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MICHIGAN’S

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

Magazine

CONSUMERS NOT JUST CHOOSING

VEHICLES ONLINE, BUT PAYING ONLINE TOO The Increasing Demand to Pay Online and Possible Solutions FEATURE STORY page 12

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• AVOID LEARNING LESSONS THE HARD WAY • USED CARS TO RECOMMEND FOR TEENS • NHTSA VIN LOOKUP TOOL

DALLAS, TEXAS Permit No. 2079

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PRSRT Standard U.S. Postage

V I S I T

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VIP Cards for 2014

06 Avoid Learning Lessons the Hard Way 08 National Leadership Conference 10 Now More than Ever 12 Consumers Not Just Choosing Vehicles Online 14 Used Cars to Recommend for Teens 16 Important Notice 18 NHTSA VIN Lookup Tool

WHAT’S NEW

Mark Your Calendar for the National Leadership Conference

NOVEMBER 11-14, 2014

The 2013 NIADA National Leadership Conference and Legislative Summit was a huge success. You don’t want to miss this year’s event! You’ll hear the latest legislative and regulatory updates in the industry and have the opportunity to voice your concerns to your U.S. congressmen. Make plans now to attend Nov. 11-14 at the Omni Shoreham Hotel in Washington, D.C.

ADVERTISERS INDEX

ADESA, Inc. ..........................Inside Front Cover Ally......................................................................7 AutoZone..........................................................16 Greater Kalamazoo AA....................................14 Indiana Auto Auction..........................................8 Insurance Auto Auctions..................................13 Lakeside Insurance Agency Inside Back Cover. Manhiem.com...................................................17 Manheim Pennsylvania......................................5 NextGear Capital................................................9 Preferred Warranties........................................11 United Acceptance...........................................15 VAuto................................................. Back Cover

OFFICE

For information on how to become a member, please contact us at (248) 828-7010 www.miada.us

NIADA HEADQUARTERS

National Independent Automobile Dealers Association www.niada.com • www.niada.tv 2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838 For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. 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 by 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. We have worked to represent the independent automobile dealers in Michigan. We need your support. State Magazine MGR./Sales Troy Graff • troy@niada.com Editors Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com Art Director Christy Haynes • christy@niada.com Printing Nieman Printing

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ASSOCIATION NEWS

u u u u u u u u u u u u

ABC Detroit Toledo ADESA Great Lakes ADESA Lansing ADESA Northern Ohio Flint Auto Auction Grand Rapids Auto Auction Greater Detroit Auto Auction Greater Kalamazoo Auto Auction Interstate-94 Vehicle Auto Auction Manheim Detroit Manheim Milwaukee West Michigan Auto Auction

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INSIDE

M IADA MEMBERS TO RECEIVE DISCOUNT CARDS All current members of the Michigan Independent Automobile Dealers Association will receive their 2014 VIP Auction Discount Card upon joining or renewing their membership investment, starting this month. The VIP Auction Discount Card is MIADA’s way of saying “thanks” for your membership commitment to the only professional trade association that represents you, the independent auto dealer. This is the ninth year MIADA has offered this member benefit. We are proud to introduce the following 12 participating auctions for 2014:

A special “Thank you” to our sponsoring auctions for their generosity and to you, our members, for your continued loyalty to MIADA!

ASSOCIATION

NEWS

NIADA Sponsors Education Sessions at SEMA Show THREE SESSIONS FREE TO ATTENDEES NIADA is sponsoring three education sessions during the SEMA Show, the premier automotive specialty products trade event in the world. The show takes place November 4-7 at the Las Vegas Convention Center. Part of the SEMA Show is the Education Days that feature top industry experts to help dealers adapt to today’s quickly changing business environment. Sessions, which are on various topics, are both practical and progressive. The NIADA-sponsored sessions include “Accessory Trends that Will Boost Your Business,” “The Art of Accessory Sales: Getting the Most from Your Sales Team” and “Money v. Myths: The Truth About Profiting from

Accessory Sales.” These sessions have a single purpose: Build auto dealer profit centers. Now is the time to discover ways to dramatically increase sales and profits. Participate in these SEMA Auto Dealer sessions and take the lead in your market. All sessions are free with your SEMA Show registration. Register before October 18 for only $25, a $50 savings. To learn more or register, visit www.semashow/NIA.

