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CIADA INSIDER J A N U A RY / F E B R U A RY 2 0 1 4

magazine

F E AT U R E S T O RY O N PA G E 1 0

Preparing for a New Age in Dealer Compliance

How dealers can cope, even thrive, in a brave new world of indirect lending pressure from evolving compliance regulation, lender challenges and regulatory scrutiny.

INSIDE

• CIADA Director Inducted into Hall of Fame • Flood Damage • Building Compliance into Your Dealership

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T

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MANAGEMENT MATTERS

U.S. Delays Health Care Exchanges for Small Dealers

Inside 06 CIADA Director Inducted into Hall of Fame 08 Flood Damage 10 Preparing for a New Age in Dealer Compliance 14 Leadership Conference 18 Building Compliance into Your Dealership

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Wanted: Dealerships that Make a Difference

MANHEIM NIADA NATIONAL COMMUNITY SERVICE AWARD

Manheim & NIADA proudly announce the fourth annual National Community Service award. The winner, which will be recognized at the 2014 NIADA Convention & Expo, will receive $5,000 for the dealer’s local charity of choice. For more information or to nominate a dealer, contact Georgia Brown at georgia@niada.com or (800) 682-3837.

Advertisers Index

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ADESA...........................................................................9 Ally..................................................................................7. CarMax Auctions.....................................................15. DAA of the Rockies...................Inside Front Cover. GoldStar GPS..............................................................5 Lobel Financial Corporation...................................3 Loveland Auto Auction..........................................16 Manheim.com.........................................................11 Manheim Denver................................... Back Cover Manheim Littleton CO...........................................14 Manheim Pennsylvania........................................13. United Acceptance.................................................12 VAuto.............................................Inside Back Cover

CIADA Office 950 Wadsworth Blvd., Suite 101

Lakewood, CO 80214 (303) 239-8000 Todd O’Connell • toddo@ciada.org

NIADA Headquarters National Independent Automobile Dealers Association

www.niada.com • www.niada.tv 2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838

For advertising information contact:

Troy Graff (800) 682-3837 or troy@niada.com. CIADA Insider 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 6006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of CIADA Insider or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA , does not constitute an endorsement of the products or services featured. Copyright © 2014 by NIADA Services, Inc.

State Magazine MGR./Sales Troy Graff • troy@niada.com

Editors

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

Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com

Art Director

Christy Haynes • christy@niada.com

The Obama administration is delaying until November 2014 the launch of the federal government’s online health exchange where smaller businesses can shop for coverage. Small businesses with fewer than 50 employees will still have the option to purchase health insurance coverage for workers through the new marketplace but will not be able to do so online. The exchanges are of great interest among auto dealers because the average U.S. car dealership had 55 employees in 2012. Until next fall, employers with fewer than 50 workers will need to use a broker or agent to buy health care plans for employees. According to the Centers for Medicare & Medicaid Services, “We’ve concluded that we can best serve small employers by continuing this offline process while we concentrate on both creating a smoothly functioning online experience in the SHOP Marketplace, and adding key new features, including an employee choice option and premium aggregation services, by November 2014.” The Small Business Health Options Program -- or SHOP Exchange -- has already experienced delays as the Obama administration focused largely on implementing an insurance marketplace for individual Americans to obtain subsidized health care insurance and coverage. While the health care law is meant to reduce the cost of health insurance, many small business groups have been skeptical, arguing that the law will backfire and lead to increases in insurance costs. For more information on ACA compatible insurance plans customized for small groups, visit www. NIADAHealthPlans.com or call 1-888-308-9340. FRONT RANGE CLASSES

Colorado Independent Automobile Dealers Association

Lakewood, Colorado Education & Training Center 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214

Pre-Licensing Certification

Colorado state statute requires anyone applying for a used motor vehicle dealer’s license or a used powersports dealer’s license be certified through a pre-licensing course. This seminar is also offered to salespeople to be able to pass the New Mastery Examination Test. Class is held at least once a week. Check our website for dates.

Basic Title Training Class

Join us to get updated information to learn the CORRECT way to fill out your paperwork at time of sale and other topics including title compliance, do’s and don’ts for titles and more. This class is held once a month for half a day.

Call CIADA for information on these classes, or to get your forms and/or Dealer/ Salespersons Bonds. Call 303-239-8000. ALL C L A SSES ARE SU B J ECT TO C HAN GE WITHOUT NOTIC E . PLEA SE C H EC K OU R WEBSITE W W W.C IADA .ORG FOR ANY C HAN GES.

www.ciada.org • phone 303.239.8000 • fax 303.237.3305

Board of Directors President Dave Cardella Mountain States Autogroup, Inc. 303-887-8977 Vice President Lloyd Donnelly King Credit Auto Sales 303-287-5511

Printing

Nieman Printing

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Secretary Stan Martin Stan’s Auto Sales LLC 303-650-1011 Treasurer Ed Couch Front Range Auto 303-659-1909

Chairman of the Board Dean Strawn AutoTrek 303-934-5600

Rick Derr About Time Inc. 303-781-1080 Dean Gunter Mile High Car Company 719-570-7800

Directors Dan Berkenkotter Berkenkotter Motors 303-660-8754 Jim Bode J. Bode Used Cars, Inc. 303-366-1535

