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• 2012 Scholarship Winners • CFPB Expands Supervisory Activities • Consumers’ Rights Under the Holder Rule • Credit Reports: What Information Furnishers Need to Know • Owners Waiting Longer than Ever to Trade In

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The Purpose for Which MIADA was Organized R E P R I N T E D F R O M T H E M I A D A A R T I C L E S O F I N C O R P O R AT I O N , J U N E 2 2, 19 81

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MAGAZINE CONTENTS 04 06 08 10 12 16

Scholarship Award Winners FTC Charges Car Dealer Credit Reports: What You Need to Know CFPB Expands Supervision FTC Asserts Consumers’ Rights Owners Waiting Longer to Trade In

MIADA EVENTS

R  Eastern Chapter Meeting: Tuesday, October 9, 2012, 7pm, American Polish Cultural Center, Troy

R  Mid Michigan Chapter Meeting:

Contact Leon Fransisco at 517-272-5000.

R  Northern Michigan Chapter Meeting: Contact Dennis Craig at 231-938-2627.

R  West Michigan Chapter Meeting: October 15, 6:30 p.m., Brann’s Steakhouse, Grand Rapids.

ALL EVENTS ARE LISTED ONLINE AT

www.miada.org ADVERTISERS INDEX

ADESA...................................................Inside Front Cover Ally....................................................................................9 AutoTrader.com................................................Back Cover Chase............................................................................ 20 Dealer Center ............................................................... 13 Dealer Services Corp (DSC).............................................5 Dodah.com......................................................................7 Greater Kalamazoo Auto Auction................................. 19 Indiana Auto Auction......................................................14 Insurance Auto Auctions .............................................. 23 Lakeside Insurance Agency ......................................... 22 Manheim.com .............................................................. 11 Protective..............................................Inside Back Cover United Acceptance ....................................................... 21 UsedCars.com by Dealix .............................................. 15 Voisys ........................................................................... 30 Westlake Financial.........................................................17

MIADA

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.

To unite in common organization those engaged in the automobile business and others interested in said business and in the welfare of our State; To protect and promote the mutual interest of its Members; To formulate and maintain ethical standards for the guidance of its members in their relations with each other and with the public; To advocate necessary public improvements and oppose unnecessary or wasteful expenditure of public funds; To promote and encourage the enactment of just and reasonable laws and ordinances affecting the licensing, regulating and conducting of the automobile business, and to oppose the enactment of those that would be unjust and unreasonable; To correlate the activities of the National Independent Automobile Dealers Association with the Michigan Independent Dealers Association and local dealer Associations in this State.

Board of Directors CHAIRMAN OF THE BOARD Ed Ophoff Ophoff Motor Sales 2921 S. Division Wyoming, MI 49548 616-452-7761 edwoph@aol.com PRESIDENT Jerry Drouillard Autohaus 4411 Delemere Royal Oak, MI 48073 248-549-3636 gdro999@hotmail.com VICE PRESIDENT Ray Campise Certified Motors 23509 Little Mack St. Clair Shores, MI 48080 586-775-7000 sales@cmotors@gmail.com TREASURER

VACANT

SECRETARY Ted Cooper Genesys Systems 360 E. Maple Troy, MI 48083 248-597-1003 ted@gensystems.com DIRECTORS Debbie Richards Ellis Richards Motors 24900 Gratiot Eastpointe, MI 48021 586-778-0606 lilellis@ameritech.net Dennis Craig Instant Car Credit P.O. Box 146 Acme, MI 49610 231-938-2627 iccinc@charter.net Jeffrey Braatz Paradise Motors 8212 W. Saginaw Hwy. Lansing, MI 48917 517-627-3900 jeffbraatz@yahoo.com Jetre Ormsbee Ormsbee Implement 241 M-68 Hwy. East Afton, MI 49705 231-238-9928

Joe Kuhta GWC Warranty 8865 Reese Clarkston, MI 48348 248-670-1133 jkuhta@gwcwarranty.com

Robert VanCoillie Van’s Motor Sales Inc. 1507 Garfield Rd. Traverse City, MI 49686 231-995-0614 vansmotors@bignetnorth.net

Leon Fransisco Fransisco Automotive Enterprises 1835 E. Jolly Lansing, MI 48910 517-272-5000 leon@frognet.net

Tony LoBretto Alamo Valley Auto Sales 6100 West “D” Ave. Kalamazoo, MI 49009 269-344-8250 alamovalley@earthlink.net

Mike Tokie Jack’s Auto Service P.O. Box 52 Grawn, MI 49637 231-218-1978 jacksautoservice@gmail.com

EXECUTIVE DIRECTOR Nancy R. Chapman ADR of Michigan 55 E Long Lake Rd. PMB 233 Troy, MI 48085 248-828-7011 nchapman@miada.org or nancy.chapman@buyadr.com

Nigel Fox Sovereign Auto Purchasing 730 N. Main Flushing, MI 48433 810-487-2020 nkfox@aol.com Rick Rynberg Rynberg’s Car Company 3880 Holton Rd. Muskegon, MI 49445 231-744-141 rickandwendy1@verizon.net

The Driveline is a publication of the Michigan Independent Automobile Dealers Association Inc., but is also mailed to non-member dealers in Michigan in an effort to encourage them to join and support our efforts to improve the profit potential for the industry. The Driveline is published quarterly by Automotive Dealers Resource of Michigan, 55 E Long Lake Rd. PMB 233, Troy, MI and the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006. Periodical postage is paid at Arlington TX, and at additional offices. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of the Michigan Independent Automobile Dealers Association Inc., Automotive Dealers Resource of Michigan, or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of the Michigan or National Associations does not constitute an endorsement of the products or services featured. For 31 years, we have worked to represent the independent automobile dealers in Michigan. We need your support. PUBLISHER/EDITOR AT LARGE: Nancy R. Chapman FRONT COVER BY Allison Chapman Wilke STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITOR Andy Friedlander • andy@niada.com ART/PRODUCTION MGR. Christy Haynes • christy@niada.com PRINTING Nieman Printing

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C O N G R AT U L AT I O N S T O O U R 2 0 1 2 S C H O L A R S H I P R E C I P I E N T S . W E W I S H T H E M C O N T I N U E D S U C C E S S .

SCHOLARSHIP 2012 Ray Ketelhut Memorial MIADA Scholarship Award Haelee Koster is the recipient of this year’s Ray Ketelhut Memorial MIADA Scholarship award of $500. Haelee graduated from Kenowa Hills High School with a 3.857 grade point average. She was named Student of the Month multiple times at Kent Career Tech Center, where she was enrolled in graphic communication courses. Haelee was a member of a youth group that traveled to Atlanta on a mission trip. Baker College of Muskegon will welcome Haelee in the fall. She’ll work toward an associate’s degree in digital media design.

WINNERS 2012 MIADA/Greater Kalamazoo Auto Auction Scholarship Award The 2012 MIADA/Greater Kalamazoo Auto Auction Scholarship of $500 was awarded to Kasey Schwartz. Kasey graduated from Paw Paw High School with a 3.953 GPA and ranked 10th in his class. He was a member of the National Honor Society, the National Association of High School Scholars, Students Against Destructive Decisions and the ski club. Kasey participated in many musical and athletic activities during his high school career. He was a member and section leader of the varsity choir ensemble and men’s chorus as well as a member and section leader of the varsity symphonic band and jazz band. He served as drum major of the marching band as a senior. Kasey was a member of the soccer, track and crosscountry teams and was captain of the soccer and track teams as a senior. He participated in student council, acted in six musical productions with his school’s performing arts center and was enrolled in several advanced placement classes. All of his hard work throughout high school earned him achievement awards in music, athletics and academics. Kasey will attend the University of Michigan in the fall. He plans to major in engineering with a minor in music.