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Board of Directors CHAIRMAN OF THE BOARD Jerry Drouillard Autohaus of Royal Oak 4411 Delemere Royal Oak, MI 48073 248-549-3636 gdro999@hotmail.com PRESIDENT Ray Campise Certified Motors of St Clair Shores 23509 Little Mack St Cl. Shs., MI 48080 586-775-7000 sales.cmotors@gmail.com VICE PRESIDENT Ted Cooper Genesys Systems of Troy 360 E Maple Rd Troy, MI 48083 248-597-1003 ted@gensystems.com TREASURER Joe Kuhta GWC Warranty of Clarkston 8865 Reese Rd Clarkston, MI 48348 248-670-1133 JKuhta@gwcwarranty.com

SECRETARY Ed Ophoff Ophoff Motor Sales Inc. 2921 S Division Wyoming, MI 49548 616-452-7761 edwoph@aol.com DIRECTORS Dennis Craig Instant Car Credit PO BOX 146 Acme, MI 49610 231-938-2627 dcintc@gmail.com Rick Rynberg Rynberg’s Car Co. 3880 Holton Rd Muskegon, MI 49445 231-744-1441 rickandwendy1@verizon.net Tony LoBretto Alamo Valley A/S 6100 West D Ave Kalamazoo, MI 49009 269-344-8250 alamovalley@gmail.com

Terry Wolfgang S & S Auto Sales 3434 Chicago Dr. Hudsonville, MI 49426 616-209-5360 terrywolfgang@hotmail.com Otto Hahne City of Cars. com 1695 Stutz Dr Troy, MI 48084 248-458-1500 otto@cityofcars.com Bob Vincent Automotive Dealer Services LLC PO Box 102 Milford, MI 48381 586-477-8282 robertvincent@live.com Executive Director Lisa Michael 5119 Highland Rd PMB 393 Waterford, MI 48327 248-828-7010 info@miada.us

Mission Statement

T he Michigan Independent Automobile Dealers Association is committed to promoting growth and preserving the vitality and integrity of the independent motor vehicle industry through education and legislation as advocates for consumers and dealers.

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DRIVELINE

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AUCTION

NEWS

Manheim Study Reveals Presence of Physical Title at Sale Greatly Increases Vehicle Conversion Rate STUDY FOCUSES ON DEALER VEHICLES

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While a variety of factors can affect vehicle conversion rates at auction, Manheim revealed in a recent study that the presence of a physical title at the time of sale can potentially double vehicle conversion rates. The research also revealed that vehicles with same-day titles contribute to slightly higher online sales via Simulcast and OVE.com. “Roughly 35 percent of all vehicles at auction are sold without the presence of a physical title and this can negatively affect customer profitability,” shared Ally Pomeroy, customer consultant. “While we observed significant differences between commercial and dealer sellers when it comes to having physical titles at auction, this study focused on dealers because the majority of vehicles with delayed titles are sold by dealers.” Conversion Rates: Manheim’s study also showed that while typical dealer conversion rates range between 50 and 55 percent, the average conversion rate for dealer vehicles with a title present is 86.2 percent, as opposed to 42 percent for delayed vehicle titles. Also revealed was that newer, lower-mileage vehicles have the lowest conversion rates without a title present, while title delay is less of a factor in the conversion of older, higher-mileage vehicles. “These findings may be due to a dealer’s INDUSTRY

tendency to have reconditioning work done on older vehicles to get them ready to retail,” Pomeroy said. “Because they are already expecting delays and extra holding costs due to reconditioning time, the title delay is less of a concern.” Online and Manheim Market Report: Having title-ready vehicles can also influence positive online buyer activity. For example, 18.5 percent of vehicles with physical titles present sold online via Simulcast or OVE.com in 2014, compared to 17.7 percent of vehicles with delayed titles. For online transactions, buyer confidence is crucial, and the risk of a delayed title can discourage dealers from making the purchase. And, when it comes to MMR, the study showed that MMR value by dealer groups is the same whether the title is present or not. The data used for the study included Manheim’s total wholesale vehicle transactions in the U.S. from January 31 through May 31, 2014. In addition, the study captured only “whole car” data and excluded specialty and total resource auctions. To review the results of this study, access the white paper at: http://www.manheim. com/content_pdfs/products/Impact-ofDelayed-Titles-at-Auction.pdf.

ROUGHLY 35 PERCENT OF ALL VEHICLES AT AUCTION ARE SOLD WITHOUT THE PRESENCE OF A PHYSICAL TITLE AND THIS CAN NEGATIVELY AFFECT CUSTOMER PROFITABILITY ABOUT MANHEIM (WWW.MANHEIM.COM) A SUBSIDIARY OF COX ENTERPRISES, MANHEIM REGISTERS NEARLY 8 MILLION USED VEHICLES ANNUALLY, FACILITATING TRANSACTIONS REPRESENTING MORE THAN $50 BILLION IN VALUE. MANHEIM’S RESEARCH AND CONSULTING ARM, MANHEIM CONSULTING, PROVIDES MARKET INTELLIGENCE AND PUBLISHES THE ANNUAL USED CAR MARKET REPORT.

