sale, this may be a violation of law. Iowa law only allows the selling dealer to offer a vehicle for sale for 30 days if their dealership submitted the lien pay off. Once the vehicle is sold, including paid for and delivered, a title must be delivered. Can a dealer who is paying off the lien take a vehicle to a wholesale auction and offer the

vehicle for sale during the 30 days of time the lien is being paid off without title in hand? Yes. Can the same dealer in this situation sell the vehicle at auction and not have title in hand? No. Can the buying dealer offer this same vehicle for sale without title in hand? No. Obviously this creates problems for both the buying and selling dealer with being able to offer the vehicle for sale but not being able to sell the vehicle. What does it cost a dealer per day to have a vehicle parked on their lot but not be able to sell it? Dealers reading this article know well what that costs you. Are there solutions and should laws be looked at? I will discuss this next time. Major Paul J. Steier Office of Motor Vehicle Enforcement Investigations Iowa Department of Transportation

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ASSOCIATION NEWS

FINANCE

M AT TERS

PERFORMANCE FINANCE, LLC

Craig Griffith grew up in the automotive business. In March 2009 he started Performance Finance, LLC to help finance departments of underperforming car dealerships. Craig’s approach allows dealers to analyze and review current finance and insurance departments within the dealership, to thoroughly discuss the establishment of an F & I office where one might not have existed previously and to understand the importance of maintaining a well-run, compliant and efficient F & I office. Craig recognizes that many independent dealerships have been reluctant to create F & I divisions and there is great potential for his services in this area. As a business trainer, Craig’s goal is to help auto dealerships streamline their finance department and remove barriers that might impede their profit. Craig started Performance Finance after realizing that many dealerships were missing out on profit potential in their operations. He offers one-on-one training programs and consulting using his 20 years of experience within the industry. Craig works with owners and general managers who want to get more out of their business. When Craig trains finance managers, he follows these guidelines: A win-win approach to enhancing the dealership finance department: Managers are trained to help themselves solve their problems while increasing profits. His mission is training: Craig does not sell products – he provides training. Keeping It Simple: In the training process, Craig works with the core components of what works. Action- Oriented: Craig’s training program is designed to lead your finance manager to take action – action towards seeing how your dealership can make their success and your success real. Craig specializes in automotive finance department management training. Often dealers establish a finance department and place an individual in this area with little training. Some dealers are reluctant to even establish this department. It is important to recognize that training is an ongoing process and leads to good skills and habits. In addition, Craig’s goals incorporate creating a vision for your staff that perhaps STREET

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AutoStar Solutions Joins as NMB Partner

CUTTING-EDGE DEALER MANAGEMENT SOFTWARE AVAILABLE TO NIADA MEMBERS

they never felt would be possible. “In many cases if I can’t increase dealership profits you won’t pay me anything,” Craig commented. Craig knows that many dealerships are working with a tough economy, inventory challenges, tighter lending practices and an increasing number of compliance issues. Dealers need answers, not theories or wasted time. Craig has those answers and won’t waste your time. His training is direct, realistic and works. Craig knows that with his training dealers can see immediate, measureable results as they use the process, tips and techniques he teaches. He will provide one-on-one training and his highest priority is to listen and adjust his advanced learning techniques to a dealership’s individual needs. Craig guarantees his training will provide you with measureable results and increased staff motivation. Here’s a look at Craig’s impressive resume: • BS – Business Management, Iowa State University • Owner – Craig Griffith Ford, Inc., Vinton, Iowa • Former Board of Directors, Iowa Automobile Dealers Association • NADA Dealer Candidate Academy • Business Manager, Macke Motors, Lake City, Iowa • Finance Manager, Dewey Ford, Des Moines, Iowa • Owner and General Manager, Griffith FordLincoln-Mercury, Carroll, Iowa • Finance Specialist and Trainer, Pat Ryan & Associates Profit certainly is not a dirty word and we feel that Craig Griffith has the talent to work with you on many levels to increase dealership profits and provide you with strong staff interpersonal relationships and non-pressure presentation skills. IIADA members looking for a fresh perspective on how to relate and share with their customers through the F & I office should strongly consider Performance Finance. Performance Finance is an IIADA approved benefit provider and we feel you will enjoy working with Craig, whether you need to beef up an existing F & I office or add F & I to your business operations.