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

FTC Charges Georgia Auto Dealer According to a recently released Federal Trade Commission (FTC) complaint, software installed on a computer at a Georgia dealership afforded unauthorized Internet access to the dealership’s network and allowed the personal private information of 95,000 consumers to be compromised. The ensuing investigation resulted in the FTC’s first actions charging an auto dealer with violations of the GrammLeach-Bliley (GLB) Act. The complaint also alleges violations of Section 5(a) of the FTC Act. The settlement agreement proposed by the FTC does not offer the dealership an opportunity to pay a monetary fine and move on. Instead, as has been the FTC’s practice in other settlements, the proposed settlement levies the company with a multitude of security program implementations and reporting requirements, most of which continue for 20 years. Section 5(a) of the FTC Act empowers the FTC to enforce unfair and deceptive acts or practices (UDAP) involving commerce. The GLB Act is commonly referred to as the Privacy Act because it includes provisions for protection of consumers’ personal private financial information. This particular GLB Act protection for consumers is implemented through the FTC’s Privacy Rule and Safeguards Rule and applies to financial institutions. The Privacy Rule focuses on privacy notices, opt-out rights and limits on use and disclosure. The Safeguards Rule focuses on data security. The FTC alleges the dealership, which sells and leases cars and provides financing, violated certain provisions of those rules as well as the UDAP section of the FTC Act. Specifically, the FTC charged that auto dealer, Franklin’s Budget Car Sales, Inc., also known as Franklin Toyota/Scion, of Statesboro, Ga., compromised consumers’ personal information by allowing peer-topeer (P2P) software to be installed on its network, which allowed sensitive financial information for 95,000 consumers to be uploaded on the P2P network. The information included names, addresses, Social Security numbers, birthdates and driver’s license numbers. The UDAP charges were based on statements included in the dealership’s privacy notice. According to the FTC,

Franklin’s privacy policy said, “We restrict access to nonpublic personal information about you to only those employees who need to know that information to provide products and services to you. We maintain physical, electronic and procedural safeguards to guard nonpublic personal information.” The FTC alleges Franklin “in truth and in fact ... did not implement reasonable and appropriate measures to protect consumers’ personal information from unauthorized access. Therefore, the representation set forth ... was, and is, false or misleading.” With respect to the alleged violations of the Safeguards Rule, the agency charged that Franklin failed to assess the risks to the consumer information it collected and stored online and failed to adopt policies to prevent or limit unauthorized disclosure of the information. It also allegedly failed to prevent, detect and investigate unauthorized access to personal information on its networks, failed to adequately train employees and failed to employ reasonable measures to respond to unauthorized access to personal information. With respect to the alleged Privacy Rule violation, the agency charged that Franklin failed to provide annual privacy notices. The FTC further alleged the dealership failed to provide a mechanism by which consumers could opt out of informationsharing with third parties. The FTC’s proposed settlement order levies an extensive, detailed and long-lasting set of requirements on the dealership, which would: • Be prohibited from misrepresenting its practices regarding consumer data. • Be prohibited from violating any provision of the Safeguards and Privacy Rules. • Establish, implement and maintain a written, comprehensive information security program. The program would include the designation of employees responsible for oversight of the program, identification of material risks, regular testing of the effectiveness of key procedures, requiring service providers to maintain appropriate safeguards, periodic evaluations and adjustments of the security program. • Obtain initial and biennial assessments and reports prepared by independent third-party professionals. Biennial

reports would continue for a period of 20 years. Assessments would document specific safeguards for the period, explain how such safeguards meet or exceed the required protections and certify the security program is operating effectively. • Maintain and make available to the FTC for a period of five years, a print or electronic copy of each document relating to compliance, including any documents that contradict the dealership’s compliance with the order. • Maintain and make available to the FTC for a period of three years, all material used in preparation of each biennial assessment. • For a period of five years from the date of the order, deliver a copy of the order to certain principals, officers, directors, managers, employees and related business entities. • Notify the FTC prior to any dissolution, assignment, sale, merger or other action that would result in the emergence of a successor company, as well as prior to the proposed filing of a bankruptcy petition. • Within 60 days after the date of service of the order, provide the FTC a written report detailing the manner and form of its compliance with the order. Thereafter, the company would submit additional written reports within 10 days after the receipt of a written request from the FTC. As proposed, the settlement order would remain in effect for 20 years. If an order is issued on a final basis, each violation could result in a civil penalty of up to $16,000. FTC Notice: The commission issues an administrative complaint when it has “reason to believe” the law has been or is being violated, and it appears to the commission a proceeding is in the public interest. The complaint is not a finding or a ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

BY ADR STAFF

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F E D E R A L T R A D E C O M M I S S I O N G U I D E ( W W W. F T C . G O V )

Credit Reports: What Information Providers Need To Know The Fair Credit Reporting Act (FCRA) is designed to protect the privacy of credit report information and to guarantee that information supplied by consumer reporting agencies (CRAs) is as accurate as possible. If you report information about consumers to a CRA, you are considered a “furnisher” of information under the FCRA. The responsibilities of information providers are explained here. Items 2 and 5 apply only to furnishers who provide information to CRAs “regularly and in the ordinary course of their business.” All information providers must comply with the other responsibilities. 1. General prohibition on reporting inaccurate information: You may not furnish information you know – or consciously avoid knowing – is inaccurate. If you “clearly and conspicuously” provide consumers with an address for dispute notices, you are exempt from this obligation but subject to the duties discussed in item 3. What does “clear and conspicuous” mean? Reasonably easy to read and understand. For example, a notice buried in a mailing is not clear or conspicuous. 2. Correcting and updating information: If you discover you’ve supplied one or more CRAs with incomplete or inaccurate information, you must correct it, resubmit it to each CRA and report only the correct information in the future. 3. Responsibilities after notice of a consumer dispute from a consumer: If a consumer writes to the address you specify for disputes to challenge the accuracy of any information you furnished and if the information is, in fact, inaccurate, you must report only the correct information to CRAs in the future. If you are a regular furnisher, you will also have to satisfy the duties in item 2. Once a consumer has given notice that he or she disputes information, you may not give that information to any CRA without also telling the CRA that the information is in dispute. 4. Responsibilities after receiving notice from a consumer reporting agency: If a