John Lindberg Auto Warehouse Inc. 970-490-2886

Deborah Thompson Automotive Search, Inc. 303-691-5622

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ASSOCIATION NEWS

CIADA Director Inducted into Colorado Motorsports Hall of Fame u

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B  OB OLDS HONORED FOR RACING CONTRIBUTION

On Oct. 23, CIADA Director Bob Olds was inducted into the Colorado Motorsports Hall of Fame. The organization is committed to honoring and preserving the achievements of individuals and organizations that have left an indelible mark on motorsports in Colorado and beyond. Olds was born in 1927 in Denver, Colo. At age 13, while on his paper route in Park Hill, he was invited into Buddy Martinson’s garage to polish wheels and clean his midget racer. He did such a good job that the crew even snuck him into the pits at Gilmore for Turkey Night. Bob went to East High School and bought a ‘31 Model A roadster for $120, took off the fenders and started drag racing all over town, including timing and speed trials at Lowry Field and old Tower Road. He is a charter member of the Denver Timing Association. Olds continued drag racing until joining the army in 1945. Even then, he would help Harry Duff and Bob Van Buskirk work on their midgets while he was on leave. In 1946, he bought a Ford roadster (an old Pikes Peak car) and raced it at Englewood Speedway. Starting in the late 1940s and into the 1960s, Bob travelled to races all over

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the country. He worked on pit crews with 1948 national midget champion Johnny Tolan as well as local drivers Joe Giba and Buddy Shay. In the early 1950s, Bob took his ‘32 Ford coupe with a blown flathead to Bonneville. He turned 107 mph, but wanted to go faster so Bill Kenz loaned him some wheels and tires and he got up to 112 mph. While there, he met Tom Beatty and helped him work on his belly tanker. As a favor, Tom let Bob drive his car and he turned 186 mph then 192 mph. Bob also worked on Leo Dobry’s pit crew for Indy style cars at Centennial Racetrack and on the Pikes Peak car of Bus Hammond, who won there in 1953. During the month of May from 1959 to 1965, Bob went to Indianapolis, Ind. He did whatever he could to help his friend and car owner Myron “Buz” Osborn. Bob was on the pit crew and was also the body and paint man for numerous cars, including the Radsco Battery Cable Special, the Myron Osborn Special, the Greenman-Casale Offy, the Denver Chicago Special (Watson-Offy), cars sponsored by Denver Chicago Trucking, White Spot Restaurant, Apache Airlines laydown Offy and the Wilbur Clark rear-engine Offy.

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From the early 1970s through the 1980s, Bob had many celebrated Colorado drivers in his midget racers, including Sammy Sauer, Jim Beckley, Don Wilson, Gene Pastor and Frank Mantello. Because Bob’s cars were clean, competitive, first class rides, he also had several notable national champion drivers, including Bob Olivero, Sleepy Tripp, Larry Rice, Bob Wente, Lonnie Caruthers, Doug Wolfgang, Steve Cannon and Danny McKnight. In 1974, Bob bought one of the early VW powered midgets from LTC in Costa Mesa, Calif. Bob’s son Scott began rebuilding the VW engines for his dad and, in 1975, Larry Rice set a one lap record at Englewood Speedway of 15:39 in the Bob Olds Motors VW (also known as Lulu’s Luv Bug). In 1977, Bob hired Sam Sauer to drive and Frank Peterson to build the engines. The team worked well with a track record at Colorado National Speedway (dirt) of 18:47 and victories in eight trophy dashes, eight heats and eight main events, resulting in the 1977 owner’s championship for Bob and crew. Bob was elected president of the Rocky Mountain Midget Racing Association in 1978.

Tragically, on May 20 at CNS in the first heat race of the season Sam Sauer was killed in a violent north turn crash in Bob’s new VW midget. Bob ran his cars competitively for a few more years and helped numerous other racers set up their midgets and sprint cars. Today, local midget racers still seek out Bob for his chassis setting expertise and coaching. Through the 1980s, his son Dave ran a formula Ford in SCCA and other local clubs, usually finishing in the top 10 during his first year. After Bob tweaked his car a few times and provided some instruction, Dave consistently finished in the top five. With a Fine Arts degree from Denver University, Bob is an accomplished artist and has created hundreds of paintings, including some beautiful paint jobs on numerous race cars and even airplanes. Currently, Bob uses his artistic gifts painting Hall of Fame drivers and cars at our favorite tracks of yesteryear. He also shares his mechanical expertise with his sons and other Colorado Vintage Oval Racers with their vintage racecars, all while running a successful car sales business for more than 44 years. w w w. c i a d a . o r g 12/20/13 1:10 PM


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TITLE PROCEDURE

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T O B E O R N O T T O B E - S A L V A G E