Dealership technology provider AutoStar Solutions has joined with NIADA as a National Member Benefit partner, offering its cuttingedge dealer management software to NIADA members in qualifying states at no upfront cost. NIADA members receive a twouser license for the software and will pay only $8 per transaction, a significant discount for a software system regularly valued at more than $1,200 per year. AutoStar’s Fusion Ignite dealer management system provides the fundamental elements needed to manage a Buy Here-Pay Here dealership, including the ability to set up deals and optimize them for maximum profitability, print forms, calculate taxes, assess late fees, print receipts, flag vehicles for repossession, create accounting transactions, view reports and more.

PLEASE CONTACT CRAIG AT WWW.GETPERFORMANCEFINANCE.COM OR 1-319-310-7768.

VISIT WWW.FREEBHPHSOFTWARE.INFO FOR MORE INFORMATION OR TO SIGN UP FOR THE IGNITE SOFTWARE MEMBER BENEFIT PROGRAM.

OCTOBER / NOVEMBER 2013

Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. In addition to its functionality, the software is webbased, which means updates to the system, including documents and forms, are conducted automatically in the background and users get automatic hourly backups of their data. All documents are fully compliant with state and federal regulations.

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INDUSTRY

AFS Acceptance Expands

EVENTS

INDUSTRY

EVENTS

MULTIPLE SES SIONS WITH SINGLE PURPOSE OF BUILDING AUTO DEALER PROFIT CENTERS.

NIADA is proud to be the exclusive sponsor for the SEMA “Dealer Days” to be held November 5-7, in Las Vegas. The educational seminar will explore ways for dealers to dramatically increase sales and profits and take the lead in their respective markets by successfully tapping into the profitable accessories market. The Dealer Day program provides the latest trends, tools and resources to sell more cars and increase the dealership’s bottom line, offering proven strategies on how to identify pitfalls and maximize opportunities. Representatives of the Martin Automotive Group in Los Angeles commented on a previous year’s event, “Dealer Day was a great value and benefit for our dealership. The discussions provided us great insight into the different approaches and strategies for accessory integration. The ability to interact with so many other dealers was invaluable, and the range of knowledge was impressive, to say the least.” 2013 sessions include “Maximizing Dealership Profitability with Accessories,” “Dealer Focused Research” presented by Polk, “Creating the Best Possible Sales Team,” “Dealer Case Studies” and “Modifying Pre-owned Vehicles.” These sessions carry the singular purpose to build auto dealer profit centers. The SEMA Education Institute (SEI) courses provide an exceptional opportunity for auto dealers to learn first-hand what trends will affect their business. Presented by top industry experts, these courses are designed to give dealers practical tools that can be implemented as soon as they return to the dealership.

FINANCE

NIADA SPONSORS SEMA DEALER DAYS

M AT TERS

EXPANSION IMPROVES SUBPRIME AUTOMOBILE FINANCING PROGRAM

AFS Acceptance, LLC, has secured $20 million in subordinate debt to support expansion of its business. The injection of liquidity supports AFS’ initiatives to provide robust products and services for both franchise and independent dealers across the country. AFS is also pleased to broaden its long-standing relationship with Capital One, the agent of the credit line, and add Wells Fargo as a lender to the newly-syndicated $75 million facility. FalconBridge Capital Markets, LLC, acted as exclusive advisor to AFS regarding the new capital raise, which gives AFS the flexibility to penetrate new markets and increase market share in the states they do business in today. “We are delighted to have assisted AFS Acceptance,” said Bennett Cole, President of FalconBridge Capital Markets. “Dov Szapiro and his management team at AFS have built an outstanding financial services platform, and we look forward to working with the company as they continue to emerge as one of the country’s leading subprime auto finance companies.” The closing of the deals marks AFS’ transition from a small, local operation to a professionally managed organization. Dov Szapiro, CEO of the Ft. Lauderdale based company, noted, “This is a big day in the history of AFS Acceptance. When we started AFS, my brother Uri and I always envisioned working with companies of this caliber and we are grateful for their support and guidance.” AFS also recently acquired the assets and intellectual property of Preferred Automobile Credit Co., a Pennsylvania based auto finance company.

FOR MORE INFORMATION, VISIT WWW.SEMASHOW.COM/EDUCATION.

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MIDWEST AUTO AUCTION DIRECTORY ADESA DES MOINES 1800 Gateway Drive Grimes, IA 50111 (515) 986-1200 Fax: (515) 986-1201 www.adesa.com General Manager: Jeff Lisle Fleet/Lease Manager: Kevin Parmenter Consignment Sale every Tuesday at 9:30 a.m. Fleet/Lease Sale Tuesday 10:30 a.m.

