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• THE RISKS OF NOT KNOWING THE RULES • THE CARLAWYER • COMPLIANCE OVERDRIVE

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INDUSTRY RESOURCES

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MAGAZINE CONTENTS 04 06 14 16 22

Letter from the President The CarLawyer Negative SEO? Risks of Not Knowing the Rules Compliance Overdrive

WHAT’S NEW AUTOMOTIVE INDUSTRY NEWS & SPECIAL MONTHLY PROGRAMS

WEAR WHAT YOU WANT. WE CAN’T SEE YOU.

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

KNOW WHERE TO LOOK FOR RECALL INFORMATION ON VEHICLES

Vehicle dealers needing information on factory recalls can visit www.recalls.gov or find manufacturer toll-free numbers by going to www.autopedia.com/html/HotLinks.html and making contact with the respective automaker. Know what recalls are pending on vehicles before you purchase them and give your customers peace of mind by checking out possible recalls before you retail the vehicle.

FOR FURTHER INFO PLEASE VISIT WWW.SAFERCAR.GOV.

SALES • OPERATIONS • F&I • REMARKETING • COMPLIANCE • LEGAL/REGULATORY • SPECIAL FEATURES • INDUSTRY EVENTS

www.niada.tv

INVESTIGATIONS INFORMATION LINE

TOLL FREE: 1-866-908-4636

ADVERTISERS INDEX

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.

ADESA........................................ Inside Front Cover Ally.....................................................................11 Auto Search Technologies...................................16 AutoTrader.com......................................Back Cover CarMax Auctions.................................................13 Chase.................................................................12 Dealer Center....................................................... 9 Dodah.com........................................................... 7 Manheim.com.....................................................15 Manheim Minneapolis..................Inside Back Cover Manheim Northstar......................Inside Back Cover NIADA Certified...................................................18 Protective............................................................. 5 QRP Central........................................................ 17 Voisys.................................................................22

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. As this line receives numerous calls during the day, please leave a message if the line is busy and your call will be returned promptly.

BOARD OF DIRECTORS

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© 2012 by NIADA Services, Inc. All rights reserved. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITOR Andy Friedlander • andy@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing

PRESIDENT Douglas Livy, Jr. Quality Motors of Ames, Ltd. 705 S. Duff Avenue Ames, Iowa 50010 Ph: 515-232-1780 CHAIRMAN OF THE BOARD Louise Cordes Jim Cordes Motors, Inc. 104 E. Main St., P.O. Box 68 New London, Iowa 52645 1-319-367-2271 VICE PRESIDENT David A. Farmer David A. Farmer, Inc. 1613 Franklin Center Point, Iowa 52213 1-319-849-2432

TREASURER Judy Wilson 409 E. Market Street P.O.Box 337 Panora, Ia. 50216 Ph: 641-755-4177 REGIONAL REPRESENTATIVES 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 Robert Pippert Pippert Cars & Trucks 2047 Highway T-47 P.O. Box B Gladbrook, Iowa 50635 641-473-3121

Clay Winterboer Carroll Car Credit Co. 409 E. 6th St., Box 805 Carroll, Ia. 51401 Ph: 712-792-0140 Jim Harbach J’s Auto 945 E. Main Manchester, Ia. 52057 Ph: 563-927-2811 Doug Wilson Lake Country Auto 409 East Market St. P.O. Box 341 Panora, Iowa 50216 641-755-3048

Jeff Schneider Pocahontas Sales & Service 205 E. Elm Ave. P.O. Box 66 Pocahontas, IA 50574 712-335-4470 Kim Nelson Nelson Automotive LLC 300 Sandpiper Court P.O. Box 466 Polk City, IA 50226 515-984-9600

Administrative Offices 409 East Market Street P.O. Box 337 Panora, Iowa 50216 Linda Kilgore Ph: 641-755-4177 Kilgore’s Enterprises Inc. Fax: 641-755-3247 501 E. Townline Email: iiada@netins.net Creston, IA 50801 Toll Free: 866-962-9202 641-782-5512

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Letter from the President Dear fellow dealers, It’s nice to see some smiling faces at the sales and hear a good tone to your voices on the telephone. It seems a lot of you are enjoying a run on sales the past couple of weeks. I don’t know the reason for the jump. I thought things would perk up after the election, but it seems to have started early. Prices at the auction still seem to outpace the NADA book, but what’s new there? It seems the book prices have trended down while the ring sales have stayed strong on 5-6 year old vehicles, though late model vehicles have taken a downward trend. Keep in mind the 2013 models are out, so everything is a year older. It also seems banks and credit unions are buying a little stronger on the used vehicle side. The new car factories seem to be keeping rates down and that affects used vehicle rates. Remember, you need to work every deal as if it were the last deal. Don’t ask your customer when he can stop in – ask when you can bring the vehicle up to his house. It’s always easier to sell them on their home turf. Test drive it back to the car lot and write up the deal. Think outside the box and you will write more deals every week, month and year. You will see your income go up weekly, monthly and yearly. Remember, if you sell one more car per week, that’s 52 more vehicles in a year and that would increase your income about $15,000 to $16,000. Nice increase, you would have to say – plus everybody would have a smile on their faces. Sincerely and good selling, Doug Livy IIADA President

R E V I E W YO U R A D V E R T I S I N G T O E N S U R E I T I S B E I N G D O N E C O R R E C T LY A N D C O M P L I E S W I T H T H E L AW

What Happens When You’ve Done Something Regulators Frown On Sometimes an auto dealer can face problems when a consumer makes a complaint to regulators against the dealership, or when something obviously noncompliant has caught the attention of the attorney general or the Department of Transportation. Iowa auto dealers are quite fortunate that our regulators are very business-friendly and often work with dealers to help them understand what they have done wrong so the dealers have the opportunity to correct it. Recently a dealer was sent an “enforcement letter” by the Iowa attorney general’s office relating to advertising. The dealer had placed ads on Craigslist without identifying himself as a dealer and failed to use the dealership’s landline. The “enforcement letter” sent to the dealer by the Consumer Protection Division of the Iowa AG’s office looks something like this: Dear Mr. Dealer: I am writing regarding the enclosed advertisements of vehicles offered for sale by your dealership. The advertisements violate Iowa law in two respects. First, an administrative regulation of the Iowa Department of Transportation,

applicable to licensed Iowa motor vehicle dealers, requires that dealers advertise the names of their dealerships in all advertisements. A copy of that regulation, 761 IAC 425.24(2) (322) is enclosed. An investigation by Iowa authorities confirms that the advertisements were placed by your dealership. In addition, it is the position of this office that the advertisements fail to comply with the Iowa Consumer Fraud Act, Iowa Code section 714.16, in that they omit to disclose the material fact that the seller is a motor vehicle dealership. Violations of the Consumer Fraud Act are pursued by this office and subject those found by a court to be in violation to civil penalties of up to $40,000 per violation, plus other civil relief. Therefore, please be advised that any further advertisements of your dealership, in any format, that fail to state the name of your dealership in compliance with applicable Iowa law may result in enforcement action by appropriate authorities, and without further notice to your dealership. We will appreciate your future compliance. Department of Justice – Attorney General Consumer Protection Division