Just a few months ago devastating floods in the Mile High City damaged thousands of motor vehicles. Dealerships nationwide have reason to worry if consumers are quick to trade in disguised, damaged vehicles that aren’t allowed to obtain a salvage brand if more than six years old. On the Colorado department of revenue’s website, the disclaimer for vehicles affected by September’s floods is that “vehicles five (5) years and newer that meet the definition of salvage…can be branded as salvage.” We can all agree on the “to be” of the salvage title, meaning reported damage to a licensed insurance company and a properly executed Colorado salvage branded title. The “not to be,” however, is more under the control of the title division, with the refusal of motor vehicles older than six years subject to cancellation of the title once the insurance company attempts to submit application. One of the most confusing and difficult processes I have had to explain as a title professional in Denver County is the salvage title procedure. Consumers as well as dealers should be educated regarding steps in the salvage title process. The first stage is pretty closed case. If title is five years or newer (meaning models 2008 to 2013 until January 2014), the damage is reported, the vehicle is rendered salvage, the consumer releases title interest and a salvage title is created. But the second level, which cannot be processed by the Colorado MVD, will leave a vehicle’s undisclosed damage undetected and unreported. Online services like vehicle history reports, CARFAX and Auto Check are inconclusive if the consumer cannot report flood damages. Fact is, if the consumer or insurance company attempt to submit a vehicle title six years or older, the state of Colorado CIADA

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will render the title as canceled or, in salvage language, junk. A junk title can never be registered, even if the vehicle is repaired or restored. Colorado Chrysler Jeep general manager Mike Surd accurately explains that with no “insurance claim on a vehicle it won’t be reported to a CARFAXtype source [with] no way to find out if the car has been flooded.” The Colorado department of revenue doesn’t have a specific type of brand for a flooded vehicle, only a broad salvage definition that covers everything from “collision, fire, flood, accident, trespass or other occurrence excluding hail damage.” Here is a sampling of scenarios of the salvage title life cycle. There are also example Colorado forms pertaining to salvage/branded titles at http://www.cindytitles. com/Helpful-Links.html. To Be – Salvage The consumer is informed that their five year old or newer vehicle is a total loss. The process should be the following: 1. Cancel plates at the local DMV of residence (a nonroadworthy salvage title means the vehicle is not to be driven). 2. If there is an active loan, the finance company will transfer the title to insurance company OR, if the consumer has clear title, they will make the transfer. 3. The insurance company will send an application for salvage title to the local county office for processing. 4. A salvage title is created deeming the motor vehicle as non-roadworthy if the claim totals the vehicle OR repairable damage confirms eligibility for a branded title with proof of repairs and receipts. A branded unit can be repaired and reregistered by the consumer. This will brand the title as salvage but will not indicate the type of damage.

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5. Once the insurance claim pays for damages, the salvage title can be signed back to the original owner. 6. Application for a new roadworthy, branded title and new plates can be submitted by the owner at their local county office. If unit is traded or sold, the disclosed damage will show on motor vehicle records, CARFAX and Auto Check. Not To Be _ Salvage A motor vehicle five years and newer and NOT financed with clear title sustains flood damage and the consumer does not report the damage: 1. The consumer cleans the car up and doesn’t report to the insurance company. 2. Unsuspecting dealership or private owner purchases the vehicle with a clear title assuming a clear CARFAX means an accurate motor vehicle report. A motor vehicle six years or older sustains flood damage, is not financed with clear title and the consumer reports the damage to their insurance company: 1. State of Colorado will not grant a salvage title and, if the vehicle is rendered unsafe, the title will be issued as canceled/junk. 2. MVR’s, CARFAX and Auto Check reports are inconclusive since the salvage brand is not allowed on older motor vehicles. With all that in mind, a dealership and private party buyer should be wary of vehicles titled in Colorado and older than five years old. Also, you never want to guess “to be or not to be...salvage.” If you are a dealership and you are accepting trade-in vehicles with a Colorado title, you may have to change your policy to include a separate check and balance system for vehicles older than six years old. Colorado has no special mandate for flood cars and the eligible salvage title mandate only applies to five year old and newer vehicles. The average

car on the road is 11 years old. That leaves a large margin of error on the part of the dealership trying to decipher a trade in with quality resale value in the wake of a natural disaster. In his article “Quirks in State Titling Laws May Allow Flooded Cars to Resurface Undetected,” Mark Ackerman of CBS4 suggests the following safety precautions for buyers: • Take a test drive. • Check underneath carpet for signs of water damage like silt, mud or rust. • Sniff the carpet and upholstery for musty and moldy smell. • Check oil for milky white or runny appearance. • Check air filters for moisture or warping and fanning caused by filters that have dried. • Check electrical systems for working conditions. • Turn the key to make sure gauges work correctly. • Consult with a certified mechanic. • Perform a vehicle history report, Carfax.com or Autocheck.com. And as always, contact Cindy or myself if you are unsure of any title or registration process. We will be glad to use our years of experience to guide you in the most compliant and safe direction.

BY CHELLE EPPERSON

ACCURATE AUTO TITLE SPECIALISTS, LLC FACEBOOK.COM/AATS.LLC HTTP://WWW. CINDYTITLES.COM

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COMPLIANCE

OVERDRIVE

Preparing for a New Age in Dealer Compliance u

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H  OW D E A L E R S C A N C O P E , E V E N T H R I V E , I N A B R AV E N E W WO R L D O F I N D I R E C T L E N D I N G P R E S S U R E F R O M E VO LV I N G C O M PLI A N C E R E G U L AT I O N , LE N D E R C H A LLE N G E S A N D R E G U L AT O RY S C R U T I N Y.