MORTGAGE LENDING – ABILITY TO REPAY DETERMINATIONS FINANCE M AT TERS

W H AT D O E S T H AT H AV E T O D O W I T H A U T O D E A L E R S ?

Buy Here-Pay Here dealers fall under the jurisdiction of the Consumer Financial Protection Bureau (CFPB) and sometimes we sit on the edge of our chairs awaiting the next press release or final rules on a particular subject matter as it relates to the auto industry. Something at the CFPB recently caught our eye. In response to the mortgage crisis, the Board of Governors of the Federal Reserve System adopted a rule in 2008 under the Truth In Lending Act prohibiting creditors from making higher-priced mortgage loans without assessing the consumer’s ability to repay the loans. In January 2013, the Consumer Financial Protection Bureau adopted a rule that implements the Ability to Repay (ATR). These generally apply to all closed-end residential mortgage loans. Again in May and July of this year the CFPB issued rules amending certain provisions of the January 2013 rule. What caught our attention in these rulings are the minimum standards that lenders must use to determine whether consumers have the ability to repay mortgages. The general standard for ATR is that the lender must make a reasonable, good-faith determination before or when they complete a covered mortgage that the consumer has a reasonable ability to repay the loan. You’re probably wondering what this might have to do with a BHPH dealer. Nothing directly at this point; however, there may be some good practices to follow. Dealers might wish to familiarize themselves with these guidelines simply because they’re good business practice. We once had a really misguided BHPH dealer tell us, “I sell cars just to repossess them and sell them again.” We can safely say that few dealers would operate in that fashion. Most dealers want to sell cars in such a way that those individuals become repetitive customers. The repossession of a vehicle is not fun, whether we sell 100 cars per month or 10. Most dealers don’t like to repossess vehicles. The CFPB says that a reasonable, goodfaith ATR evaluation must include eight ATR underwriting factors as a minimum guideline: 1. Current or reasonable expected income STREET

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or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan. 2. Current employment status (if you rely on employment income when assessing the consumer’s ability to repay). 3. Monthly mortgage payment for the loan (for which there is a formula). 4. Monthly payment on any simultaneous loans secured by the same property. 5. Monthly payments for property taxes and insurance and other possible property fees. 6. Debts, alimony, and child-support obligations. 7. Monthly debt-to-income ratio or residual income. 8. Credit history. It reminds me of what we talked to our kids about when they were going to buy a house, new furniture, an outdoor grill (bigger than the dog house) and a new boat. They belonged to the “I want it and I’ll have it generation,” not looking at what the overload was going to be for their income and the budget busting caused by these purchases. Many BHPH dealers use these same types of guidelines to determine if their customers can repay the car loan and many BHPH dealers help their customers when vehicles need mechanical repairs. Rules, regulations and laws are often passed because there was a particularly bad guy involved. In the case of the mortgage industry bubble – there were a lot of folks who didn’t play very nice (to say the least) and it created a huge problem for our nation’s economy. The Iowa Consumer Credit Code currently makes it an unconscionable practice to issue credit unless the creditor has a reasonable belief in the debtor’s ability to repay. Iowa Code section 537.5108(4) is current law that applies to any loan of $25,000 or less. The Consumer Financial Protection Bureau has a publication called Small Entity Compliance Guide, published 8/14/2013, which can be found at www.consumerfinance.gov. Just enter the name of the publication in the Search Box. We’ll keep you posted if and when the CFPB comes up with guidelines for the auto industry. The savvy dealer will be ten steps ahead!