CRA notifies you that a consumer disputes information you provided: • You must investigate the dispute and review all relevant information provided by the CRA about the dispute. • You must report your findings to the CRA. • If your investigation shows the information to be incomplete or inaccurate, you must provide corrected information to all national CRAs that received the information. • You should complete these steps within the time period the FCRA sets for the CRA to resolve the dispute – normally 30 days after receipt of a dispute notice from the consumer. If the consumer provides additional relevant information during the 30-day period, the CRA has 15 days more. The CRA must give you all relevant information it gets within five business days of receipt, and must promptly give you additional relevant information provided from the consumers. If you do not investigate and respond with the specified time periods, the CRA must delete the disputed information from its files. 5. Reporting voluntary account closings: You must notify CRAs when consumers voluntarily close credit accounts. That is important because some information users might interpret a closed account as an indicator of bad credit unless it is clearly disclosed that the consumer – not the creditor – closed the account. 6. Reporting delinquencies: If you report information about a delinquent account that’s placed for collection, charged to profit or loss, or subject to any similar action, you must, within 90 days after you report the information, notify the CRA of the month and year of the commencement of the delinquency that immediately preceded your action. That will ensure CRAs use the correct date when computing how long derogatory information can be kept in a consumer’s file. How do you report accounts you have charged off or placed for collection? A few examples: • A consumer became delinquent on March 15, 1998. The creditor placed the account for

collection on October 1, 1998. In that case, the delinquency began on March 15, 1998. The date the creditor placed the account for collection has no significance for calculating how long the account can stay on the consumer’s credit report. In that case, the date that must be reported to CRAs within 90 days after you first report the collection action is March 1998. • A consumer fell behind on monthly payments in January 1998, then brought the account current in June 1998, paid on time and in full every month through October 1998 but thereafter made no payments. The creditor charged off the account in December 1999. In that case, the most recent delinquency began when the consumer failed to make the payment due in November 1998. The earlier delinquency is irrelevant. The creditor must report the November 1998 date within 90 days of reporting the charge-off. For example, if the creditor charged off the account in December 1999 and reported the charge-off on Dec. 31, 1999, the creditor must provide the month and year of the delinquency – November 1998 – within 90 days of Dec. 31, 1999. • A consumer’s account became delinquent on Dec. 15, 1997. The account was first placed for collection on April 1, 1998. Collection was not successful. The merchant placed the account with a second collection agency on June 1, 2003. The date of the delinquency for reporting purposes is December 1997. Repeatedly placing an account for collection does not change the date the delinquency began. • A consumer’s credit account became delinquent on April 15, 1998. The consumer made partial payments for the next five months but never brought the account current. The merchant placed the account for collection in May 1999. Since the account was never brought current during the period partial payments were made, the delinquency that immediately preceded the collection commenced in April 1998, when the consumer first became delinquent.

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T H E K E Y T H AT O P E N S T H E D O O R T O S U P E R V I S E B H P H D E A L E R S

CFPB Expands Supervisory Activities The Consumer Financial Protection Bureau (CFPB) is finalizing rules to implement its supervisory powers over the following financial institutions: • “Larger” participants of a market for consumer financial products or services, such as credit reporting agencies and debt collection agencies. • Any covered person (including Buy Here-Pay Here dealers) the bureau has reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. In the first rule, released July 16, the CFPB published the definition of “larger market participants” for the consumer reporting industry. With that done, the bureau is now free to begin supervision activities of these “larger” credit reporting agencies. As noted in the bureau’s press release, consumer reporting agencies that have more than $7 million in annual receipts will meet the “larger market participant” definition of the rule. The bureau estimates 30 companies, which account for about 94 percent of the market’s annual receipts, will be affected. The bureau’s definition of consumer reporting agencies encompasses a slightly different group of companies than does the definition associated with the Fair Credit Reporting Act (FCRA). For purposes of the rule, “consumer reporting” means collecting, analyzing, maintaining or providing consumer report information or other account information used or expected to be used in any decision by another person regarding the offering or provision of any consumer financial product or service. The bureau acknowledged that certain entities not subject to the FCRA – such as analyzers of consumer report information – might be subject to the rule. On the other hand, the bureau specifically excluded from the rule entities that furnish information about their own – or their affiliates’ – experiences or transactions to consumer

reporting entities. The bureau further excluded persons who use consumer report information for their own purposes. So if you are a BHPH dealer who is either using credit reports or providing transaction information to credit bureaus, you might be thinking those exclusions mean you are safe from the CFPB’s oversight. Before you breathe that sigh of relief, however, it is important to realize the purpose of the first rule is simply to define the criteria of “larger market participants” in the credit reporting industry, as required by the Dodd-Frank Act. That rule basically affords the bureau access to an enormous repository of consumer financial data – the complete credit histories of 200 million consumers, including records of users of 6 billion credit reports issued annually and providers of 36 billion updates per year. The consumer reporting agency data is the key that opens the door to supervising other financial institutions, including BHPH dealers, under the second rule. As of this writing, the second rule had been proposed and commented on, and was awaiting final publication. Titled “Procedural Rules to Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination,” the second rule formalizes the bureau’s authority to supervise “any covered person” (BHPH dealers and others) the bureau believes might be engaging in conduct that poses a risk to consumers with regard to the offering of consumer financial products. On Sept. 30, the bureau can begin its supervisory activities of the credit reporting agencies. They have three stated supervisory purposes: assess agencies’ compliance with federal consumer financial law, obtain information about agencies’ activities and compliance systems or procedures, and detect and assess risks to consumers and to consumer financial markets. Data collected during supervisory activities will be stored in the bureau’s

non-depository institution supervision database. Data can include information about customers of those credit reporting agencies, such as name, account numbers, address, phone number, email address and date of birth. Information can also include confidential supervision information or personal information, including information relating to individuals that is derived from confidential supervisory information or from consumer complaints. As the bureau begins to mine the extensive and detailed data at the credit reporting agencies, it’s reasonable to assume anomalies associated with user requests for credit histories and/or the data provided to the agencies will be duly logged into the CFPB’s database. It won’t happen overnight, just because of the volume of data involved, but the CFPB will steadily and persistently dig through the agencies’ data, coupling it with consumer complaint data and attempting to identify any covered person (such as a BHPH dealer) who “is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services,” and building cases for supervision of the same under the second rule. It’s worth noting that the bureau will not hesitate to exercise its supervisory authority under the “risk to consumer” rule. In the comment discussion preceding the rule defining “larger market participants,” the bureau made clear the futility of attempting to avoid its supervision with the following statement: “It bears emphasizing that expenditures on an accounting system intended to prove a firm is not a larger participant cannot necessarily protect a firm from being supervised. The bureau can supervise a firm whose conduct the bureau determines, pursuant to 12 U.S.C. 5514(a)(1)(C), poses risks to consumers.” A final note – the bureau will be the one to define “risks to consumers.”

BY ADR STAFF

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F T C A D V I S O R Y O P I N I O N A F F I R M S C O N S U M E R S ’ R I G H T S T O A F F I R M AT I V E R E C O V E R Y

Consumers’ Rights Under the Holder Rule The Federal Trade Commission (FTC) recently issued an advisory opinion affirming consumers’ rights under the FTC’s Holder in Due Course Rule. The Holder Rule protects the rights of consumers who make a purchase using credit obtained through a merchant, even when the merchant sells the credit contract to another lender. The purpose of the Holder Rule is to provide recourse to consumers who otherwise would be legally obligated to make full payment to a creditor despite breach of warranty, misrepresentation or even fraud on the part of the seller. The recent opinion was issued in response to a request by the National Consumer Law Center (NCLC). The NCLC requested confirmation that the Holder Rule does not limit a consumer’s right to an affirmative recovery in certain circumstances. An affirmative recovery is when the consumer maintains a claim against

the creditor for a refund of money the consumer has already paid under the contract. According to the NCLC, various court cases have held that a consumer can only obtain an affirmative recovery against a creditor under the Holder Rule when the seller’s breach is so substantial that rescission and restitution are justified or where the goods or services sold to the consumer are worthless. The recent opinion states that, under the Holder Rule, a creditor or assignee of the contract is subject to all claims or defenses the consumer could assert against the seller. The Holder Rule does not create any new claims or defenses for the consumer. It simply protects the consumer’s existing claims and defenses. The only limitation included in the rule is that a consumer’s recovery “shall not exceed amounts paid” by the consumer under the contract. Despite the rule’s plain language,