Failures in the mortgage lending industry played an important role in the recent economic crisis. In response, Congress passed legislation that created the Consumer Financial Protection Bureau and required a number of consumer real estate lending changes. Naturally, the new CFPB has focused an enormous amount of its attention on the mortgage finance industry. It has created numerous new regulations and modified existing ones. As a colleague says, the mortgage industry has experienced a decade’s worth of regulatory change in just a few years. Many of the regulatory changes become effective this month (Jan. 2014). So lend a sympathetic ear to your friends in the mortgage lending industry. They might return the favor in the near future. With a bulk of its mortgage-related efforts launched, the CFPB will now have more time to focus on other industries, such as consumer auto lending. The forecast for regulatory attention in the coming year has its roots in events from 2013. Last year, the CFPB published Bulletin 2013-02 in March on indirect auto lending and compliance with the Equal Credit Opportunity Act. The bulletin didn’t create a new regulation or modify an existing one. Instead, it notified the marketplace of its conclusion that common dealer discretionary rate markup and dealer compensation practices are resulting in credit discrimination violating the ECOA. The CFPB also interpreted common lender-dealer interaction as sufficient to classify lenders as “creditors” under ECOA requirements – which makes lenders responsible with dealers for rate markup ECOA violations. A final point in the bulletin was the CFPB’s suggestion that alternative dealer compensation methods would reduce or CIADA

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eliminate the ECOA compliance risk, such as flat fees. The bulletin sparked concern and debate in the industry. How did the CFPB reach the conclusion that dealer discretionary rate markups plus dealer compensation methods were resulting in credit discrimination? In June and again in October, members of Congress asked the CFPB for an explanation of the data and methods used to conclude that discretionary rate markups and dealer participation are causing ECOA violations. Part of the concern is that dealers are generally not allowed to collect and record a buyer’s gender, age, race and other information about a buyer’s status in groups protected under the ECOA. So how can a dealer, lender or even the CFPB analyze auto loan portfolios to determine if violations are occurring? The CFPB provided information on how it analyzes data for gender and race/ethnicity using U.S. census data in a few presentations, including its November forum on preventing illegal discrimination in auto lending. (Visit www. consumerfinance.gov/blog/ category/auto-loans/ for more detail.) Some of the industry concern and debate has been about the accuracy of the methods described. It is still unclear where the CFPB got the data to analyze and whether the programs analyzed are representative of other rate markup and dealer participation programs. Numerous news sources have reported that the CFPB has requested records from a number of large auto finance sources. If the CFPB is receiving and analyzing their data, there will likely be more discussion about the methods used to analyze and the accuracy of results. Does (or should) the law make lenders responsible for dealer discrimination and how

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can lenders even know that it is happening? Lenders argue that they are not sufficiently involved in dealer’s rate setting to fairly be considered “creditors” (and thus possibly responsible for discrimination) in the credit transaction between dealer and buyer. Staff commentary to Regulation B has been fairly clear on this point for a number of years, providing that a creditor “includes all persons participating in the credit decision. This may include an assignee or a potential purchaser of the obligation who influences the credit decision by indicating whether or not it will purchase the obligation if the transaction is consummated.” There are some legal arguments about the commentary, but the focus of recent discussions has been more on the practical side of how a lender can know if a dealer is intentionally discriminating in its rate markup practices. Even more difficult is the idea that a lender can be responsible for a dealer’s practices when the dealer’s discrimination was unintentional. A dealer may not intend to discriminate in its rate markup practices, but if a protected group statistically ends up paying more, the discriminatory impact on that group is an ECOA violation. The CFPB has made it clear that it intends to find and take action on ECOA violations based on intentional discrimination and disparate impact. The debate is whether, and the extent to which, the ECOA prohibits disparate impact. The U.S. Supreme Court seems interested in this issue and has agreed to hear two disparate impact cases in recent years. Most recently, the Mount Holly v. Mount Holly Garden Citizens case was scheduled to be argued before the U.S. Supreme Court in early December, but settled before arguments. It

was a housing disparate impact discrimination case, but the auto lending industry was interested to see how the Supreme Court analyzed the issues and if it might shed light on analysis for consumer credit. The legality and merits of disparate impact discrimination will continue to be debated well into this year and beyond. It is important to remember that regardless of whether discrimination is intentional or unintentional, in theory, a careful statistical analysis should identify whether gender or race/ethnicity (and possibly other categories) discrimination is occurring. Would flat fee dealer compensation reduce or eliminate the risk of discrimination? If yes, would it do so without negatively affecting the availability and cost of consumer credit? Some have criticized the suggestion of paying a flat fee compensation for dealers, saying it would have a negative impact on the cost of credit for low- and moderate-income borrowers in particular. The argument is that it would shift the dynamic between dealers and lenders and would encourage dealers to move away from seeking the lowest interest rates from lenders to seeking lenders offering the most attractive flat fee compensation structure. The result could lead to higher or less competitive consumer interest rates. Last October a bipartisan group of 22 U.S. senators jointly sent the CFPB a letter with their concerns about the CFPB’s guidance in this area and inquiring about the extent to which it had looked at the impacts of the proposed flat fee approach, such as on the cost of credit for consumers. In a response issued in November, Director Richard Cordray conceded that the CFPB has not undertaken a study of “how market-wide adoption of a single non-discretionary compensation C O N T I N U E D O N PA G E 1 2