We want to emphasize that investigations are performed to substantiate infractions that have occurred. The investigations are very time-consuming and thoroughly look at the problem at hand. If you receive this type of communication, it is wise to review your advertising to ensure it is being done correctly and complies with Iowa law, rule and regulation. Remember, you, the dealer, are responsible for all of your advertising, how it is written up and the inclusion of any compliance requirements. You are the one who will be fined should it be proven in court that you violated Iowa law. Enforcement letters are open records advising the dealership of a violation and that further violations might lead to enforcement action. Enforcement letters are not given press coverage, whereas when lawsuits are filed by a regulator or settlements and/or judgments are obtained, the regulator will issue a press release to notify the public of such an occurrence. JW

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L E G I S L AT I V E A N D R E G U L AT O R Y H I G H L I G H T S

The CARLAWYER 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 is not even close to being every recent development. We select those we think are important or interesting to car dealers. Note that this column does not offer legal advice. You should consult your dealership lawyer with any legal questions. We include items from other states. Why? We want you to be able to see new legal developments and trends. Also, another state’s laws might be a lot like your own state’s laws – if AGs or plaintiffs’ lawyers are pursuing particular types of claims, those laws and claims might soon appear in your state. As always, though, there is no substitute for checking with your own lawyer before you rely on anything we report or if you have any questions.

Federal Law What do you think of the CFPB’s fiveyear plan? On Sept. 25, the Consumer Financial Protection Bureau posted a draft strategic plan for the years 2013-2018 on its website and was seeking comments until Oct. 25. The draft plan sets forth four strategic goals of the CFPB: preventing financial harm to consumers while promoting good practices that benefit them; empowering consumers to live better financial lives; informing the public, policymakers and the CFPB’s own policymaking with data-driven analysis of consumer finance markets and consumer behavior; and advancing the CFPB’s performance by maximizing resource productivity and enhancing impact. The CFPB predicted that, by adopting these goals, it will encourage the development of a consumer finance marketplace in which customers can see prices and risks up front and easily make product comparisons; in which no one can build a business model around unfair, deceptive or abusive practices; and that works for American consumers, responsible providers and the economy as a whole. The time for comment has already passed. So what does this mean to dealers?

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It means the CFPB plans on sticking around, even if there is a Republican president, a Republican Congress and a conservative U.S. Supreme Court – not that we’re predicting the outcome of any election. The bureau will continue to encourage clear disclosure of prices and risks associated with financial products and services and engage in enforcement actions and rulemaking designed to prohibit unfair, deceptive or abusive practices. It means it’s time to clean the house, because your mother-in-law is here to stay. The CFPB takes its third major enforcement action: In early October, the CFPB announced an enforcement action with orders requiring three American Express subsidiaries to refund an estimated $85 million to approximately 250,000 customers for illegal card practices, and to pay more than $27 million in civil monetary penalties. In its press release, the CFPB indicated the action was the result of a multi-part federal investigation that found at every stage of “the consumer experience,” from marketing to origination, servicing and debt collection, American Express violated consumer protection laws. The Federal Deposit Insurance Corporation and the Utah Department of Financial Institutions discovered the alleged illegal activities during a routine examination of an American Express subsidiary, the American Express Centurion Bank. The FDIC transferred parts of the investigation to the CFPB when the bureau opened its doors last year, and the agencies worked together to resolve the matter. Alleged violations include deceptive sales of a credit product, the imposition of illegal late charges, age discrimination, consumer reporting failures and misleading debt collection practices. That enforcement action comes on the heels of actions against Capital One and Discover. In July, the CFPB announced its first public enforcement action with an order requiring Capital One Bank (U.S.A.), N.A. to refund approximately $140 million to two million customers and pay an additional $25 million penalty to the CFPB’s Civil Penalty Fund. The action resulted from an examination through the CFPB’s supervision process that

identified deceptive marketing tactics used by Capital One’s call-center vendors to pressure or mislead consumers with low credit scores or low credit limits into paying for “add-on products,” such as payment protection and credit monitoring, when they called to activate their credit cards. On Sept. 24, the FDIC and CFPB announced they had issued an order requiring Discover Bank to refund approximately $200 million to consumers and pay a $14 million civil penalty for using deceptive telemarketing and sales tactics in connection with various credit card “add-on” products. Specifically, the agencies alleged that the telemarketing scripts Discover used for selling the company’s payment protection, credit score tracking, identity theft protection and wallet protection products misled consumers about whether there was a charge for the products, misled consumers about whether they had actually bought the products, enrolled consumers without their consent, and withheld material information about eligibility requirements for certain benefits. The order also required Discover to institute changes to its telemarketing of those products and to submit to an independent auditor who will report to the CFPB and FDIC on Discover’s compliance with the order. Those are the first in what will probably be a string of enforcement actions. As the CFPB enacts regulations defining larger participants and the online and offline complaint processes take shape, the pool of enforcement targets will expand. We suspect some of our dealer friends might be swimming in that pool. What in the world is a CID? On Sept. 21, the CFPB blogged about CIDs. That is a “civil investigative demand.” The CFPB uses CIDs to gather information relevant to an investigation. A CID is authorized by law and issued to people and institutions that might have information sought by the CFPB. A CID consists of a list of questions and requests documents, paper and electronic, to be used in the investigation. The CFPB isn’t the first federal agency to issue a CID. The Federal Trade Commission has been using them for years. In its blog, the CFPB said it carefully considers what to request in each CID. C O N T I N U E D O N PA G E 8

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| THE CARLAWYER INDUSTRY NEWS