Michigan’s newest license plate, which encourages organ donation efforts, is now on sale, Michigan Secretary of State Ruth Johnson announced Aug. 13. The Donate Life plate carries the Donate Life logo and the message, “Be an Organ, Eye & Tissue Donor.” A portion of the proceeds from the sale of the plate, which costs $35 in addition to any applicable registration fees, will go to the Thomas Daley Gift of Life Fund to promote organ, tissue and eye donation. The fund is named in honor of Thomas Daley, 23, who died in an accident in 2011 and was an organ donor. Daley was the son of Rep. Kevin Daley (R-Lum) and his wife Deborah. “The need is so great in Michigan and this will be a clear reminder to Michigan residents about the need for people willing to give the gift of life,” said Johnson, who has championed organ donation awareness efforts since becoming secretary of state. During her tenure, record numbers of people have signed up as potential donors on Michigan’s Organ Donor Registry. The registry grew by nearly 400,000 people – a 25 percent increase – last year. More than 3,000 people in Michigan are waiting for life-saving organ transplants. A single donor can save up to eight lives through organ transplants and can improve the lives of up to 50 more through tissue and cornea transplants. The Donate Life plate can be purchased by mail, fax or at any secretary of state office, and will be mailed to customers. Donate Life plates can be personalized using Plate it Your Way. For more information, visit the secretary of state website at www.michigan.gov/sos. Organizations that supported creation of the plate include: the Donate Life Coalition of Michigan; the Gift of Life Foundation; Gift of Life Michigan; the Gift of Life Minority Organ Tissue Transplant Education Program; The Henry Ford Transplant Institute; the Lisa Biskup Organ, Eye, Tissue Donor Program; the Michigan Donor Family Council; the Michigan Eye-Bank; Second Chance at Life; St. John Hospital and Medical Center and the University of Michigan Transplant Center.

BY ADR STAFF

NEW & RENEW MEMBERS

W W W. M I C H I G A N . G O V / S O S

New Donate Life License Plate Now on Sale

however, some courts have imposed additional limitations on a consumer’s right to affirmative recovery. Beginning with Ford Motor Credit Co. v. Morgan (Mass. 1989), some courts have allowed affirmative recovery only if the consumer is entitled to rescission or similar relief under state law. When originally adopting the rule, the FTC determined the creditor is always in a better position than the buyer to return seller misconduct costs to sellers. In the recent opinion, the FTC affirmed that in order to give full effect to the original intent to shift seller misconduct costs away from consumers, consumers must have the right to recover funds already paid under the contract if such recovery is necessary to fully compensate the consumer for the misconduct – even if rescission of the transaction is not warranted.

NEW

ADVANTAGE MOBILITY OUTFITTERS AJ’S AUTO SALES INC. ALL SEASONS AUTO LLC AUTO EXCHANGE AUTO TRAKK AUTOMOTIVE DEALER SERVICES AUTOMOTIVE FINANCE CORP. FOGG MOTOR COMPANY GOODTIME MOTORS INC. GREAT LAKES COMPANIES HAVERCAMPS SALES & SERVICE INC. J & J USED CARS INC. KALS AUTO SALES III MUNISING MOTORS LLC NORTHSIDE USED AUTO ROAD RUNNER AUTO SALES INC. RUHLE FINANCIAL SERVICES LLC SCHALL AUTOMOTIVE

RENEW

A & B MOTORS INC. A & M PREMIER AUTO SALES AIS EQUIPMENT CO. AUTO CITY LEASING & SALES AUTO EXCANGE INC. AUTO GROUP LEASING LLC AUTO PRO INC. AUTOMAX FINANCE CENTER BLAKE HOLLENBECK AUTO SALES INC. BOB FOX AUTO SALES LLC BOB’S AUTO SALES BOULEVARD USED CARS BOWEN-FISCHER MOTORS INC. BRIAN’S AUTO SALES BRIGHTS USED CARS C B R AUTO SALES CAR COUNTRY CERTIFIED MOTORS CHARLEVOIX MOTORS INC. CHASE AUTO FINANCE CONIGLIARO MOTORS DALTON AUTO SALES DEALS UNLIMITED INC. DON’S ADOPT-A-CAR ELITE MOTOR SALES ERWINE’S AUTO SALES INC. GREATER KALAMAZOO AUTO AUCTION

HARVEY CAR COMPANY HAYLETT AUTO COMPANY I DEAL AUTO INC. INSURANCE AUTO AUCTION JERRY KASH INC. JIM’S AUTO SALES KALS AUTO SALES KALS AUTO SALES II KCS AUTO LAND LINDEROTH SALES & SERVICE LOPRESTO’S AUTO SALES LUCKY AUTO SALES INC. M & B AUTO SALES INC. M & M CAR SALES INC. MAJESTIC CAR COMPANY MARK’S AUTOS LLC NATIONWIDE ACCEPTANCE CORP. ONAWAY AUTO & FINANCE CO. P.T. AUTO SALES PARADISE MOTOR SALES INC. PENN WARRANTY CORP. PEOPLE’S CHOICE AUTO SALES LLC PERFORMANCE UNLIMITED SALES INC. PRESTIGE IMPORTS WEST MICHIGAN QUALITY WHOLESALE CARS INC. R & R VEHICLE SALES RAINBOW MOTOR SALES RHO-MAR AGENCY INC. RICHARDSON CHEVROLET BUICK INC. RIVERSIDE AUTO LLC RPM AUTO SALES SHARP CAR COMPANY SKYLINE AUTO SALES INC. SML INDUSTRIES LLC SOUTH LYON MOTORS INC. SPRAGUE AUTO SUMMIT AUTO SALES INC. SUPERIOR AUTOMOTIVE SUPERIOR MOTORS UNION CITY AUTO SALES UNITY MOTORS LLC VAN’S MOTOR SALES INC. VAN DAM AUTO SALES INC. VANDER HAAG CAR SALES WEST MICHIGAN AUTO AUCTION WEST POINT AUTO SALES ZELENKA AUTO SALES LLC

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SAFET Y

NHTSA: Car Heat Sensors Not Enough to Save Kids Sensors designed to warn parents who have left children in their car when the vehicle gets too hot aren’t reliable, the U.S. government has warned. That means parents might have a false sense of security when their kids’ health and safety is actually at risk. The aftermarket devices are difficult to install and prone to deliver false warnings that could encourage parents to ignore a signal when children really are in danger, said David Strickland, director of the National Highway Traffic Safety Administration (NHTSA). “While we feel these devices are very well-intended, we don’t think they can be used as the only countermeasure to make sure you don’t forget your child behind in a car,” the nation’s top automotive safety chief said during a conference call with reporters. The issue is not insignificant. A number of children have reportedly died after being left in vehicles during the heat waves that

swept across much of the country during the summer. In 2010, there were 49 fatalities. The number dropped to 33 last year as attention to the problem increased. Heat stroke is reportedly the leading cause of death for children under 14 after vehicle crash-related incidents. Complicating the problem with the use of aftermarket sensors, the devices will not warn parents if a child enters the vehicle without their knowledge or if a child is not in an approved child seat. Those situations account for about 40 percent of deaths caused by excessive vehicle heat. The devices can also be subject to cellphone interference or the lack of a signal, and are prone to short-circuiting if liquid spills on them, a not uncommon problem in a vehicle used to transport children. “The devices [tested] required considerable effort from the parent to

ensure smooth operation,” said Kristy Arbogast, a researcher with the Children’s Hospital of Philadelphia, which released a study on the technology in conjunction with the NHTSA news conference. “Some of the devices turned on and off or beeped during the drive. We’re concerned about the frustration and source of distraction this might lead to.” Several manufacturers have discussed the possibility of building child heat sensors directly into a vehicle but have so far not brought the technology to market. It’s not clear if that’s due to technical challenges, costs or other issues. With the relative ineffectiveness of the technology, Strickland warned parents the devices cannot be effectively trusted and said they should consider finding an alternative means to ensure children are not exposed to dangerous heat by being left inside a car.