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program would affect the availability of credit.” During its Nov. 14, 2013, forum, the CFPB also conceded that establishing a flat fee program may not be a perfect solution. The CFPB noted that it is still interested in ideas and suggestions from the marketplace on how to allow reasonable dealer compensation for credit sales transactions without creating an environment for possible discrimination and without negatively affecting consumer credit or the marketplace. Some of the other options that have been discussed include setting a percentage of the amount financed on a car loan as the dealer payment, or even developing a combined approach that would take into account contract duration and amount financed to calculate dealer payment. Clearly, the discussion on flat fees and dealer compensation in general will continue. What can you do to prepare your dealership and adapt, even thrive, in this new reality for your business? The concerns and discussions about discretionary rate markup and dealer compensation from last year will continue in 2014. There is uncertainty on how some

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of these issues will ultimately be resolved. But there is a lot we do know and a lot that dealers can do to prepare and adapt to the increased focus on dealer compliance. Now is the time to respond in a way that may just put your dealership in a position to not only survive but even thrive in this new reality. During the previously referenced November forum “Preventing Illegal Discrimination in Auto Lending,” Cordray told the audience, “Each lender bears the responsibility for policing its own lending program to avoid unlawful practices…” In spite of the attention to this issue, lenders may be hesitant to provide too much guidance or oversight to dealers on how to comply with ECOA for fear of creating liability for themselves. Part of the issue is that the more lenders get involved the more they look like “creditors” under Regulation B and the stronger the argument that they should be liable for dealers’ credit discrimination. So lenders might not tell you what to do or how to do it, but they will clearly require dealers to have up-to-date policies and procedures in place for ECOA compliance. Dealers should make sure that they have these things in place along with staff training,

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clear escalation requirements for rate exception decisions and rate exception documentation. Remember that there are compliance companies and consultants in the marketplace who can help you create or update your ECOA program (Do some research to make sure you find a qualified and experienced one.). Once prepared, you will be able to confidently respond to lender questions on your ECOA compliance. Remember, too, that dealers are required to comply with the ECOA even if they hold their own credit contracts – so your preparation will also allow you to confidently respond if your state or federal regulator asks about your ECOA compliance. A second action item is to participate in the industry discussion on discretionary rate markups and dealer compensation. Consider the issues and ideas for how current practices could be improved to help avoid the risk of credit discrimination and offer your ideas to the NIADA staff. There is still time to influence changes to the industry’s best practices and the CFPB’s views on them. A third action item is to be prepared for possible changes in your lenders’ program requirements on dealer discretionary markup and

dealer compensation. Lenders may set limits on the amount by which you can mark up their buy offers. They may also change whether and how dealers are compensated for any rate markups. Even though we don’t know how those issues may ultimately be resolved, now is the time to evaluate how those pricing elements fit in your dealership’s overall pricing and profit models. Consider how change to those pricing elements will impact your business and how you can respond to various change scenarios. The concern, discussions and uncertainty will continue, but it is still possible to take action on things within your control. Following these three action items will immediately benefit you as a dealer and also your lenders. It will also give you a solid foundation from which to implement any future changes made regarding discretionary rate markups and dealer compensation.

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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ASSOCIATION NEWS

NIADA

Goes to Washington

A R OA D T R I P T O T H E C A P I T O L M A K E S A B I G I M PAC T O N L E G I S L AT O R S A N D L E AV E S D E A L E R S H U N G RY F O R M O R E

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You can’t actually see the Capitol from the historic Capitol Room of the Fairfax at Embassy Row hotel in Washington D.C. But to the used car dealers, association executives and industry leaders who packed the place on a frigid November evening, it sure seemed like that famous dome was looming right there in the middle of the room. On the opening night of the NIADA National Leadership Conference and Legislative Summit, the Capitol – and the opportunity it represented – was on everyone’s mind. “I’m really looking forward to going to the Capitol,” NIADA president Keith Hagler said. “That’s where we need to be.” Two days later, that’s exactly where NIADA was, capping the most anticipated association event in recent memory with A Day on the Hill. Nine teams of NIADA members stormed the Capitol – figuratively, of

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course – meeting with the staff of 34 U.S. representatives and senators, including a number of the legislators themselves, to get acquainted, discuss the ins and outs of the used vehicle industry and share their concerns about government’s effect on their businesses. It was an all-out effort to reemphasize NIADA’s first and most vital purpose – to be the voice of the used vehicle dealer in D.C. “They need to hear our voice and they need to hear our story,” explained Hagler, who has made that the top priority of his term. “Especially the Buy Here-Pay Here industry, just to use that segment as an example. They really don’t understand who Buy Here-Pay Here dealers are and what we do in the community, how we help our customers each and every day with all the different things we do, and how we fill a big need that’s out there. These people can���t get credit anywhere else

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and we supply transportation for them. “That’s what I mean by telling our story.” And that was the big story of the NLC. For all its other functions – the annual event brings together NIADA’s officers, committee members and state executives for association business and leadership training – this NLC was special because it marked the first time since 1999 that NIADA brought its leaders to Washington for a chance to interact with legislators and federal regulators. It was that interaction, culminated by A Day on the Hill, that generated the enormous buzz among the 113 attendees. “I think it helps us immensely,” said Ken McFarland, owner of City Auto Sales in Hueytown, Ala., and president of the Alabama IADA. “We were able to get in front of several legislators and we brought the NIADA to them, let them know who we are, what we’re all about,

how many people we represent and what impact their legislation has on our industry. “The information we shared with them really opened their eyes to the fact that we really are a big industry and we have a lot of impact on what goes on in America.” Not that all the action was on Capitol Hill. Back at the Fairfax, representatives of the federal agencies that oversee the used vehicle industry – including the Consumer Financial Protection Bureau and Federal Trade Commission – addressed the conference, letting dealers know what is on the regulators’ radar and how to stay in compliance with the ever-growing list of rules governing them. Even more crucial was the chance for dealers to ask questions of the regulators, particularly those from the CFPB, which had previously been unavailable for Q&As.