We’ve seen a number of CIDs and “careful consideration” is not the first thought that comes to mind. While CIDs typically do not ask for the middle name of your first-born son, the information requested is quite expansive and required to be provided to the CFPB in a particular format in a very short time. Dealer groups have already spent a great deal of money and time responding to the requests. A recipient of a CID can challenge a CID by petitioning the CFPB’s director. The director can respond in three ways: he can reaffirm the information request, modify the demand or set it aside altogether. Recently, PHH Corporation, a mortgage lending company, petitioned to modify or set aside a civil investigative demand, claiming the CID failed to identify the “nature of conduct constituting the alleged violation that is under investigation,” as required by law. Further, PHH claimed the CID was overly broad and unduly burdensome. In his first response, director Richard Cordray ordered PHH to comply with the civil investigative demand within 21 days. Litigation Arbitration clause on back page of RISC deemed unenforceable: When a consumer bought a car, he signed a retail installment sale contract with an arbitration clause on the back page that the dealership did not show or otherwise mention to the consumer. When the consumer sued the dealership, the dealership moved to compel arbitration, and the consumer countered that the arbitration clause was unconscionable. The trial court denied the motion to compel arbitration, and the Court of Appeal of California affirmed, finding the clause both procedurally and substantively unconscionable. Procedurally, the appellate court found there was both oppression in the bargaining process and surprise regarding the inclusion of the clause. The contract was on a pre-printed form, the terms of which the consumer had no opportunity to negotiate, and he was not made aware of the clause, which was “hidden” on the back page of the agreement. Substantively, the clause contained provisions that, although facially neutral, were determined by the court to be one-sided. See Goodridge v. KDF Automotive Group, Inc., 2012 Cal. App. Unpub. LEXIS 6230 (Cal. App. August 24, 2012). This is the most recent of several “antiarbitration” cases out of California. In light of a line of California cases finding the arbitration clause in form contracts procedurally and substantively unconscionable, some California contracts have been modified in an attempt to address the issues raised by those cases. Those contracts have adopted a separately signed agreement to arbitrate on the front of the contract that refers to the

arbitration provision on the reverse side, and a more conspicuous bolding of the arbitration provision to address procedural unconscionability. To address issues of substantive unconscionability, some contracts have been modified to increase the costs a creditor is willing to “front” the buyer in an arbitration; remove specific rights to appeal, relying on the FAA to govern both buyer and creditor appellate rights; and include a non-waiver of the right to arbitrate by seeking remedies such as individual injunctive relief or self-help repossession. Breach of peace in which incident between repossessor and car’s owner took place after repossession was complete: A car owner was injured when he tried to stop his vehicle from leaving the parking lot when it was being repossessed for nonpayment. He testified he approached the car when he heard the engine start and saw a person in the car. The repossessor testified he had already reversed the vehicle out of the parking spot and shifted into drive when the car owner jumped onto the hood. The car owner sued, and the trial court determined that a breach of the peace occurred during repossession. The secured creditor appealed, arguing that the evidence was legally insufficient to support the trial court’s judgment because the repossession was complete before the car owner approached the vehicle and was injured. The Court of Appeals of Texas affirmed. The appellate court found there was no conclusive evidence that the repossessor completed the repossession of the vehicle before any breach of the peace occurred. The record contained evidence demonstrating that the car owner confronted the repossessor as he was in the process of removing the vehicle from its parking place and attempting to drive it from the owner’s apartment complex. Furthermore, the repossessor did not stop the vehicle after contact with the owner. See Price Auto Sales, Inc. v. Sanders, 2012 Tex. App. LEXIS 7274 (Tex. App. August 29, 2012). 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 410-865-5411 OR VISIT WWW.COUNSELORLIBRARY.COM. COPYRIGHT COUNSELORLIBRARY.COM 2011, ALL RIGHTS RESERVED. SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (8/12) HC# 4842-2522-3440.

Sandy Not as Hard on Vehicles as Expected While the National Insurance Crime Bureau (NICB) warned of the potential for fraud regarding vehicles affected by Hurricane Sandy, The Associated Press reported the dire predictions of hundreds of thousands of flood-damaged vehicles was way off the mark. According to insurance claim data reviewed by AP, about 38,000 claims have been received by five major insurance carriers in the area, far fewer than expected. Early estimates predicted the storm that hit the densely populated Northeast to result in more damaged cars than the 600,000 affected by Hurricane Katrina, which hit the Gulf Coast in 2005. NADA senior analyst Larry Dixon said as many as 200,000 vehicles could end up scrapped because of the storm. But that apparently is not the case, said Frank Scafidi, a spokesman for the National Insurance Crime Bureau, an insurance company group that monitors fraud and other trends. He said insurers watched by his group are logging far fewer claims than they did with Katrina. “It doesn’t translate to there’s going to be 2, 3, 400,000 cars out of this thing just because this is such a huge geographic storm,” he told AP. Even if there are fewer than expected, there are likely to be more flood-damaged vehicles on the market than normal, and many won’t be labeled as such when they are sold in the wholesale or retail markets. “Unscrupulous salvage operators and dealers often try to conceal from potential buyers the fact that vehicles have been damaged by a natural disaster,” NICB president and CEO Joe Wehrle said. After Katrina, NICB established VINCheck, a free service that allows individuals to check if a vehicle has ever been declared as salvage by one of NICB’s member insurance companies. VINCheck is available at www.nicb.org.

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YOUR VOICE HEARD: A BLUEPRINT FOR SUCCESS BY STEVE JORDAN

NIADA CHIEF OPERATING OFFICER

H O W C A L I F O R N I A’ S B U Y H E R E - PAY H E R E L E G I S L AT I O N G A LVA N I Z E D T H E I N D U S T R Y

Since the passage of the Wall Street Reform and Consumer Protection Act in 2010, also known as the Dodd-Frank Act, federal and state regulators have been clamoring with interest in the financial arm of the automotive industry – specifically, the Buy Here-Pay Here (BHPH) segment. The interest in BHPH hasn’t been limited to only regulators, but has also been fueled by state legislators, the media and some consumer advocate groups. It’s been a year since the Los Angeles Times published a three-part series profiling a largely one-sided portrayal of BHPH. Within weeks, three bills were introduced in the California legislature that sought to impose a wide, sweeping choke-hold on BHPH operators in the state. Until then, not many outside the industry had taken a real interest in following the operational complexities of BHPH. Suddenly, for the first time in a very public way, BHPH was under a microscope and the legislative die was cast. Many were asking if it was really possible that those bills were written as a knee-jerk reaction to the series of overly sensational L.A. Times stories. The answer, unfortunately, is yes. Welcome to the age of legislative recklessness, in which public policy can be conjured up by the media, hoping to unfairly influence business law in the name of consumer protection. As automotive dealers, financiers and other industry stakeholders pulled up chairs to watch the drama unfold in California, many BHPH dealers began to wonder how they would tell the intensely customer-service BHPH story to state legislators, committee members and their staffs. There was growing concern about how the BHPH industry would come together and fight the toxic provisions in California Senate Bill 956, Assembly Bill 1447 and Assembly Bill 1534 (see sidebar).