OCTOBER / NOVEMBER 2013

ADESA KANSAS CITY 101 S.W. Oldham Road Lee’s Summit, MO 64081 (816) 525-1100 (800) 950-2350 Fax: (816) 525-4714 General Manager: Harold Chapman Dealer Sales Manager: Tamara Kunkel Tuesday 9:30 a.m. ADESA MINNEAPOLIS 18270 Territorial Road Dayton, MN 55369 763-428-8777 763-428-8701 Sale: Tuesday, 10 a.m. www.adesa.com ADESA SIOUX FALLS 46893 271st Street P.O. Box 218 Tea, SD 57064 (605) 368-5364 Fax: (605) 368-2808 General Manager: Bob Holm Wednesday Sale 10:00 a.m. IAAI SALVAGE SALE EVERY OTHER WEDNESDAY – 8:30 A.M. ADESA ST.LOUIS 7858 Highway 61-67 Barnhart, Missouri 63012 636-475-9311 ADESA WISCONSIN W 10415 State Road 33 Portage, WI 53901 608-742-8245 608-742-4415 (f) Tony Manwarren, general manager Sale: Thursday, 9:30 a.m. www.adesa.com AMERICAS AUTO AUCTION 14001 S. Karlov Crestwood, Il 60445 (708) 389-4488 Fax: (708) 389-4558 General Manager/Owner: Larry Hero Wednesday 10 a.m. CARMAX AUCTION – DES MOINES 10315 Hickman Road Urbandale, Iowa To Register: 888-804-6604 In House Auction – Every other Monday 9:30 A.M. DEALERS CHOICE AUTO AUCTION, INC. 503 South Wapello Road Mediapolis, Iowa 52637 319-394-3510 (888) 771-6810 319-394-3511 (fax) www.dcaa.com President: Monte Delzell Nationwide Transportation: EZ Auto Shippers Steve Miller: 866-310-5936 Sale Every Tuesday – 6:00 p.m. DES MOINES AUTO AUCTION 1530 S.E. McKinley Road Des Moines, Iowa 50320 (515) 285-8911 Fax: (515)256-9161 FRIDAY AT 9:30 A.M. Todd Givant, General Manager GREATER QUAD CITY AUTO AUCTION 4015 78th Avenue Milan, Il 61264 (309) 787-6300 Fax: (309) 787-4541 Tuesday 10 a.m. – Thursday – 6 p.m. General Manager: Larry Anderson GREATER ROCKFORD AUTO AUCTION 5937 Sandy Hollow Road Rockford, Il 61109 (815) 874-7800 (800) 830-4722 Fax: (815) 874-1325 General Manager: Mark Capriola Wednesday 10 a.m. KCI AUTO AUCTION 11101 N. Congress Kansas City, MO 816-502-3318 816-801-8565 (f) Doug Doll Consignment Sale: Thursday, 9:30 a.m. www.kciaa.com

MANHEIM ARENA ILLINOIS 200 West Old Chicago Drive Bolingbrook, Il 60440 (630) 759-3800 (630) 759-9668 General Manager: John Olejniczak Dealer Sales Manager: Louis Palermo Tuesday 9 a.m. MANHEIM CHICAGO 20401 COX AVENUE MATTESON, ILLINOIS 60443 815-806-4222 Mike Cesta, General Manager MANHEIM KANSAS CITY 3901 North Skiles Road Kansas City, MO 64161 (800) 247-7163 Fax: (816) 452-2393 General Manager: Peggy Sprenger Dealer Sales Manager: Kevin Rhoads Wednesday 9:30 a.m. MANHEIM MINNEAPOLIS 8001 Jefferson Highway Maple Grove, MN 55369-4924 (763) 425-7653 (800) 622-7653 Fax: (763) 493-0310 www.manheim.com General Manager: Jerry Aman Auction Manager: Carter Theissen Assistant General Manager: Jon Eisenmann Fleet Manager: Commercial Accounts MGR: Candice Crockett Sale every Wednesday; 9am Ford Credit, 9:30am TD Auto Finance, Select Lane and Fleet/Lease/ Rental Groups, 9:45am Dealer Consignment. Ford Factory Sale bi-weekly Wednesdays at 12 Noon. TRA Sale weekly, Tuesdays at 1:00pm. Specialty Sale (Heavy Trucks/ Equipment/Powersports) bi-weekly, Wednesdays at 12:30pm. MANHEIM MILWAUKEE 561 South Highway 41 - 27th Street Caledonia, WI 53108 (262) 835-4436 (800) 662-2947 Fax: (262) 835-2684 General Manager: Dennis Worthy Dealer Sales Manager: Kimberly Schure Wednesay 9 a.m. MANHEIM NORTHSTAR MINNESOTA 4908 Valley Industrial Blvd. North Shakopee, MN 55379 (952) 445-5544 (888) 445-2277 Fax: (952) 445-6773 General Manager: Jerry Aman Thursday 9 a.m. MANHEIM OMAHA 9201 S. 144th Street Exit 440 off of I-80 Omaha, NE 68138 (402) 896-8000 (800) 218-4192 Fax: (402) 896-6758 General Manager: Todd Pfeifer Assist. Gen Manager: Korey Grell Thursday 9:30am. MANHEIM ST. LOUIS 13813 St Charles Rock Road Bridgeton, MO 63044 (314) 739-1300 (800) 533-5414 Fax: (314) 298-3347 General Manager: Victor Ferlaino MID-STATE AUTO AUCTION 100 Bach Ave. New York Mills, MN 218-385-3777 218-385-3232 (f) Rob Thompson, president Sale: Friday, 10 a.m. www.msaanym.com PLAZA AUTO AUCTION, INC. 320 Highway 30 West P.O. Box 147 Mt. Vernon, IA 52314 (319) 895-6232 Fax: (319) 895-6727 www.plazaaa.com Owner: Mark Greb Office Manager: Debbie Welsh Becky Thuerauf: Fleet/Lease Administration Connie Van Ginkel: Consignment Manager Consignment Sale every Wednesday at 6:30pm. Fleet/Lease/Repo Sale Wednesday at 7pm. TRI-STATE AUTO AUCTION Jct. Highway 11 & 80 P.O. Box 735 Cuba City, WI 53807 (608) 744-2020 (608) 744-3418 (800) 356-0625 Fax: (608) 744-7425 Owners/Managers: Gerald and Helen Brogley Thursday 6:30 p.m.