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NIADA actually wound up getting a bonus in that regard. The day after leading their teams of dealers at the Capitol, NIADA regulatory counsel Shaun Petersen and executive vice president Steve Jordan were among a select group of 150 of the industry’s most influential leaders invited to participate in the CFPB’s Auto Finance Forum, featuring CFPB director Richard Cordray. NIADA’s legislative committee made a splash, too, announcing its plan to form a task force to provide the association’s Buy Here-Pay Here dealers a perpetual forum in which to discuss and act on issues specific to their segment of the industry. And not only did NIADA go to Congress, Congress came to NIADA – Rep. John Carter spoke to the conference at a Tuesday night dinner, and fellow Texas Republican Rep. Joe Barton spoke at Wednesday’s luncheon

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at the Capitol Hill Club. At the luncheon, Barton, whose district includes the NIADA national office in Arlington, Texas, received a donation from the NIADA PAC Fund, which Jordan called a crucial piece of the association’s ongoing efforts in Washington. In his remarks, Barton noted the importance of having NIADA members come to Washington to meet with legislators rather than the usual lobbyists. “If you get to see your congressman or senator, you’re unfiltered,” Barton said. “You’re not a focus group. Most of you represent small businesses. Some of them are secondand third-generation family businesses. … That’s the real world.” Barton’s reaction was not rare. In fact, legislators and staffers were unanimously receptive to the visits from constituents, according to the dealers who met

with them, especially since Texas Congressmen John Carter (left) and Joe the NIADA Barton were featured speakers at NIADA’s contingent National Leadership Conference. came offering assistance as which was beneficial to everyone.” a resource rather than seeking Those who attended the NLC favors. had no doubt it was beneficial “We weren’t going in asking to NIADA and the used vehicle for anything,” said Carolinas industry. They left Washington IADA president Michael excited by their success and Darrow, president of The Auto ready to use the experience to Finders in Durham, N.C. “It maintain the relationships they was just opening channels of built – and to work on building communication, letting them new ones with officials in their know who we are at the national state governments. and state level. Now in the future The goal now is to increase if we do have a need we’ll have that impact. And, Hagler said, the opportunity to come back and the way to do that is obvious. talk to the same people and get “This is what we need to be the assistance we need. doing,” he said. “We need to “A lot of them were shocked come back again next year and that we weren’t there asking for hit it strong and hit it again. We something, that we just showed need to come back every year up to say, ‘Hi, we’re NIADA and and get in front of them, let we’re car dealers,’ and to kind stand for and all the people we of explain our industry to them, represent.”

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PRODUCTS

& SERVICES

Tips to Improve Trade-In Experience for Consumers u

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A UTOTRADER.COM OFFERS TIPS & AN ONLINE TOOL TO EASE TRADE-IN PROCESS

Hammering out an agreeable trade-in value often creates negative feelings for potential buyers. AutoTrader.com recently offered four tips to help dealers ease the pain of the trade-in and increase customer satisfaction. Site officials wanted to create a strategy for stores because they contend satisfaction with the vehicle-buying process decreases significantly once consumers make the transition from online shopping to in-store purchasing. AutoTrader said negotiating the value for the trade-in is the activity with which purchasers are least satisfied. In fact, according to their research, only 37 percent of consumers reported being satisfied with that step. However, a tool like AutoTrader. com’s Trade-In Marketplace can serve as a bridge between the online and offline aspects of the shopping experience, thereby significantly helping dealers increase customer satisfaction.

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“Car shoppers have access to more online resources than ever before, and they are using them to choose their buying and trade-in opportunities carefully,” said Juan Flores, director of operations for AutoTrader.com’s Trade-In Marketplace. “By addressing the most painful part of the transaction — negotiating the trade-in — dealers can increase customer satisfaction significantly, and they can also stand out from their competition. It’s a win-win if they implement — and merchandise — the tool in the right way,” Flores continued. The Trade-In Marketplace, accessible via AutoTrader.com, KBB.com from Kelley Blue Book, participating dealer websites and in select physical dealerships, can enable consumers to get an instant offer on their used vehicles, sight unseen. The offers are based on an extensive set of parameters,

JANUARY/FEBRUARY 2014

including VIN-specific information, details surrounding the condition of the unit and the impact of the specific vehicle’s history and after-market equipment. The result is that consumers receive an offer on their vehicles that represents an amount that a dealer would be willing to pay for their vehicle immediately. Flores offered the following tips for dealers using the TradeIn Marketplace: • Showcase your trade-in process online. Prominently signal on your website and other marketing platforms that you have an online appraisal tool that will enable shoppers to get an instant cash offer on their vehicle. • Reduce the pressure. Let the customer know that you are very interested in the vehicle, regardless of whether he/she wants to trade in the vehicle or simply sell it to the dealer.