As the committee assignments in the California Senate and Assembly were being handed down, the Independent Automobile Dealers Association of California (IADAC), NIADA’s state affiliate, began to lay the groundwork for its approach to the legislative campaign. Generally, NIADA doesn’t engage in state legislative activities – that is normally directed by our state associations – but given the far-reaching and restrictive nature of the California bills, it was decided that NIADA would participate heavily. With each passing committee hearing, it became more apparent the fate of the bills was being dictated by party-line votes, and our direct opposition to the premise of the bills was falling on deaf ears. Much of the committee testimony we saw in support of the bills consisted of consumers telling customer service stories that would not have been solved by the bill’s provisions. One car buyer complained that a car she bought with four mismatched tires was unreliable. She took the vehicle back to the dealer and ultimately got her money back for the car. Problem solved. Yet supporters of SB 956 claimed that capping interest rates and limiting asset recovery for BHPH dealers would have somehow given this customer additional recourse to solve her problem. A problem that was easily resolved by her dealer once he knew about it. The bills raced through the Democratic-controlled Senate and Assembly, and in April we realized the traditional lobbying efforts in which we were heavily engaged needed to be augmented by additional public relations support, and the fragmented BHPH voice needed to be unified. During a meeting at the National Alliance of Buy Here-Pay Here Dealers (NABD) Conference that month, Ken Shilson asked that NIADA lead

a discussion with the various BHPH industry stakeholders to determine ways we could all work together more collaboratively, since we were all interested in the same outcome. During that meeting, representatives from NIADA, NABD, DriveTime, J.D. Byrider, CarHop, Hudson & Cook and a recently formed group of concerned independent BHPH dealers – most of whom are NIADA members – called the Community Auto Finance Association, all gathered and aired their feelings, concerns and desires to work together for a common cause. We realized we were stronger collectively than individually. And so a more unified voice was agreed on, and the final piece to winning the fight in California was in place. The coalition decided NIADA would take the lead position. Not wasting any time, NIADA’s newly formed ad hoc BHPH “coalition” raised nearly $100,000 and enlisted the help of a public relations firm to tell the BHPH story and show that auto dealers were not the only business concerns in the state opposed to the bills. IADAC’s lobbyist, Bill Dohring, and executive director, Larry Laskowski, continued to march the halls of the legislature and work with officials at the DMV and Department of Corporations. Dealers were expected to be against the bills, but many local and county government officials, Chambers of Commerce and concerned consumers began to voice their opposition as well. We formed the “Coalition to Protect Our Freedom to Drive,” complete with a website and Facebook profile. As our opposition support grew, we began to ask legislators to look more closely at how the passage of the bills would impact state sales tax revenues. We called for a fiscal impact study. Based on our internal industry data and preliminary research, NIADA determined C O N T I N U E D O N PA G E 1 2

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YOUR VOICE HEARD:

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that losses in revenue for California could range anywhere from $220 million to $330 million dollars annually. That was corroborated by California’s Board of Equalization, which agreed that such revenue losses would have a devastating downstream effect for county and local governments that rely heavily on state funding for basic constituent services like police and fire protection. Additionally, we voiced our concern that the passage of the bills would in fact be a violation of the equal protection clauses of the constitutions of California and the United States – asking one segment of the auto industry to play by operational guidelines that do not apply to the entire industry. That was an argument we were preparing to make in the courts, if necessary, in opposition to SB 956. Concerned mostly with blocking the inherently overreaching restrictions on BHPH dealers proposed in SB 956, we focused less on AB 1447 and AB 1534. Though we fundamentally opposed all three bills, our BHPH coalition felt there were provisions in AB 1447 and AB 1534 that would make sense to protect consumers and would not unduly impede BHPH operations. Ultimately, all three bills passed the

legislature by the end of August and were sent to Gov. Jerry Brown for final passage or veto. Our focus then shifted to lobbying the governor, his chief legislative counsel and the state agencies charged with providing regulatory oversight to the industry on passage. On Saturday, Sept. 29, 2012, a day before his veto power was set to expire for this year’s legislative session, Gov. Brown vetoed SB 956 saying he was “not yet convinced the evidence merits the regulatory oversight of this bill.” NIADA couldn’t agree more! With one stroke of the pen, SB 956 was dead. For now, we all breathed a collective sigh of relief. As for the media and consumer advocates, they claimed victory for passing AB 1447 and 1534. NIADA is fine with that – we did not see those new laws unduly impeding BHPH operators. After the veto, the L.A. Times reporter who wrote the original series of articles wrote, “BHPH dealers congratulated one another on Sunday, and credited a lobbying effort that had little impact on lawmakers but apparently caught the governor’s ear.” Again, we couldn’t agree more. Clearly, our lobbying efforts were never given

credence by California’s legislators because they were either unwilling or incapable of seeing what the governor saw. To provide common-sense consumer protection, you don’t have to do it at the expense of devastating small business. In the end, Gov. Brown’s veto gave everyone what they wanted. The consumer advocates received additional protection that NIADA in fact believes BHPH dealers should be offering their customers, and the industry was shielded from excessive, businessending rulemaking that would have ironically led to less access to affordable transportation for the very consumers the legislators and media were trying to protect. Should similar issues arise next year, NIADA will be prepared to enter the fray to protect our members again. Most importantly, let’s not forget this would not have happened without the combined efforts of the industry’s stakeholders working together nationally and in California, marshaling our resources and making our collective voice heard on behalf of our dealers and their customers.

BY STEVE JORDAN

NIADA CHIEF OPERATING OFFICER

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DETAILS OF THE CALIFORNIA BILLS

Here’s a look at the requirements of Senate Bill 956, Assembly Bill 1447 and Assembly Bill 1534: SB 956 Would have required BHPH dealers to: • Cap interest rates at 17 percent plus the fed rate (currently one-fourth of 1 percent). • Obtain a license under the California Finance Lenders Law and be regulated by the Department of Corporations. • Allow an account to become 16 days past due before initiating recovery or repossession of their asset. • Use a licensed repossession agency to physically repossess a vehicle. • Limit repossession and recovery fees to $500 on past due accounts. Those fees could not be collected within 45 days.

ECONOMIC NEWS

Economic Census Coming Soon In November and December, more than 4 million American businesses, including 740,000 retailers, will receive 2012 Economic Census forms. Responses to the questionnaire are required by law to be returned by Feb. 12. Every five years, the government conducts the Economic Census to develop a comprehensive portrait of American business, from the national to the local level, relying on timely and accurate data. The U.S. Census Bureau has created a web page __ business.census.gov __ to provide information about the Economic Census as well as statistics businesses can use to assess and grow their business operations. The site includes webinars and videos to educate businesses about the census and what it means to them, as well as a section geared toward small businesses. FO R MO R E I N FO R MAT I O N , V I SI T BU SI N ESS. C EN SU S. G OV.