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VERIDIAN CREDIT UNION NEW BENEFIT PROVIDER

IIADA would like to welcome our latest approved benefit provider – Veridian Credit Union, whose main office is located in Waterloo. In 1934 a handful of John Deere employees who wanted to offer their fellow co-workers an alternative to commercial banks and other for-profit financial institutions founded John Deere Employees Credit Union in Waterloo, Iowa. Their field of membership was extended to those living or working in the neighboring town of Cedar Falls in 1986 and they became John Deere Community Credit Union. John Deere Community Credit Union had always operated independently of Deere & Company and, in 2004, Deere asked them to discontinue the use of “John Deere” in the name to avoid trademark confusion. This brought the name change in 2006 to Veridian Credit Union. The new name came from the words “verdant,” meaning green and growing, and “veritas,” or truth. Veridian has grown to become the largest credit union in Iowa and among the top credit unions in the nation. Today’s Veridian Credit Union is a modern, fullw w w. i o w a i a d a . c o m IA_1013.indd 15

15 service financial institution offering a broad range of products and services to fit a variety of member preferences and lifestyles. Veridian is a not-for-profit organization owned by its members, not by stockholders. As a not-for-profit group, Veridian’s main objective is to benefit its members and their families. Veridian will finance new and used automobiles, new and used motorcycles, new and used motorhomes, new and used boats and travel trailers. Veridian has special programs that benefit first-time buyers and credit-challenged customers. IIADA member dealers in any of Iowa’s 99 counties may work with Veridian and the indirect lending program they have established for auto dealers and their customers. Offices are located in Waterloo, Cedar Falls, Independence, Oelwein, Waverly, Cedar Rapids, Iowa City, Coralville, West Des Moines, Ankeny, Johnston, Marion and Omaha. Current IIADA members may work with Kara Van Wert or Tony McKillip in the indirect lending department. Kara is in the Waterloo office and Tony is in the West Des Moines office and their contact information is noted below. Any auto dealer within Veridian’s current field of membership may work with Veridian in providing financing solutions for their customers and many Iowa auto dealers are already working with Veridian. However, when Veridian recently expanded its field of membership to work with auto dealers who are IIADA members in additional counties of Iowa, Veridian provided a great opportunity

for IIADA members who were previously outside of Veridian’s field of membership. If you have not joined IIADA yet, we invite you to fill out the membership application on page 17 of Street Smart. In doing so, you will find many resources such as Veridian to assist with your customer financing needs. If you have any questions, please call the IIADA office at 641-755-4177. You can also go to www.veridiancu.org and look at the membership information under the About Us tab for more details. Iowa business men and women working with Iowa lenders is a very rewarding experience and IIADA feels very privileged to offer this benefit to our members. Thank you Veridian Credit Union for your willingness to work with the members of IIADA. You will find our members to be highly reputable, good business partners who are community-oriented and wonderful people to work with. Veridian contacts to obtain your signup packet: Tony McKillip 5910 Unversity Avenue West Des Moines, Iowa 50266 TonyJM@VeridianCU.org Fax: 866-407-0656 Kara Van Wert P.O. Box 6000 Waterloo, Iowa 50704 KaraLV@VeridianCU.org Fax: 319-236-5655

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APPROVED MEMBER BENEFIT PROVIDERS ADVANCED BUSINESS PRODUCTS, INC.