• Let the customer take the lead. If they haven’t generated a Trade-In Marketplace offer by the time they walk in, take the customer to the TradeIn Marketplace kiosk or a workstation and allow them to answer the vehicle condition questions themselves. • Involve the customer in the walk around. Don’t leave the customer sitting alone while you validate the condition of their vehicle. Invite them to do the walk around with you and talk with them about the factors that affect the value of their vehicle — both the positive and the negative. “Enabling consumers to be more involved in the trade-in process has proven to be a winning strategy that helps dealers increase customer satisfaction and stand out from the crowd,” Flores said.

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CIADA Benefits Here are some of the projects CIADA is working on for our members:

MEDIATION Professional mediation is now available for all members. We are handling dealer-auction issues. Soon we will be expanding to the areas of dealer-dealer and retail customer issues. The fee of $150 will be split by the parties in mediation. You can resolve your issues with the auctions in a professional, effective manner. Do not put yourself though the frustration of expressing your issues improperly. Call Todd O’Connell, executive director of CIADA, at 303-239-8000, extension 301. CIADA LANE EVERY WEDNESDAY Run lane at Denver Auto Auction for CIADA members only, every Wednesday in lane 8, beginning with run number 60. The CIADA program introduces pre-inspection and a seven-day certification for sold vehicles at no cost to the seller. There is still room for more vehicles. Take advantage of this offer! Call Charles Bryant at 303-3433443 for registration. Last week high sales percentage, with cars bringing top dollar-plus, discounted buy and sell fees for all CIADA members. LEGAL PROTECTION FUND CIADA LEGAL PROTECTION FUND All of you may have heard we have some overly aggressive, predatory attorneys starting to concentrate on Colorado dealers in a major way. Some of them are even coming from other states. CIADA is determined to bring our dealers into compliance in every possible way. We do not want to fall victim to those guys. There have been several cases brought to federal court, with costs to the defendant dealer in excess of $40,000. We need to prevent this from happening to our dealers. We will be emailing to all who have joined the legal fund a video that features all the compliant paperwork in delivering a vehicle, how to present it and how to avoid future litigation. Who has $40,000 lying around? There are many dealers not doing it correctly, which makes you susceptible to those fee-hungry predators. Do not be their next unsuspecting victim. Call Todd O’Connell NOW! 303-239-8000, extension 301. INSURANCE: COMMERCIAL , HEALTH, WORKMAN’S COMP and PERSONAL Taggart Insurance: CIADA has partnered with Taggart as its agency of choice. Taggart is a full-service agency featuring many choices of dealer garage liability policies with special discounts for CIADA members. Compare your policy. Taggart has policies that cover many of the issues the predators are looking for. Check your existing policies right away, then call Mark Harrington with any questions you might have: 303-442-1484. FREE INVENTORY LISTINGS Dodah is a FREE vehicle listing service offered through CIADA for all members, anticipated to eventually rival Craigslist. Dodah is currently in the process of building inventory and member subscriptions prior to an advertising campaign targeting retail buyers. This is a national listing service expressly for vehicles, unlike Craigslist. This service is free for CIADA members. Call CIADA at 303-239-8000 to register.

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APONTE & BUSAM LOBBYIST CIADA has contracted Aponte and Busam to monitor issues relating to our industry and to help keep us informed to protect ourselves against legislation that would be detrimental to us and to support legislation that would that would be in our interest. This is a big deal affecting all dealers. We are lucky to have the best people on top of this for us. CIADA VIP DISCOUNT CARD VIP CARD A VIP card is issued to your dealership with your membership. A $225 membership will give you up to $600 in benefits. Great savings – do the math. Tell other dealers. Our goal is to have 100% membership. Call CIADA today to join at 303-239-8000. QUALITY DEALER OF THE YEAR NOMINATIONS QUALITY DEALER OF THE YEAR This honor is open to all CIADA member dealers. You may nominate any dealer you choose, including yourself. The honor has monstrous benefits in FREE publicity. Use it in your ads, website and lots more for a full year. You may also be selected as the National Quality Dealer, with all the benefits that come with that title. Call CIADA today for more information: 303-239-8000. CURBSTONING There is no single simple solution to problem of illegal sales of vehicles. This activity is everexpanding, from vacant lots to the Internet. The association is attacking the curbstoning problem on several fronts: through the State Auto Industry Division, the Attorney General’s Consumer Protection Office, local zoning and law enforcement agencies, plus exploring additional legislative prosecution. Please help by calling the Curbstoning Hotline to report violators – 303239-8000, extension 301. CIADA EDUCATION & TRAINING EDUCATION CIADA offers a full complement of educational classes – new salesperson classes and testing at our new offices, plus many other enlightening opportunities, including title, technology, F&I, pre-licensing and compliance to state standards! We also have new dealer education. For additional details, call the CIADA office at 303-239-8000. GET ALL YOUR FORMS THAT COMPLY WITH THE STATE! FORMS AND BONDS Call our office at 303-239-8000 to order forms at a discount for our members and a complete professional bonding process. ATTORNEY QUESTIONS LEGAL ASSISTANCE CIADA members enjoy FREE phone consultation for legal questions. Call 303-239-8000 for more information. Dealers, you need to take advantage of this service before you wind up in a bad situation. Make the best of the problems you have. DEALER MANAGEMENT SYSTEM CIADA partner is providing a quality Dealer Management System at highly discounted rate for CIADA members. Some of the many features: inventory, retail workbench (F&I), wholesale, CRM, sales history, commission journal, Buy Here-Pay Here, accounts payable A/P, general ledger, service department and more. Call Mike Cintron at 720-838-7400 or www.skywerks.com for more information.