AB 1447 Requires BHPH dealers to: • Provide customer disclosure of the use of GPS or starter-interrupt devices on vehicles sold. • Provide a 30-day/1000-mile limited warranty on every vehicle sold. AB 1534 Requires BHPH dealers to: • Affix a label on any used vehicle being offered for retail sale that states the reasonable market value of that vehicle. Definition of BHPH Dealer A “Buy Here-Pay Here” dealer is a dealer, as defined in Section 285, who is not otherwise expressly excluded by Section 241.1, and who does all of the following: (a) Enters into conditional sale contracts, within the meaning of subdivision (a) of Section 2981 of the Civil Code, and subject to the provisions of Chapter 2b (commencing with Section 2981) of Title 14 of Part 4 of Division 3 of the Civil Code, or lease contracts, within the meaning of Section 2985.7 of the Civil Code, and subject to the provisions of Chapter 2d (commencing with Section 2985.7) of Title 14 of Part 4 of Division 3 of the Civil Code. (b) Assigns less than 90 percent of all unrescinded conditional sale contracts and lease contracts to unaffiliated third-party finance or leasing sources within 45 days of the consummation of those contracts. (c) For purposes of this section, a conditional sale contract does not include a contract for the sale of a motor vehicle if all amounts owed under the contract are paid in full within 30 days. (d) The department may promulgate regulations as necessary to implement this section. The term “buy-here-pay-here” dealer does not include any of the following: (a) A lessor who primarily leases vehicles that are two model years old or newer. (b) A dealer that does both of the following: (1) Certifies 100 percent of used vehicle inventory offered for sale at retail price pursuant to Section 11713.18. (2) Maintains an onsite service and repair facility that is licensed by the Bureau of Automotive Repair and employs a minimum of five master automobile technicians that are certified by the National Institute for Automotive Service Excellence. w w w. i o w a i a d a . c o m

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COVER STORY

Negative campaigning isn’t limited to politics – your competitors could be sabotaging your website

Negative SEO? When you first hear the words “Negative SEO” you probably think it sounds like an oxymoron. You know, like living dead, original copy, dark light or accidentally on purpose. But two items that don’t seem to mesh are finally doing so. During this election year, we have all seen the dirty tricks politicians have played on each other – negative smear campaigns and truth spinning. But don’t think those tactics are isolated to politics. In the automotive industry, there are growing numbers of companies that like to play dirty as well, and if you are not aware of it yet, you need to continue reading. With the constant uphill battle of your competition “flagging” your ads on Craigslist or leaving negative reviews on listing services such as Dealerrater .com, Google Places or even Merchant Circle, the war has just become a bit more complicated. “Negative SEO” can mean any type of malicious harm intentionally caused to hurt the placement of a website’s search engine rankings. The thought process is, if you can’t become No. 1, then sabotage all of those ahead of you until you are No. 1. Forcing one website to appear lower in the SERP (search engine rank placement) means other websites will climb higher in the SERP. That’s why negative SEO is considered a viable model by unethical website providers and online marketing companies. The most common form of negative SEO is accomplished by linking a website to low-quality, unrelated businesses. Those are called “black-hat” links – they’re the bad guys. Links are among the most important items when it comes to SEO (search engine optimization), but you want to make sure related industry businesses are linking into your website. Links can pass value to your website when done the right way. Links can harm your website when done the wrong way.

There are two types of linking that can be done with any website: internal linking and external linking. Internal linking is linking to resources inside your website/domain, while external linking links to web pages or other resources outside your website/domain. A link on another website that points to your site can either have value to it and help your site or it can have a negative effect on your website and hurt you. External links that point to your site are a common way negative SEO is applied, and it is very hard to see because it all happens away from your site and is nearly invisible. Related incoming business links: You might have heard the term “link swapping.” That’s when a business asks you to place a link to it on your website in exchange for a link from its website. That can be beneficial if the business is in the same industry as you are. For example, if a used car dealership swaps links with an auto repair/service facility, a towing company or a tire sales business. There is a reason for you to swap links because you are helping your customers navigate to a product or service that you might not offer that could be considered helpful. Value can be associated to both websites in that process. Each of the links from the other website that points to your website counts as an “incoming/inbound link” to your site. Other related links that can qualify are from third-party paid listing services, social media outlets, online video channels and business directory listings. If you are link swapping with other businesses, you always want to make sure the links you are pointing to are valid websites that are still in business. If you are linking to an off-line website, or “dead link,” as it is called, it can easily wipe out the value of hundreds of positive links. Disassociated business links and unnatural links: Disassociated

links are considered an attempt to try to boost the ranking of your site for the sole purpose of increasing your position. Some businesses think all links are good links. Right? Wrong! Make sure links pointing to your website are within your general industry – stay away from disassociated links, such as linking a used car dealership with, say, a flower shop, a hardware store or a movie theater. In addition to disassociated links, there are companies referred to as “link farms” that advertise they’ll sell you hundreds or thousands of incoming/inbound links, which are referred to as “backlinks.” The companies will point those links to your website for a monthly fee. Most of the time, the companies will claim the links they provide will be within the same industry as your business, but there is no real way to guarantee that. Google recently released an update called the Penguin that in part identifies websites in the link farm business that offer unnatural links. If you are found on the receiving end of those links, you could have some serious issues with your online placement. Because there is nothing to keep a competitor from signing up your website’s URL with those kinds of companies, and the links do not appear on your website, that style of attack can easily go unnoticed. Be aware of who is linking to you. Periodically looking into what links are being directed to your website can help detect negative SEO campaigns that have been launched against your business, as well as identify any links that are unrelated to your industry. There are many free websites you can use to check for backlinks. A good free site to check is www.ranksignals.com, which allows you to identify the total number of backlinks as well as get a page rank of the links that are pointing to your website.

BY MICHAEL D. JACKSON CEO OF AUTO SEARCH TECHNOLOGIES, INC. HE CAN BE REACHED AT (949) 608-0809 OR CEO@AUTOSEARCHTECH.COM.

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B E AWA R E O F T H E R E G U L AT I O N S T H AT G O V E R N YO U R A D V E R T I S I N G A N D R E V I E W YO U R A D S F O R C O M P L I A N C E

Do You Know the Risks of Not Knowing the Rules?