BY PAUL A. EISENSTEIN

Auction Update: Manheim

The Manheim 2012 Q2 update is a quick look at web traffic, online visits and transactions at Manheim.com for the second quarter of 2012. Mobile: Mobile visits to Manheim.com are up an astounding 368 percent over last year – 4.76 million vs. 1.02 million for the second quarter of 2011. One in three customers accessed Manheim.com on a mobile device, an indication mobile is becoming increasingly popular in the auto remarketing industry as dealers use smartphones to conduct business at their convenience. More customers are choosing to do business online – 25 percent of all transactions for the quarter were made by an online buyer. Digital visits: Digital visits to Manheim are up 12 percent over last year. Simulcast turns 10: More than 4 million vehicles have been purchased via Simulcast since its launch in 2002, representing almost $60 billion worth of inventory. Buying: More than 30,000 customers bought vehicles online in 2012. Selling: More than 20,000 customers sold a vehicle online in 2012. 14

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EXTENDED COMMITMENT

Rent-A-Wreck Offers $1,000 Off a Franchise ARE 10 YEARS AND 150,000 MILES BECOMING THE NEW NORMS?

Owners Waiting Longer than Ever to Trade In American motorists are waiting longer than ever to trade in their cars, trucks and crossovers, with 10 years and 150,000 miles becoming the new norm, rather than the exception, according to a pair of new reports. In the golden era of planned obsolescence, it became common for American new car buyers to trade in their vehicles as often as every two to three years. Perhaps that was no surprise in an era when quality and reliability were secondary to styling and automotive oneupsmanship. But as quality and reliability become essential requirements for automakers, consumers can be comfortable a car will last longer -- which has become a requirement as prices rise and the economy falters, analysts suggest. Nearly eight in 10 owners will now hold their vehicles for a decade or longer before trading them in, according to a survey by AutoMD.com. A Black Book survey found the majority of owners will not trade in until their vehicles have at least 125,000 to 150,000 miles on the odometer, with 200,000-mile trade-ins being anything but rare these days. “There is nothing surprising about the economy driving car owners to hold on to their vehicles for longer – our data has been showing this trend for the past three years,” AutoMD.com vice president of marketing Brian Hafer said. “But what is most compelling is that longer ownership has become an embedded habit for car owners, regardless of what the economy does.” The survey of 4,000 vehicle owners by AutoMD.com found: • 78 percent plan to keep their current vehicle until it’s more than 10 years old • 15 percent expect to trade in when it’s 8 to 10 years old • 4 percent will trade in between 6 and 7 years • 3 percent expect to trade in between 3 and 5 years. That is, of course, bad news for an auto industry struggling to bring customers

back into the showroom as soon and as often as possible. But, in a sense, the industry only has itself to blame. According to other recent studies, such as the J.D. Power and Associates Initial Quality Survey and Power’s Vehicle Dependability Survey, today’s products last longer than ever, with fewer problems requiring major repairs along the way. Meanwhile, many automakers are now offering free scheduled maintenance programs while vehicles are under warranty. Where motorists of the past knew their vehicles were reaching a ripe old age at 100,000 miles, today’s consumers just see that figure as a milestone to show friends. AutoMD’s data shows 60 percent of primary vehicles now have more than 100,000 miles on them. “Americans are holding onto their cars longer today, and this aged vehicle is what’s being traded in as we’ve seen a rise in new-car sales activity,” Black Book managing editor Ricky Beggs said. The shift in consumer attitude is obvious. While manufacturers have been putting a renewed focus on emotional design, consumers say that’s great but won’t give up quality and functionality for looks. The AutoMD study found 52 percent of motorists said their next vehicle purchase will primarily be influenced by practicality, with only 21 percent saying they will be more influenced by styling. Asked why they’re holding on to their vehicles longer, 47 percent of AutoMD respondents listed a weak economy. In the survey, which allowed motorists to list more than one answer, 44 percent checked off the fact that they’ve been vigilant about service and repairs, 37 percent cited the desire to save money, 28 percent mentioned they were doing their own repairs to keep the old jalopy running and 19 percent noted that today’s cars simply last longer.

BY PAUL A. EISENSTEIN

Rent-A-Wreck of America, a franchise company with more than 150 used car rental locations throughout the U.S., is now offering NIADA members a $1,000 discount off the purchase of a franchise. Rent-A-Wreck, an endorsed NIADA National Member Benefit Partner, has extended its commitment to independent dealers by pledging to contribute $1,000 to the dealer’s state association or the national association for every franchise sold to an NIADA member. Since 1973, Rent-A-Wreck of America has offered used car dealers a franchise they can operate at their existing retail sales lot to bring extra revenue and additional foot traffic with little additional overhead. “Our franchise brings used car dealers everything they need to become a player in their local car rental marketplace,” Rent-AWreck of America vice president of operations Michael DeLorenzo said. “We have financing, insurance, a global reservation system and a comprehensive and sophisticated training system that makes car rental a near turnkey opportunity for a used car dealer. “Rent-A-Wreck is a great brand with a long and successful history with used car dealers. Our franchisees who are used car dealers see the benefit of additional cash flow and profits from rentals, but also see that the increased foot traffic helps them sell more cars as well.” Rent-A-Wreck franchise owners receive access to a fleet leasing and purchase program that includes access to closed factory sales, a reservation system connected to multiple global booking channels, online travel agencies, rentawreck.com and 1-800 telephone reservations, point of sale integration with the reservation system, a comprehensive training program in pre-open and postopen phases, a dedicated area representative for recurrent and ongoing needs, insurance and more. For more information, visit www.rentawreck.com/NIADA or call (469) 939-6132 to speak to a company representative.

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A T H I R D O R M O R E O F A L L R E C A L L E D V E H I C L E S A R E N O T F I X E D B Y T H E I R O W N E R S . A R E A N Y I N YO U R I N V E N T O R Y ?

Finding Open Recalls Should be a Dealer Priority Manufacturer recalls are a common occurrence, with hundreds of recalls issued every year affecting millions of cars. In fact, more than 20 million cars were recalled in 2010 alone. But what is alarming about recalls is how many go unfixed by their owners – roughly a third or more of all recalled units. And thousands of those cars are bought and sold every day. It’s believed there are anywhere from 40 million to 60 million cars out there with unfixed recalls. In just the past two years, roughly 12 million cars with open recalls were added to the growing tally. And some of those vehicles are moving daily through auto auctions and being taken in on trade. While finding and fixing open recalls is everyone’s responsibility, it’s up to retailers to take the proper steps to identify any potential issues. Many are already keeping a sharp eye out for evidence of things like flood damage, odometer rollbacks or previous accidents. But what about open recalls? In 2010, a plumber from Delaware named Bob Knotts bought a van for his business from a local independent dealership. He never asked about open recalls, never checked for them and was never told if any existed.