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Building Compliance Into Your Dealership… It’s Good Business. u

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LOOK FOR A CMD CL AS S NEAR YOU

PROVIDE UP-TO - DATE DOCUME NT S FOR CU STOME RS AND LE NDE RS

This time of year many dealerships are thinking of the busy tax return season when customers are flush with cash for down payments. It’s also a time to reflect back on 2013 for a moment and contemplate what we’ve learned over the past year that will influence the way we do business in the future. Regulatory change and government focus on our business is increasing. We now know that others are looking at the industry with deep scrutiny. The public forums and participation by lenders, customer advocates, multiple regulatory agencies and national associations have now given insight into how others view the auto industry and the concerns they have about many common business practices. Before any new regulations, rules or guidance are issued, dealers can take steps to minimize the risk to their dealerships as well as to their customers and vendors. In the past year many regulatory changes have been enacted across the country – some at the federal or state level while others by local governments or agencies. These new regulations and rules affect many parts of the business, but none more directly than in the finance office. Whether the customer is paying cash or acquiring a loan to finance the vehicle purchase, the forms used to close the sale are the same. With loan files containing an average of 25 pages, the risk of noncompliance is always great. One common misconception is that if a lender accepts a contract package and funds a loan, the dealership is now off the hook, but that’s far from true. Many lenders also fall short of adequately managing their accepted forms lists. This list may be provided to dealers or to their internal staff, so dealers could actually be using the wrong forms or maximum fees allowed by law. This may go unchecked until an audit is performed and a large portfolio of loans has been originated. Since the loans were originated within the dealership, the dealership may share in the responsibility for correcting the loan documentation or financial liability for uncollectible loans. In spite of this risk, many dealers are still pulling forms from a pre-existing stack of forms and completing them in the same manner until they’re all gone. If you think this is an acceptable practice, here are some questions that you may ask yourself: • Are they the most current versions? • Do they provide the customer with the proper disclosures, rights and privileges under the current law? CIADA

CMD Travels to Sunny Florida

INSIDER

• Are the fees, payment calculations and interest rate calculations being used in the finance office accurate? There are a few more questions that need to be answered of your compliance management process: u  Who is tasked with ensuring that the forms used in your dealership are the most current and compliant? u  Do you depend on information about proposed and enacted legislation from your forms provider, DMS, legal counsel, finance manager or back office? u  How often do you review the forms versions, calculations method, and allowable fees? u  Do you understand your liability in providing outdated forms, incorrect fees and incorrect calculations to your customers and lenders? These are just a few questions to consider when setting up a forms compliance management program within your dealership. The extent of your forms management program may well depend on the types of business you are engaged in. For instance, if you are engaged in primarily cash sales, you may have little exposure. But if you are engaged in in-house financing or financing through multiple indirect lending sources, your risk may be much greater. There are few immediate steps you can take to minimize your risk: u  Establish a point person who is responsible for managing forms, fees and calculation methods. u  Sign up for compliance notifications from a trusted source. There are many companies who will provide email notifications when regulations change that affect your business. u  Audit your dealership. Many dealerships have their own legal counsel. Have your legal counsel or trusted advisor review your completed loan packages for compliance. u  Stick to a schedule. A quarterly review of your compliance concerns could drastically reduce the risk to your dealership. If nothing else, the current regulatory environment provides ample motivation for creating a compliance regimen within your dealership. But the fact is it’s just good business to provide up-to-date documents that give your customers and lenders the correct disclosures, rights and privileges under the laws.

BY CHET HEUGHAN CHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW. WOLTERSKLUWERFS.COM.

JANUARY/FEBRUARY 2014

NIADA’s Certified Master Dealer course will travel to sunny Florida January 18-20. The class will be held at Hilton Tampa Airport in Westshore. Also look for a CMD class near you! The CMD program helps dealers manage and grow their businesses. It has become one of the industry’s most respected training programs. Be proactive in growing your business! Dealers who attend this training bring a wide range of experience to each class and leave with new strategies for analyzing their business practices and increasing their bottom line. Topics include general management and increasing your effectiveness as a business professional and your company’s leader; financial management and how an extensive analysis of your financials will guide your decision-making and marketing and merchandising strategies and the basis for each. Instruction is provided by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling management and training experience. “I wasn’t sure what to expect from the class because after being in this business for over 10 years, I began to fool myself into thinking that as president and CEO I already knew everything about the car business,” said Michelle Groover of Members Auto Choice (Lawrenceville, Ga.). “Boy, was I wrong!” Eric Freeman, President of Freeman Motor Company (Portland, Ore.), asks, “Can you afford to keep doing things the way you’ve always done them?” Registration for the Florida class is now open. CMD classes are also scheduled in Alabama, Virginia and Iowa. For more details and to register, contact Georgia Brown at Georgia@ niada.com or visit www.niada. com/certified_master_dealer. php. w w w. c i a d a . o r g 12/20/13 1:11 PM


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