A recent court opinion illustrates the mischief a dealer’s advertisements can cause and the expense a dealer is likely to incur if the authorities decide to yank the dealer’s chain over advertising content. A New Jersey-based used car dealership has been ordered to disclose damage to and prior use of the vehicles it is offering for sale, after the attorney general and the New Jersey Division of Consumer Affairs sued the dealership. The state alleged Lencore Leasing, Inc., which does business as North Jersey Auto Mall and DCH Motors, and owner/operator Lenny Belot violated the Consumer Fraud Act, Used Car Lemon Law and motor vehicle advertising regulations in their advertisement, offering for sale, and sale of used motor vehicles. A superior court judge recently granted the state’s request to stop the dealership from advertising and selling used vehicles without disclosing prior damage and/or prior use, pending a hearing on the state’s request for preliminary injunctive and other relief. The judge also granted the state’s request for the appointment of a temporary monitor for the dealership. “Used cars are not inexpensive,” Attorney General Jeffrey S. Chiesa said. “Consumers who are spending thousands of dollars for a used vehicle are legally entitled to be told if the vehicle has sustained prior damage or if it’s

been used as a fleet or rental vehicle.” The state’s complaint identified 51 used vehicles the defendants allegedly offered for sale that, by the state’s calculation, had a cumulative $213,758 in undisclosed damage. The state also alleged that, in some instances, consumers were told vehicles were “absolutely mint in and out,” or were “in pristine condition” when that was not the case. The opinion dealt only with a motion by the state to regulate the dealer’s actions pending a hearing on the state’s motion for injunctive relief. So it is possible that as the matter proceeds we’ll find out there are facts more favorable to the dealer. But that’s down the road a bit. Right now, we’re looking at a dealer who has been hauled into court and ordered to stop doing things the attorney general characterizes as being illegal. The dealer has had his reputation impugned and presumably has incurred the cost of hiring a lawyer and going to court to defend against the state’s claims. Before the matter is resolved, it’s likely the AG will seek to recover for consumers the estimated dollar amount of the undisclosed damage and will attempt to impose monetary penalties as well. To add insult to injury, the AG might also seek to stick the dealer with the AG’s own costs of litigation, as well as court costs.

The aggregate sum of all of those amounts would be an expense that would put many small dealerships out of business. What do you do to avoid these dire consequences? Well, you could have a lawyer review all your ads – keep in mind that includes anything you are doing on the Internet, as well as through social media, and it especially includes anything an outside advertising or promotion company tries to sell you. You might choke at the idea of paying for such a professional review, but the amount you’ll pay pales in comparison with the recent hits dealers have taken in AG advertising enforcement actions. Fines of $250,000 are not unusual. If you aren’t convinced having the lawyer review your ads is the way to go, or you simply don’t have the resources for that, how about creating an internal advertising checklist and implementing it? Determine what advertising laws and regulations apply in your state. Go to your state auto dealers association and/or independent auto dealers association and ask if they have advertising guidelines. Many associations have such materials, and some are very good. Go to the Federal Trade Commission’s website, and glom onto the excellent advertising guideline material there. Then go to the principal federal regulations that govern advertising for credit sales and leases – Regulations Z and M – and add the advertising materials from those regulations to your pile. When you have gathered everything you can find, ask your lawyer if you’ve correctly identified all the applicable provisions and ask if you’ve missed any (I know, you’re trying not to spend bucks on lawyers, but sometimes you just have to bite the old bullet). Train someone at your dealership to be your advertising specialist. Provide that person with all of the materials you have been able to locate and give him or her enough of a budget so when questions arise over advertising requirements, he or she can call the lawyer for help. Remember that the world turns. Nothing stays the same, and that’s true for the laws and regulations that affect advertising. Schedule a periodic update of your advertising requirements. Your lawyer can help you decide how frequently it should take place. Another time-consuming, pain-in-the-rear compliance requirement? Absolutely. More expense? Yup. But there is no alternative, unless you count closing the dealership before the AG does it for you, taking the money and opening that bait shop.

BY THOMAS B. HUDSON

THOMAS B. HUDSON, ESQ. (TBHUDSON@HUDCO.COM) IS 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. HE IS ALSO A PARTNER IN THE MARYLAND OFFICE OF HUDSON COOK, LLP. SPOT DELIVERY AND CARLAW ARE PRODUCED BY COUNSELORLIBRARY.COM LLC. FOR INFORMATION, CALL 410-865-5411 OR VISIT WWW. COUNSELORLIBRARY.COM.

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BUSINESSES ARE ENCOURAGED TO BEGIN E-FILING NOW

FinCEN Announces Electronic Filing for Form 8300 This fall, the Financial Crimes Enforcement Network (FinCEN) announced that a wide variety of businesses are now able to electronically file Form 8300, “Reports of Cash Payments Over $10,000 Received in a Trade of Business,� using the Bank Secrecy Act (BSA) electronic filing system. Many businesses, such as car dealers, boat dealers and art and collectible merchants, sometimes deal in large amounts of cash. Each person engaged in a trade or business that, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions must file Form 8300. The form can also be filed voluntarily for any suspicious transaction, even if the total amount does not exceed $10,000. The information contained in the reports, when added to the FinCEN database, can be cross-referenced with other FinCEN reports, such as Suspicious Activity Reports and Currency Transaction Reports, to establish

money trails and expose hidden criminal trends and patterns. Last year, FinCEN received almost 200,000 paper filings of Form 8300. E-filing is a free, web-based electronic filing system that allows businesses to submit their FinCEN reports through a secure network. The new system is faster and more convenient, secure and cost-effective. Greater use of the e-filing system also assists FinCEN in providing important information relating to money laundering and terrorist financing to law enforcement in the quickest manner possible. Paper filings of Form 8300 will continue to be accepted for the near future, though businesses are encouraged to take advantage of the benefits of e-filing now. For technical questions or assistance, contact the BSA e-filing help desk at 1-866-346-9478 (option 1) or at bsaefilinghelp@fincen.gov . The help desk is available Monday through Friday from 8 a.m. to 6 pm Eastern Time.

BY JW

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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. 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.

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.

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.

MANHEIM CHICAGO 20401 COX AVENUE MATTESON, ILLINOIS 60443 815-806-4222 Mike Cesta, General Manager

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 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) biweekly, 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. 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 MISSOURI AUTO DEALERS EXCHANGE 5912 Mitchell Ave. St. Joseph, MO 64507 816-232-7653 816-232-3019 (f) Pam and Scott Wall Consignment Sale: Wednesday, 5:45 p.m. www.moautoexchange.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. 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 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.

NEBRASKA AUTO AUCTION 7500 N. 56TH St. Lincoln, NE 68514 402-466-8477 402-466-7932 (f) www.nebraskaautoauction.com Dave LaFleur Consignment Sale: Tuesday, 10:30 a.m.