Printing, Promotional Products, & Wearables Contact: Scott Jayne PO Box 71547 Des Moines IA 50325 Phone: 515-225-6343 Toll Free: 888-464-2274 Fax: 515-225-6510 Toll Free Fax: 877-987-3514 Website: www.go4abpi.com

ASHTON BONDING AGENCY

7505 NE Ambassador Place, Suite A Portland, OR 97220 800-452-2663 503-253-1353 (fax) dave@ashtonportland.com

ASSOCIATIONS MARKETING GROUP INC Health Insurance Jesse Patton 1112 Maple Street West Des Moines, Iowa 50265 Toll Free: 800-798-6772 Phone: 515-270-8178 Fax: 515-270-0398 E-mail: lpatton@amgi-dsm.com

AUTO OWNERS INSURANCE

10% DISCOUNT TO ALL IIADA MEMBERS Corcoran & Associates, Inc. Mick and Teresa Corcoran 2525 E. Euclid, Suite 102 Des Moines, Iowa 50317 Phone: 515-262-3141 Fax: 515-262-3086 Toll Free: 877-518-4051 E-mail: teresa@corcoranandassoc.com

AUTO OWNERS INSURANCE EASTERN BORDER OF IOWA Amy Goodnight LOHMAN COMPANIES 3901 15TH STREET D MOLINE, IL 61265 800-747-8431 309-764-5967 (fax) amy@lohman-companies.com

AUTOJINI.COM

Websites for Dealers Contact: Syed Azam 310 Main Street Ste 201 Ames IA 50010 Phone: 515-232-2024 E-mail: syed@octadyne.com

AUTOMOTIVE DEVELOPMENT GROUP, LLC

Dealer Compliance Education, F & I Compliance and Training, Service Contracts, GAP and Protective Coatings Contact: Scott Erikson 5810 W. 78th St., Ste. 300 Bloomington, Minnesota 55439 402-639-0664 info@adgtoday.com

CITIZENS COMMUNITY CREDIT UNION

2012-1ST AVENUE SOUTH FORT DODGE, IOWA 50501 Phone: 515-955-5524, Ext. 202 Fax: 515-955-8241

CORCORAN & ASSOCIATES INC.

CYCLONE AUTOMOTIVE TRAINING INC.

F&I Training, Sales Training, Service Contracts, Rob Miller and Chris Hochstein 515 N Jefferson Way Ste H Indianola IA 50125 Phone: 515-962-0099 or 515-962-0100 Fax: 515-961-8400 Rob: 515-205-5900 cell Chris: 515-205-5800 cell E-mail: cycloneautomotive@ cycloneautomotive.com

FLOORPLAN XPRESS

Dealer Floor Plans Fast, Flexible and Still Independent 3220 99th Street Urbandale, IA 50322 Phone: 515-276-1770 Fax: 515-331-8099 www.floorplanxpress.com Contact: Nicki Christianson

FOLLOW-UP PLUS

“Customers for Life” Repeat Sales, Referrals & Customer Loyalty Contact: Terry & Sue Newell P.O. Box 294 Carthage IL 62321 Ph: 888-353-2668 Fax: 217-357-9076 E-mail: tlnewell@frontienet.net

FRAZER COMPUTING, INC.

6196 US Highway 11, PO Box 569 Canton, NY 13617 Phone: 888-963-5369 Fax: 888-963-3366 Email: info@frazer.biz

GLOBE ACCEPTANCE INC

Sub-prime Lender Contact: Beth Dieter P.O. Box 65400 West Des Moines, Iowa 50265 Phone: 515-225-9067 globeaccepts@globeacceptance.com Website: www.GlobeAcceptance.com

SPIREON GOLDSTAR GPS

2093 20th Ave. S.E. DYERSVILLE, IOWA 52040 PHONE: 563-581-3861 Contact: Peter Gael e-mail: pgael@spireon.com Website: www.goldstargps.com

GREATER IOWA CREDIT UNION 1630 – 22nd Street West Des Moines, Iowa 50266-1407 Gene Holtorf, Dealer Direct Manager Ph: 515-954-1666 F: 515-956-6966 gholtorf@greateriowacu.org

INNOVATIVE DEALER SERVICES, INC.