Around midnight his wife ran into the house from walking the dog, screaming that smoke was pouring out of the van. The entire front cabin was engulfed in flames. The van was destroyed. “It caught fire from an electrical component under the driver’s seat that was recalled and never fixed,” Knotts said, standing next to the van parked less than five feet from his home. “My house could have caught on fire, or I could have been driving it. Had it spread to the back of the van, where I keep a propane torch and glue that’s highly flammable, it would’ve been a complete fireball. “Not knowing there was an unfixed recall cost me $8,000.” One way to tell if a car has an open recall is to check the vehicle history. Most manufacturers report their open recall information to CARFAX. When you’re evaluating a vehicle or looking at the auction run list, consider getting a CARFAX Vehicle History Report to help you pinpoint which vehicles have open recalls before taking them into inventory. “We understand that recalls are a concern for our customers,” said Ryan Corey, president of Autoline Automotive in Atlantic Beach, Fla. “It’s up to us to make sure the cars we’re selling

have had potential issues addressed. “As an independent dealer, we take full advantage of tools like CARFAX reports that help identify open recalls. Any recalls that show up are taken to get fixed before we retail that vehicle. In fact, as a CARFAX Advantage Dealer, we run a CARFAX report on every vehicle we sell as well as any vehicle we buy. It’s a key part of our everyday operations and builds trust with potential buyers. We know we’re doing right by our customers and are putting the best cars on our lot.” Checking the vehicle history with CARFAX for every unit on your lot helps you make better buying decisions and builds confidence with customers. It can be to your advantage to let your customers know upfront about an open recall and help them get it fixed. Auto manufacturers understand the importance of informing their customers about a recall. Customer safety and the company’s reputation are at stake. With so many of those vehicles changing hands before they’re fixed, most manufacturers choose to work directly with CARFAX to reach the greatest number of buyers and sellers. C O N T I N U E D O N N E X T PA G E

Plans to cover groups and individuals. A promise to cover everyone. We have a broad range of group plan options, including PPO, Flexible Blue (HSA), HMO, Dental and Vision. We also offer affordable individual health care for you and your family, at any stage of your life. Blues group and individual members have unparalleled statewide and nationwide access to the doctors and hospitals they need. We accept everyone, regardless of medical condition and will never drop your employees for health reasons. Our nonprofit mission means you can trust us to put your needs first instead of paying dividends to stockholders. We reinvest in health care for Michigan. Because Michigan is our home. For more information, contact: Michigan Independent Automobile Dealers Association 248-828-7010 bcbsm.com 18

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Unrepaired open recalls are an important factor in vehicle evaluations,”

“Ford is committed to communicating safety recall information to vehicle owners in an open and transparent manner as part of our commitment to top quality,” Ford Recall and Service Programs Operations Manager Robert Case said. “Ford was the first major automaker to establish a relationship with CARFAX to provide open safety recall information as we recognized the CARFAX Vehicle History Report as a valuable tool used by many consumers and business entities.” Maintaining an open dialogue with customers is vital for manufacturers to alleviate concerns about recalls. Mitsubishi North America general manager of public relations Dan Irvin said one of the simplest ways to connect with millions of used car buyers and sellers is through CARFAX. “Mitsubishi Motors is relentless in our commitment to quality and safety,” Irvin said. “An element of ensuring safe vehicles is making certain that if a vehicle is recalled, the required inspection and service, if necessary, are performed. In this spirit, Mitsubishi has been a longtime partner with CARFAX in providing auctions, dealers and current and prospective customers with free-of-charge information regarding any open recalls on our vehicles.”

C A R FA X C O M M U N I C AT I O N S D I R E C T O R L A R R Y G A M A C H E

Independent dealers can save time and choose the right cars by checking for open recalls through CARFAX prior to acquisition. If you already have vehicles on your lot with open recalls, the smart and safe thing is to take them in to be closed. Show your customers the CARFAX report and the service receipt with the recall completion. Customers will appreciate your honesty and focus on safety. “Unrepaired open recalls are an important factor in vehicle evaluations,” CARFAX communications director Larry Gamache said. “Estimates are that nearly a third of all recalled vehicles aren’t fixed by their owners. CARFAX is working with leading manufacturers, our dealer customers and consumer advocates to alert people to open recalls and make sure more of these are fixed.” Used car shoppers are looking to dealers to make them aware of any issues like open recalls. Be informed about the cars you’re retailing before they even reach your lot – CARFAX can help. To become a CARFAX subscriber, NIADA members can visit www.carfaxonline.com, call 877-606-9119 or visit www.niada.com and click on the “Links” tab.

BY CARFAX

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INDUSTRY NEWS

Michigan Institute to Test Connected Vehicles

Improv­ing safety and eas­ing traf­fic are key points brought up in many trans­ porta­tion sec­tors, whether it’s fed­eral safety reg­ul­a­tions or test­ing dri­ver­less cars. The U.S. Department of Trans­porta­tion and the Uni­ver­sity of Michi­gan Trans­ porta­tion Research Insti­tute (UMTRI) will soon begin con­duct­ing the largest exper­i­ment ever on con­nected vehi­cles using wire­less sig­nals to talk to one another. The objec­tive is improv­ing high­way safety while also eas­ing traffic. Advanced vehi­cle com­mu­ni­cation tech­nol­ogy could fos­ter a break­through safety improve­ment. The National High­way Traf­fic Safety Admin­is­tra­tion says improved technol­ogy could help pre­vent as many as three out of every four high­way deaths. High­way traf­fic and safety is impacted by a num­ber of fac­tors, including multicar collision pile­ups, dis­tracted dri­ving, work­force sched­ules, sport­ing and enter­tain­ment events, com­mer­cial vehi­cle deliv­ery and trans­port road trips. The yearlong project will be conducted by UMTRI in Ann Arbor, where about 3,000 cars, trucks and buses equipped with vehicle-to-vehicle and vehicle-toinfrastructure com­mu­ni­ca­tion devices will “talk” to each other and to high­way infra­struc­ture systems. The tech­nol­ogy being tested has poten­tial advan­tages for both pas­sen­ger vehi­cles and heavy duty trucks, said Scott Belcher, pres­i­dent of the Intel­li­gent Trans­porta­tion Soci­ety of Amer­ica – an associ­a­tion that recently pre­sented an award to sub­ur­ban Detroit supplier Mer­i­tor­Wabco for devel­op­ing smart safety sys­tems for com­mer­cial trucks. Even though bud­gets for high­way depart­ments all over the U.S. are feel­ing the squeeze, the new fed­eral high­way bill includes fund­ing for research on con­ nected vehicles and the infra­struc­ture, which should fos­ter growth and devel­op­ ment, Belcher said.

BY AUTOMOTIVE DIGEST

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MARKETING NEWS

Help Your Dealership Go for the Gold Think your shot at living like an Olympian ended after your high school or college athletic career? Think again. Successful Olympic athletes employ a set of traits and techniques you can still use to help market your car dealership. The elements that work together to create popular medalists, with thousands or millions of people rooting for them, can similarly elevate your dealership in the eyes of your customers. On the website marketingprofs.com, Veronica Maria Jarski showed how winning Olympians’ behavior relates to marketing, and that applies perfectly to the way your car dealership can win by adopting the same focus. Don’t believe it? Here’s how you can use what works for the gold medal winners: Share your story: The personal story behind the winners often creates massive support for one athlete or another, or sometimes an entire team. You weren’t dropped onto this earth running a successful auto dealership, so go ahead and share what it took to get there. Every dealership began with a lifelong love of cars, a careful plan or a less-than-direct route that included far-flung adventures. Whatever the story, knowing it helps people identify with you. Understanding the journey builds support for current success.