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EDUCATION IOWA USED MOTOR VEHICLE DEALER EDUCATION CLASSES FIVE-HOUR CONTINUING EDUCATION CLASS MUST BE TAKEN PRIOR TO DEC. 31, 2012 During 2012, the five-hour dealer continuing education classes will again be held at community colleges throughout Iowa. The following is an overview of the specialty classes dealers may select from: PAPERWORK, PAPERWORK, PAPERWORK This class is an excellent refresher for the veteran dealer, and beginning dealers will become familiar with every facet of the paperwork required for operating a dealership in Iowa. Attendees will learn how to properly complete titles and related documents as well as developing compliant procedures for cash sales, financed sales and wholesale sales that everyone at your dealership can follow to help ensure adherence, consistency and correctness. You will discover how to set up your dealership to meet compliance requirements at the state and federal level. Updates from the Iowa Department of Transportation, the Consumer Protection Division of the Iowa Attorney General’s office and other state and federal agencies will be reviewed. COMPLIANCE TOOLS FOR BUY HERE-PAY HERE DEALERS Participants will learn how to avoid fines and penalties. This class will provide an in-depth discussion of policies and procedures that must be followed by BHPH dealers and those considering a Buy Here-Pay Here dealership in Iowa. Advertising rules for dealerships will also be shared. Updates from the Iowa Department of Transportation, the Consumer Protection Division of the Iowa Attorney General’s office, the new Federal Consumer Financial Protection Bureau and other state and federal agencies will be reviewed. CARKNOWLOGY: FINANCING REGULATIONS AND RESPONSIBILITIES Dealers who offer consumer financing and those considering making financing available should take this course to understand fully how to conduct business legally, ethically and in compliance with state and federal law. Discover what lenders expect from you and your customers regarding compliance with sales, consumer finance rules, regulations and law. The course will include a review of the legal requirements of selling service contracts, warranties and insurance products, plus the importance of working with reputable providers. You will take part in a hands-on review of all legal requirements and document preparation for the sales of motor vehicles when lenders are involved. Updates from the Iowa Department of Transportation , the Consumer Protection Division of the Iowa Attorney General’s office, the new Federal Consumer Financial Protection Bureau and other state and federal agencies will be reviewed. ENVIRONMENTAL AND SAFETY COMPLIANCE DNR, EPA AND OSHA Requirements: If you think you are exempt, think again. This course will be beneficial to dealers who have service

departments, body shops and those who have a used motor vehicle dealer license coupled with a recycler’s license. If you have employees, you will want to become better aware of these state and federal compliance issues. Updates from the Iowa Department of Transportation, the Consumer Protection Division of the Iowa Attorney General’s office and other state and federal agencies will be reviewed. Class locations, times and course numbers will be posted on the IIADA website (www.iowaiada.com) and will be included in Street Smart magazine throughout 2012. Weather could be a factor, so please listen to local radio stations to insure the class will be held. If you arrive more than 15 minutes late, the community college may ask that you register for a future class. If you have any special needs, please let the community college know when you register for a class. You may bring an interpreter to class, but please let the college know you will be doing so. Registration: Dealers will be asked to provide the following information: the class name and section number, and the participant’s social security number, date of birth, name, address, phone number, email address and credit card information. Prepayment is required. Most colleges accept VISA, Mastercard, Discover and American Express. Fees: The five-hour continuing education class cost is $159, which includes an updated manual. Monday, December 10, 2012 Des Moines Area Community College – Ankeny FFA Building, 2006 S. Ankeny Blvd., Ankeny, Iowa To Register Call: (515) 964-6800 OR (800) 342-0033 5-Hour Continuing Ed. - Carknowlogy: Financing Regulations and Responsibilities 8:00 a.m. until 1:00 p.m. – Please arrive at 7:45 a.m. FFA Bldg. Room 112 & 113 Course No. 16167 Prof 977 5-Hour Continuing Ed -. Compliance Tools for Buy Here Pay Here Dealers 1:30 p.m. until 6:30 p.m.– Please arrive at 1:15 p.m. FFA Bldg, Room 109 Course No. 16169 Prof 976 5-Hour Continuing Ed. Paperwork, Paperwork, Paperwork - 2 Classes 8:00 a.m. until 1:00 p.m. – Please arrive at 7:45 a.m. and 1:30 pm - 6:30 p.m. Please arrive at 1:15 pm FFA Bldg Course No. 16168 Prof 979 - 8:00 am Class – Room 108 Paperwork, Paperwork, Paperwork Course No. 18947 - 1:30 pm Class - Room 112

Thursday, Dec. 13, 2012, noon-5 p.m.: Kirkwood Community College, The Kirkwood Center, 7725 Kirkwood Blvd. SW, Cedar Rapids, Iowa. Please arrive at 11:45 a.m. To register, call 319-398-1022 or 800-332-8833. Course offered: Paperwork, Paperwork, Paperwork (Course No. CBBC-2050-25427), Room 123 Friday, Dec. 14, 2012, 8 a.m.-1 p.m.: Kirkwood Community College, The Kirkwood Center, 7725 Kirkwood Blvd. SW, Cedar Rapids, Iowa. Please arrive at 7:45 a.m. To register, call 319-398-1022 or 800-332-8833. Courses offered: Carknowlogy: Financing Regulations and Responsibilities (Course No. CBBC-2060-25429), Room 122; Compliance Tools for Buy Here-Pay Here Dealers (Course No. CBBC-2040-25431), Room 123 Tuesday, Dec. 18, 2012, 8 a.m.-1 p.m.: Kirkwood Community College, The Kirkwood Center, 7725 Kirkwood Blvd. SW, Cedar Rapids, Iowa. Please arrive at 7:45 a.m. To register, call 319-398-1022 or 800-332-8833. Course offered: Environmental and Safety Compliance (Course No. CBBC-201525433), Room 124 Dealer Questions and Answers The DOT has requested that Iowa dealers submit their dealer license renewal papers by Dec. 1, 2012, primarily so dealer plates can be sent before the end of the year. Other frequently asked questions: When do the current dealer licenses and plates expire? Dec. 31, 2012. Titles cannot be transferred after that date unless the license has been renewed. Privileges to operate as a dealer end on Dec. 31, 2012 if you have not renewed before that date. The five-hour dealer education class must be taken prior to submitting your dealer license renewal paperwork. If I have sent in my renewal papers and have not received my new dealer plates by Dec. 31, 2012, can I use my old dealer plates? No. Your dealer plates are manufactured by Prison Industries, whereas the dealer license is printed and mailed by the Iowa Department of Transportation after the renewal papers are processed. The dealer license will come quicker than the metal plates. A dealer can request temporary paper plates from the Iowa DOT if needed. If you have further questions regarding your renewal, call 515-237-3110 or email vehser@dot. iowa.gov.

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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

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.

2564 W. Main St., P.O. Box 569 Canton, New York 13617 Phone: 888-963-5369 Fax: 888-963-3366 E-mail: ucd@FrazerComputing.com National Rep: Mike Frazer Dealer Management Software for Used Car Dealers

FRAZER COMPUTING, INC.