Dealer Software Management Systems P.O. Box 23189 Shawnee, Kansas 66283 913-312-7344 – Ext. 11 Fax: 810-821-1718 Website: innovativedealer.com Contact: Deems Peterson, Sales Manager dpeterson@innovativedealer.com

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Onsite F&I Evaluation, Consultation and Training 2725 61st Street Lane, Ste. 8 Vinton, Iowa 52349 Craig Griffith : 319-310-7768 craig@getperformancefinance.com www.getperformancefinance.com

PROSOURCE FINANCE 2670 106th Street, #180 Urbandale, Iowa 50322 Jeff Rubino 515-491-6051 jeff@prosourcefinance.com

RELIABLE AUTO FINANCE INC. 954 28th St. SW P.O. Box 9700 Grand Rapids, MI 49509 800-814-9294 Brian Chisholm brianc@reliableautofinance.com

REYNOLDS & REYNOLDS INC.

Dealer Bonds Long Term Care Insurance Various types of insurance Contact: Dean M Clark 300 Walnut Street Ste 200 Des Moines IA 50309 Phone: 515-243-1724 Toll Free: 800-767-1724 Fax: 515-243-6664 E-mail: d.m.clark@reynolds-reynolds.com

S & C AUTOMOTIVE, INC.

Service Contracts, GAP, Aftermarket Products Sales & F & I Training thru Star Training Group 3828-70th Street Urbandale, Iowa 50322 515-276-9622 800-776-9622 515-276-8472 (fax) e-mail: dougeckhart1@yahoo.com website: www.scautoia.com Contact: Doug Eckhart

ALLY SMART AUCTION

4300 SW Cambridge Avenue Topeka, Kansas 66610 785-249-4166 Iowa Rep: Seth Fair seth.fair@ally.com 515-777-4592

VERIDIAN CREDIT UNION 1827 Ansborough Avenue P.O. Box 6000 Waterloo, Iowa 50704-6000 800-235-3228 Kara Van Wert –Tony McKillip

WILSON DISTRIBUTOR SERVICE IIADA DEALER CAP FORMS Car Brite Products Forms, Detail Supplies, Equipment & More Jason & Lisa Goody 105 N McCoy Mt. Pleasant IA 52641 Phone: 800-634-0974 Fax: 319-385-2927 E-mail: jasonwds@lisco.com Website: www.wds-usa.com

ZURICH

Garage Keepers, Property, Garage Liability Dealer Bonds 7045 College Blvd. Overland Park, Kansas 66211 Michael Novak – Western Iowa Rep lmichael.novak@zurichna.com CELL: 515-777-0719 Scot Smith – Eastern Iowa Rep. scot.smith@zurichna.com Cell: 319-331-9597

Various Types of Insurance Contact: Teresa Corcoran 18-2nd St., N.E. Mason City, Iowa 50401 Phone: 877-518-4051 Phone: 515-262-3141 Fax: 515-262-3086 Email: teresa@corcoranandassoc.com

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Benefits with the Iowa Independent Automobile Dealers Association  IIADA NIADA Membership  Protect your business through IIADA and NIADA’s     

legislative programs that monitors and protect used motor vehicle dealers with Congress, FTC, and others FREE NIADA publications - Street Smart & Used Car Dealer magazine Certified Master Dealer program through the NIADA/Northwood University Garage insurance; health and other types of insurance Retirement program; prescription drug savings Conventions, trade shows and dealer training programs

 Discounts on NADA used car guides - monthly, older,        

RV, marine, motorcycle Discounts on credit card processing Discounts on accounting & investment services Dealer Awards Scholarships - for your children/grandchildren and employee children $2,000 in discount coupons from mid-west auctions Choice hotel discounts; Hertz rental car discounts NIADA-TV - 24/7 Telephone assistance to IIADA members and updates on laws and regulations

Membership Application Name _______________________________________________ Title ___________________________________________

Business Name _________________________________________ State Dealer License # _________________________ Street Address __________________________ City ____________________ State ________ Zip Code _____________ County Where Dealership is Located _______________________________ (Iowa) Phone _______________________ Fax _______________________ E-Mail ______________________________________ Recommended by __________________________________________________________ Years in Business __________ How would you like to receive your newsletter: Mail _____ Fax _____ E-Mail __________________________________ Amount Enclosed ___________________ Date Received ___________________ By signing this application, you certify that you are engaged in the used automobile business or affiliated with the auto industry. You agree upon the signing of the application and, if accepted as a member, you pledge to uphold the by-laws and the constitution of the association, its code of ethics, and all local, state and federal laws pertaining to the automobile business.