Deliver on your promises: Actions count far more than words, so prove what matters to you with every engagement, every customer and every sale. The claims you make about what distinguishes your dealership carry a lot more weight when they’re backed up in the interactions that happen minute by minute. Use the right tools: A diver can’t use a pommel horse and a gymnast doesn’t get any mileage out of a pool. Make sure your marketing messages go to the audiences that can use them best. Your brand and your message should be consistent, but it’s smart to craft and deliver the relevant points with laser targeting. Details, details: Try to think about the dealership experience from a customer’s perspective. The little details of each phone call or visit are critically important in shaping the impression visitors take away from any contact. It’s all connected: Authenticity matters everywhere your dealership has a presence. The customers who seem to disappear are still making waves and influencing your reputation long after they’ve left the premises. What happens on the showroom floor and in the finance department today will assuredly be reflected someday, somehow, in a conversation online or in person where you don’t hear it.

You can only run today’s race today: Letting go of the past, wins and losses alike, is the best way to free up energy to focus on today’s challenges. Learn from what worked and what didn’t, but greet each new customer with fresh and full intent to create a lasting asset. Remember the team: Good sportsmanship is appealing. Acknowledging all the people who make your dealership successful is as relevant as the cars and deals themselves. From the manufacturers to the service personnel, your team merits respect and appreciation. They will appreciate the recognition, too. Happy employees will work harder and are more loyal. While you might never stand on a podium and proudly listen to the national anthem while your fans cheer wildly, you can certainly enjoy strong popular support and the loyalty of customers who see you as a winner. Follow these strategies and go for the gold!

BY JIM FITZPATRICK

JIM FITZPATRICK IS PRESIDENT/CEO OF FITZPATRICK ADVERTISING, A FULL-SERVICE AUTOMOTIVE ADVERTISING AGENCY, AND FOUNDER OF FORCE MARKETING, A DIGITAL AND DIRECT MARKETING COMPANY. FOR MORE INFORMATION, CALL 1-800-917-8637, EMAIL JFITZPATRICK@FITZADV.COM OR VISIT FITZPATRICKADVERTISING.COM.

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F T C ’ S S TAT E M E N T U P H E L D

Risk-Based Pricing Notices in Third-Party Financing If, as an automobile dealer, you engage third-party finance sources in the course of your credit sales, you are likely subject to the risk-based pricing (RBP) rule and are obliged to provide certain consumers with the appropriate notice. Last July, the Federal Trade Commission (FTC) issued a statement noting dealers engaged in three-party vehicle financing transactions “use” a credit report based on the finance source’s use of a credit report, and are therefore subject to the RBP rule’s notice requirement. The National Automobile Dealers Association challenged the FTC’s interpretation in Federal District Court, but U.S. District Judge Ellen Segal Huvelle recently ruled against the NADA, upholding the FTC’s original statement. “Risk-based pricing” is when a dealer, or the financing entity a dealer selects to finance a vehicle, directly or indirectly uses information from a credit report, such as a customer’s payment history, to establish the

price and other terms, specifically the annual percentage rate (APR), of the credit being offered or extended. Under the RBP rule, a risk-based pricing notice must be provided when a creditor engaging in risk-based pricing extends credit to a consumer on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of the creditor’s other consumers. A typical third-party automobile financing transaction involves an automobile dealer, a consumer and a third-party creditor or financing source. In these transactions, the dealer sells a vehicle to a consumer, the consumer signs a retail installment sales contract with the dealer, and the dealer assigns the contract to a third-party financing source that has notified the dealer it will purchase the consumer’s contract on specified terms. The third-party financing source then services the debt directly with the customer.

In three-party financing transactions, you are subject to RBP rule if you set the APR of credit offered based in whole or in part on information in a credit report, or if you set the APR of credit offered based on a wholesale buy rate proffered by a thirdparty finance source, and that buy rate is based in whole or in part on information in a credit report. That holds true whether you directly obtain the credit report yourself or whether the third-party finance source obtains the credit report. The RBP rule applies to the original creditor – the dealer – if that person “uses a consumer report in connection with” an application for credit. In response to an industry inquiry, the FTC provided the following example of a threeparty financing transaction in which the dealer is obliged to provide an RBP notice: “The specific financing situation … involves an automobile financing transaction in which an automobile dealer is the original creditor. In this three-party financing transaction, a consumer visits the automobile dealer and applies for financing by completing a loan application with the dealer. The dealer submits the loan application to one or more unrelated finance sources, which finance source(s) then conducts underwriting on the consumer’s credit application. “Based in whole or in part on the consumer report, the finance source(s) provides the dealer with an approval of the consumer’s application and the wholesale buy rate at which the finance source(s) will purchase the resulting credit contract from the dealer. The dealer then selects the finance source to which it intends to assign the contract and determines which credit terms, including a retail finance rate (APR), it will offer the consumer. “The [industry inquiry] commenter asserts that because the original creditor (the automobile dealer) does not directly obtain the consumer report and/or credit score from a consumer reporting agency, and instead relies on the buy rates from the underlying financing sources, the original creditor does not ‘use’ the consumer report and is outside the scope of the riskbased pricing rules. The Federal Trade Commission disagrees. The automobile dealer must provide the consumer with a risk-based pricing notice. C O N T I N U E D O N N E X T PA G E

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S O F T WA R E N E W S

DealerRater Adds Chat Software “The original creditor has ‘used’ a consumer report in connection with an application for credit because the original creditor initiated the request that caused the financing source to obtain the consumer report and used the resulting information from the financing source to set the rate offered to consumers. Applying a causal, transaction-based analysis to the term ‘use’ is consistent with the clear intent of Congress to provide consumers with information about the role that their credit history plays in setting the terms for credit. “In the scenario set forth above, the consumer report was used in connection with the application for credit made by the consumer to the automobile dealer because the consumer report was obtained by the financing source in order to fulfill a request made to it by the automobile dealer. The finance source has not obtained and used the consumer report and/or credit score independently of the automobile dealer. The finance source, at the behest of the automobile dealer, has obtained the reports and performed underwriting and has told the automobile dealer the wholesale buy rate at which it will purchase the contract. “The original creditor incorporated the wholesale buy rate in the rate offered to the consumer, establishing a causal connection between the consumer report and the ultimate rate offered to the consumer. The original creditor [i.e. the automobile dealer] has ‘used’ the consumer report.” We believe it is the association’s responsibility to provide an option for dealers to come into compliance with both federal and state regulations in the simplest, most reasonable way. Accordingly, our staff is available to assist both member and nonmember dealers in preparation of your riskbased pricing notices. Feel free to contact us at 800-364-8833.

The car dealer review website DealerRater has partnered with Contact At Once! to add a live chat feature for its certified dealer partners, enabling real-time chat between automotive dealerships and online shoppers. “Our third-party generated dealer reviews and ratings have helped car shoppers to determine and validate which dealerships they would like to do business with,” DealerRater president Chip Grueter said. “We believe the integration of Contact At Once! chat will enable our certified dealers to connect with in-market consumers in a way that is faster and more convenient than an email or a phone call.” The Contact At Once! dealer chat network includes third-party listing sites such as AutoTrader.com, Cars.com and UsedCars.com, as well as standalone dealership and dealer group web pages. Once enabled, dealers can respond to consumer chats originating from anywhere in the dealer chat network. Dealers that use dealer live chat typically experience a 25 percent increase in online shoppers contacting the dealership.