Contact: Scott Erikson, Iowa Rep 100 Prairie Center Drive, Suite 200 Eden Prairie, Minnesota 55344 Scott Erikson: 402-639-0664 serikson@adgtoday.com

AUTOJINI.COM

GLOBE ACCEPTANCE INC

AUTOMOTIVE DEVELOPMENT GROUP, LLC

GOLDSTAR GPS

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

Dealer Compliance Education, F & I Compliance and Training, Service Contracts, GAP and Protective Coatings Contact: Scott Erikson 100 Prairie Center Drive, Suite 200 Eden Prairie, Minnesota 55344 Scott: (402) 639-0664 serikson@adgtoday.com

CITIZENS COMMUNITY CREDIT UNION

Sub-prime Lender Contact: Sarah Grisham P.O. Box 65400 West Des Moines, Iowa 50265 Phone: 515-225-9067 globeaccepts@globeacceptance.com Website: www.GlobeAcceptance.com 2093 20th Ave. S.E. DYERSVILLE, IOWA 52040 PHONE: 866-655-8825 Ext. 120 Fax: 866-655-8285 Contact: Mark VanDyke e-mail: markv@goldstargps.com Website: www.goldstargps.com

GREATER IOWA CREDIT UNION

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

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

CORCORAN & ASSOCIATES INC.

INNOVATIVE DEALER SERVICES, INC.

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

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

JR 5 TRANSPORTATION Transport Services John Robinson, President 1109 S.W. 63rd Street Des Moines, Iowa 50312 515-822-3447

NADA BOOKS

Official Used Car Guides, Subscription Discounts, Annual Subscription through IIADA, Save $$ Contact IIADA at Phone: 641-755-4177 E-mail: iiada@netins.net

PROSOURCE FINANCE, LLC 3126 1044th Street 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

SECURITY AUTO LOANS (SAL) Sub-prime Lender Contact: Scott Erikson/Joe Ruhland 4900 Highway 169 N., Suite 205 New Hope, Minnesota 55428 P: 763-559-5892 F: 763-559-7549 website: www.securityal.com Scott: 402-639-0664 e-mail:serikson@adgtoday.com Joe: 612-804-0720 e-mail: joe@autofaqs.biz

ALLY SMART AUCTION

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

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 michael.novak@zurichna.com 800-344-4917, Ext. 3909 Scot Smith – Eastern Iowa Rep. scot.smith@zurichna.com Toll Free: 800-840-8842, Ext. 3944

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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 21

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COMPLIANCE OVERDRIVE

Out with the Old and In with the New?

The year’s end is a time of reflection. When it comes to auto finance and compliance challenges, the story can sound similar from year to year. There are usually a handful of new regulations facing dealers and lenders that have made a big impact on the industry over the previous 12 months. But this year doesn’t really fit the mold. That’s because 2012 arguably hasn’t been as much about new regulation as about the additional scrutiny of regulators enforcing laws that have been in place for some time. That has been particularly evident in the areas of state-specific forms, model language and loan documentation. Some recent examples suggest a trend that state regulators are taking a closer look at existing motor vehicle retail sales financing authority and transaction documentation: New Mexico: Since 2009, a New Mexico attorney general’s regulation has required creditors to provide a summary or a translation of English-language transaction documents in consumer sales negotiated in a language other than English. Its coverage is very broad and somewhat difficult to understand. This year, the New Mexico attorney general proposed additional changes to the regulation. After receiving comments, the

AG acknowledged issues with the proposed changes and with the existing regulation itself. As a result, it pulled back the changes and repealed the existing regulation to allow for further study. Michigan: Years ago, the Michigan Department of Licensing and Regulatory Affairs, Office of Financial and Insurance Regulation (OFIR) said bad check charges are not allowed in motor vehicle retail contracts in spite of statutory authority that seems to allow it. This year, the OFIR published a letter saying bad check charges cannot be collected on retail motor vehicle sales contracts unless the contract contains a bad check charge provision, indirectly reversing its prior position. The OFIR now holds that bad check charges are allowed as long as they are specifically authorized in the retail contract. Montana: The Montana late charge authority is a bit ambiguous and has been that way for many years. Because of the ambiguity, there were vastly different interpretations in the marketplace. In response to a request, the Montana Division of Banking and Financial Institutions recently published a letter clarifying its interpretation of the state statute. The apparently heightened state scrutiny might be just a coincidence. It could also be that states are demonstrating their diligence and control to the public and to the new federal Consumer Financial Protection Bureau (CFPB). The CFPB regulates dealers who don’t routinely assign their financing contracts to unaffiliated third parties. For the most part, that means the CFPB regulates Buy Here-Pay Here dealers. The Federal Trade Commission (FTC) continues to regulate the rest of the auto sales and finance industry. The net result is there are two federal regulators in the auto finance marketplace. It’s possible states are more actively clarifying and enforcing their existing laws and regulations in an effort to maintain a level of control over the auto finance industry – hoping to minimize federal oversight. In addition to reflecting on the year that has been, it’s also time to think about what might lie ahead. What will the new regulatory environment look like in 2013? Many thought the CFPB would have done a lot of regulatory change in auto financing by now, but that hasn’t been the case. One reason is it has been focused on real estate financing practices and disclosures. The CFPB also seems to be carefully studying the consumer finance marketplace – and even consumers – to lay a solid foundation for its regulatory oversight. The CFPB’s strategic plan for 2013-18 notes one of its strategies is to “develop and maintain an efficient fact-based approach to developing, evaluating, revising and finalizing regulations.” “Fact-based” is a key term. We have seen the CFPB asking good questions and conducting extensive research on areas it is

tasked with overseeing. For example, the CFPB tested draft real estate disclosure documents with consumers in shopping malls. The Dodd Frank Act requires the CFPB to research and provide policy guidance on whether arbitration provisions should be allowed in consumer credit (non-real estate) transactions. To start that process, the CFPB published a request for suggestions, data sources and strategies to study the issue. It’s also clear the CFPB is not afraid to take a fresh approach to presenting transaction information to consumers. For example, the CFPB published a proposed rule in July regarding integrated mortgage disclosures under RESPA and the Truth in Lending Act. Leading up to the proposed rule, it published a number of drafts trying various new disclosure formats and designs. That was one of the first significant proposed rules from the CFPB, and the planning process involved extensive research and solicitation of industry and consumer feedback. As a result, the proposed rule and explanatory materials are more than 1,000 pages. The upside is the CFPB is trying practical, consumer-tested ways to present information so average consumers can understand key transaction terms. The downside is the volume of information in the proposal is overwhelming. It’s hard to know when the CFPB will complete its foundation-building and begin proposing new regulations or revising existing ones that affect the consumer auto finance industry. It’s likely big changes will come to the market. It’s just unclear when. While we’re in this waiting period, dealers might feel there are a lot of variables out of their control, but the focus needs to be on the areas you can control. Since a number of states seem to be focused on clarifying and enforcing existing requirements, dealers should review and button down compliance documentation and processes to make sure they are satisfying those requirements. Additionally, reviewing and tightening transaction standards and communication within the dealership is key. Make sure your sales and finance teams are describing financing terms and options, vehicle features, and add-on products and services in a correct and consistent manner. Educate your buyers and be direct and honest about each element of a transaction and the risks each party is assuming. Investing in those areas can go a long way toward maintaining compliance now and preparing for what lies ahead.

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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IIADA Street Smart Dec 2012