Signature ___________________________________________________________________________________________ Annual Dues $250

IIADA is an affiliate of NIADA. NIADA membership included. Please make checks payable to:

IIADA 409 E. Market St., PO Box 337 Panora, Iowa 50216 641-755-4177

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Back to Basics

COMPLIANCE

OVERDRIVE

IN THE CURRENT REGULATORY ENVIRONMENT, IT MIGHT BE BETTER TO TAKE A MORE CONSERVATIVE APPROACH TO THE CREDIT FEATURES AND OPTIONS YOU OFFER.

Several years ago, a friend in the auto lending industry pointed out that a few aggressive indirect lenders were forcing motor vehicle lease rates down to what he thought were irresponsible lows. Instead of trying to compete with such risky rates, his employer decided to offer more reasonable rates and focus on offering unique product features and improved dealer services. That was possible because as long as the unique program features were well researched and executed, the regulatory risk was relatively low. The lender in this example wasn’t alone. Other indirect lenders also began to compete on features instead of trying to offer unreasonably low rates. A few years later when market conditions changed, the high risk-low rate lessors suffered terrible losses and many closed operations. The strategy to compete on features and service rather than price alone turned out to be the better, more stable strategy. In years past, indirect lending sales products offered features like variable interest rates, stepped rate interest (predetermined increases in the interest rate during the repayment term) and balloon features that allowed consumers to sell the vehicle back to the dealer instead of paying the balloon amount. The sheer range of programs might have been complicated to manage, but dealers saw the benefits of those creative approaches in consumer demand and sales numbers. Consumers, for their part, benefited from the competition to offer the most compelling programs and from the wide range of options available. There’s not as much demand for those features today. Lately we’ve seen a shift back to more basic features and programs. Why the simplified approach? One reason might be increased regulatory pressure – unique new credit features attract not only the interest of consumers, but also of regulators. The more complicated the program’s structure, the greater the compliance risk. The regulatory environment is definitely leaving less room for error and experimentation. A chilling reminder came when the CFPB recently announced a consent order against a major bank and one of its nonbank partners for violations in a unique military installment loan program. The CFPB determined the companies failed to properly disclose all the fees and charges to participants in their program. In the past, the analysis might have ended there, providing remedies based on Truth in Lending Act disclosure violations. But the CFPB said the program failures also violated the Dodd-Frank Wall Street Reform and Consumer Protection STREET

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Act’s prohibition on deceptive acts or practices. In response, the companies must return about $6.5 million to service members. The CFPB noted the companies were proactive in addressing the problems and their positive response “was one of several factors the bureau considered when choosing not to impose a civil money penalty in this matter.” Had civil money penalties been added, the result would have cost the companies even more. In such a regulatory environment, it might be better to take a more conservative approach to the credit features and options you offer. A good starting point would be to review the market need and use of each program and program feature. For example, if you still offer a variable rate auto loan, is there a strong market for it? Is your documentation and software still up to date? Is there still a strong secondary market for them if you want to sell/assign the contracts? Do the benefits of offering variable rates justify the added costs and risks of maintaining the program?

Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well.

OCTOBER / NOVEMBER 2013

Do the same analysis for all your key program features. Now might be a good time to simplify your options, removing features that could do more harm than good. Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well. Make sure: u The program options and features have been recently reviewed by your compliance officer. Consumer finance laws and regulations are constantly changing, so a review done three years ago could be outdated. And while last year’s approved program might still be okay, new options you added this year (without being reviewed) can create a compliance problem. Details matter, so make sure your review includes all of the options offered. u Your internal processes and execution of program options and features have been reviewed. Third-party vendor products and deliverables should be included in your review. Make sure you understand and accurately represent dealer and third-party products to potential buyers. The products might be fine, but the process of presenting and selling them can create a problem. u You review your finance program options and features with your indirect lenders to see if any fall outside their program parameters. If so, is it because they present compliance, calculation or operations issues? And are you confident you can address those issues and sell the contracts to other indirect lenders? u You have ongoing compliance monitoring in place during the program. Your program might be perfect when you launch it but fail afterward due to poor training, execution, unreported changes, compliance requirement changes, etc. Again, the monitoring needs to include third-party vendors – remember, the large bank and its nonbank partner were both included in the CFPB’s consent order. Using a third-party vendor does not necessarily absolve you of responsibility if things go wrong. One benefit of cleaning your financial product house is that you can reduce the compliance risks associated with high-risk, less popular credit features. Focusing on core products and features gives you a solid foundation from which you can confidently and cost-effectively add new features in the future.

BY CHIP ZYVOLOSKI

CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW. WOLTERSKLUWERFS.COM/INDIRECT.

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