Notes: We are not attorneys. This article was prepared for informational purposes only. It has been made available with the understanding that neither ADR of Michigan nor MIADA is engaged in rendering legal advice. You are urged to contact legal counsel for its application to your operation. … This article only addresses the applicability of the RBP rule in three-party finance transactions. The RBP rule applies to other finance transactions involving credit reports as well, including Buy Here-Pay Here transactions.

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Camaraderie

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MI DEALER ORDER FORM Wolters Kluwer Financial Services/Bankers Systems Inc.

Retail Installment Contracts & Security Agreements MI Dealers Receive

15% Off

WKFS/BSI Retail Pricing

(when placed through ADR of Michigan only)

(RS--SI SI--MV MV--MI) Simple Interest without Late Fee (RS

Quantity*

WKFS/BSI Retail Pricing

Pricing Through ADR of MI †

50

$89.75

$77.00

100

$167.92

$143.00

200

$310.98

$265.00

* Larger quantity quotes available upon request.

6% MI Quantity Subtotal Sales Tax

Simple Interest without Late Fees Total

(RS--SI SI--MVLF MVLF--MI); with Arbitration (RS (RS--SI SI--MVLFA MVLFA--MI) Simple Interest with Late Fee (RS

Quantity*

WKFS/BSI Retail Pricing

Pricing Through ADR of MI †

50

$177.42

$151.00

100

$336.53

$287.00

200

$643.47

$547.00

6% MI Quantity Subtotal Sales Tax

Simple Interest with Late Fee Total

* Larger quantity quotes available upon request.

Shipping Information SHIP TO NAME ADDRESS

IS THIS A RESIDENTIAL ADDRESS? YES___ NO___

CITY, STATE, ZIP CODE (AREA CODE) PHONE

Payment Information Credit Card Charge to: □ MasterCard □ Discover Credit Card Account Number:

□ VISA □ American Express

Exp. Date:________________________ Customer Security Code (CSC):_____________

(AREA CODE) FAX

EMAIL ADDRESS

Billing Address:___________________________________________________________

Signature X______________________________________________

† BSI shipping and handling will be charged separately.

MAIL TO: ADR of Michigan, 55 E. LONG LAKE RD PMB 233, TROY, MI 48085 FAX TO: 888-855-7111 PHONE ORDERS: 888-855-0100 ORDER ONLINE: www.buyadr.com Prices are subject to change without notice

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MI DEALER ORDER FORM Wolters Kluwer Financial Services/Bankers Systems Inc.

Retail Installment Contracts & Security Agreements MI Dealers Receive

15% Off

WKFS/BSI Retail Pricing

(when placed through ADR of Michigan only)

(RS--SI SI--MV MV--MI) Simple Interest without Late Fee (RS

WKFS/BSI Retail Pricing Quantity*

Pricing Through ADR of MI †

50

$89.75

$77.00

100

$167.92

$143.00

200

$310.98

$265.00

* Larger quantity quotes available upon request.

6% MI Quantity Subtotal Sales Tax

Simple Interest without Late Fees Total

(RS--SI SI--MVLF MVLF--MI); with Arbitration (RS (RS--SI SI--MVLFA MVLFA--MI) Simple Interest with Late Fee (RS

Quantity*

WKFS/BSI Retail Pricing

Pricing Through ADR of MI †

50

$177.42

$151.00

100

$336.53

$287.00

200

$643.47

$547.00

6% MI Quantity Subtotal Sales Tax

Simple Interest with Late Fee Total

* Larger quantity quotes available upon request.

Shipping Information SHIP TO NAME ADDRESS

IS THIS A RESIDENTIAL ADDRESS? YES___ NO___

CITY, STATE, ZIP CODE (AREA CODE) PHONE

Payment Information Credit Card Charge to: □ MasterCard □ Discover Credit Card Account Number:

□ VISA □ American Express

Exp. Date:________________________ Customer Security Code (CSC):_____________

(AREA CODE) FAX

EMAIL ADDRESS

Billing Address:___________________________________________________________

Signature X______________________________________________

† BSI shipping and handling will be charged separately.

MAIL TO: ADR of Michigan, 55 E. LONG LAKE RD PMB 233, TROY, MI 48085 FAX TO: 888-855-7111 PHONE ORDERS: 888-855-0100 ORDER ONLINE: www.buyadr.com Prices are subject to change without notice w w w. m i a d a . o r g

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COMPLIANCE OVERDRIVE

Regulatory Landscape Feeling Tougher? You’re Not Alone There is no denying that dealers and lenders have grown accustomed to a regulatory environment that is constantly changing, with new laws and regulations. But today’s regulatory landscape is different than it was years ago – and not just because the requirements continually change. If you feel like it’s becoming increasingly complex, you’re not alone. Here are the likely culprits: Shorter notice: Some states have started publishing regulatory changes on rather short notice. For example, in New Mexico the attorney general recently gave 30 days’ notice to add a new spot delivery disclosure to the sales transaction document or purchase order. The short notice was made worse because a proposed regulation had not been published – at least not recently – so the final regulation came as a surprise to the industry. While one month might feel

like a long time to add one disclosure, the required notice is quite large and requires substantial formatting changes to the documents affected. The attorney general eventually delayed the effective date of the regulation by 60 days, apparently after significant industry feedback. More frequent changes and updates: Across the country, there seem to be more frequent changes being made. That has clearly been the case with state motor vehicle title forms. Previously, those forms were rarely revised. But over the past few years, some states have changed their title forms as many as two or three times per year. One potential driver for that might be that technology now allows states to redesign and reissue their forms and revise (increase) the related fees more easily. But often the changes come with little or no notice, which underscores how important it is for dealers and lenders to be confident in their ability to monitor the changes that are constantly taking place. Volume of information: While it can be difficult to keep up with the pace of change and various deadlines and effective dates, it’s also quite a task to consume the volume of information and content surrounding new laws and regulations. For example, the Consumer Financial Protection Bureau (CFPB) published a proposed rule July 9 regarding integrated mortgage disclosures under RESPA and the Truth in Lending Act. It 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 total more than 1,000 pages. The good news is the proposed rule provides significant details and explanations of the changes. The bad news is that many pages of material can be overwhelming (aren’t you glad you’re not in the mortgage lending business?). Operating in a highly regulated industry, one can’t help but wonder if that is an indication of the volume of change yet to come and how dealers and lenders will absorb all of the changes and their nuances.

Disparate technology systems: Though computer technology allows us to do many things faster than before, disparate file formats, field naming conventions, calculation engines, software and hardware, and reliance on multiple vendors can make it difficult to quickly change or revise transaction documentation and its completion tools. That often means all the component parts need to be updated in sequence rather than in parallel – adding more time to make the required changes. Today’s environment is characterized not only by constant change, but by tougher enforcement as well. There is more visibility and greater scrutiny of compliance and risk management in all organizations. Dealerships and financial institutions should regularly question whether they feel confident that new laws and regulations are being embedded in their business operations. The challenges underscore a need for greater operational efficiency. Disparate systems and procedures can make even relatively simple changes more timeconsuming and complex. As you prepare for additional changes, consider reviewing your process maps, technology, vendor coordination and steps necessary to respond to compliance changes. Creating greater operational efficiency now will make it that much easier for you to respond to the inevitable next compliance crunch-time event.

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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Driveline of Michigan Autumn 2012