PERSPECTIVE

The Value of Auction Relationships FLOOR PLAN COMPANIES CAN BE A VALUABLE ASSET FOR AUCTIONS, DEALERS ALSO BENEFIT B Y NEXTGEAR CAPITAL Auctions and floor plan companies have a mutually beneficial relationship. Creating and maintaining these relationships in the floor plan industry is essential for success, especially for auctions, which face numerous challenges in their day-to-day business, including but not limited to: • Dealers lacking funding. • Slow payment. • Difficulties in flooring. • No assistance available. • No marketing. • Fewer dealers at sales. Floor plan companies help auctions negate some of these challenges, as they provide a valuable service of fast, timely guaranteed payments for sold units, which allows auctions to focus on what they do best: selling cars. But there are other advantages to auctions having a solid relationship with floor plan companies: Guaranteed funds in the lane: It is in an auction’s best interest to have buying power in the lanes. This is common knowledge, but it is the basis and most important aspect to an auction’s business. As their business is predicated on one thing –

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selling more cars – having a relationship with a floor plan company provides the auction with a customer who has funds to spend. This leads to more units in the lane, which has a more positive effect on the auction’s available working cash. Higher conversion rates: Generally, more money in the lanes equals more cars sold, resulting in higher conversion rates. Furthermore, with wholesale prices continuing to be volatile, sellers like to sell cars at auctions where dealers have open and available funds. Therefore, they want to go where there is money in the lanes. Stronger ongoing relationships: As with any business, auctions want dealers to be recurring customers who purchase vehicles from them again and again. If an auction has a solid relationship with a floor plan company that many dealers use, those dealers will be more likely to become recurring customers. What’s more, it will provide auctions with word-of-mouth advertising, as those dealers will be more likely to tell other dealers about the auction, attracting even more customers. To make the most of these advantages,

it’s important that auctions leverage their relationships with floor plan companies and equally important to think about the future as well as the present when it comes to these relationships. Transparency and trust are vital to the relationship-building process, making it important that both parties set clear concise goals from the beginning of the relationship. This will allow both auction and floor plan company to work together through a relationship that is built on mutual trust and respect. Where this relationship truly adds value can be measured on many levels in addition to what has been mentioned here. Flexibility, clear and concise goals, ease of use, and mutually beneficial relationships are all equally important for the dealer that is looking for a positive buying experience. Providing all of these tangibles can set businesses apart and promote success. Simply put, when both auctions and floor plan companies come together and act as partners to create an atmosphere that benefits the dealer, all parties can win.

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COMPLIANCE

OVERDRIVE

Avoid Learning Lessons the Hard Way TAKE A COMPREHENSIVE APPROACH TO YOUR COMPLIANCE HEALTH

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In one of my recent Compliance Overdrive columns (How a Compliance Management System Can Help Your Dealership), I discussed increasing pressures on independent auto dealers as the Consumer Financial Protection Bureau and other federal regulators move to require them to demonstrate how they will ensure compliance with various consumer protection requirements. These mounting pressures are in addition to already challenging day-today requirements for managing operational and compliance risk by a staff of individuals wearing many hats and juggling a variety of responsibilities. This month we look at a good example of how state regulators can sometimes enforce not only state but also federal requirements. This reinforces the need to address both state and federal compliance issues to avoid some potentially painful lessons in compliance management. A case in point: Condor Capital. Condor Capital Corporation is a New York-based sales finance company that acquires and services subprime automobile retail sales contracts. Condor’s 2013 loan portfolio reportedly contained outstanding loans of more than $300 million nationwide.

AN OBVIOUS TAKEAWAY FROM THIS LAWSUIT IS THE IMPORTANCE OF HAVING BUSINESS CULTURES AND PRACTICES THAT PLACE THE HIGHEST VALUE ON HONESTY AND INTEGRITY.

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New York’s superintendent of financial services recently filed suit against Condor Capital Corporation, alleging, among other things, it has “systematically hidden from its customers the fact that they have refundable positive credit balances and then failed to refund those balances unless specifically requested.” The complaint provides a laundry list of compliance violations beyond the handling of positive balances, all of which seem to suggest the lack of a culture of compliance within the organization. The suit seeks restitution for consumers and disgorgement of profits. The complaint charges that Condor’s activity is an unfair, deceptive or abusive act or practice pursuant to Sections 1031 and 1036(a) (1) of Dodd-Frank. This marks a significant entry into state prosecution under federal Dodd-Frank laws. The authority comes from a provision in the federal Dodd-Frank Act that allows state regulators to enforce the provisions of the act against entities that are statechartered, incorporated, licensed or otherwise authorized to do business under state law. Condor Capital is a state-licensed sales finance company, so the New York regulator chose to bring a claim against it under the federal Dodd-Frank Act as well as other state laws. What are some of the other abuses cited in the Condor case? The complaint details instances of information security and privacy problems. For example, the department examiners found “stacks of hundreds of hard-copy customer loan files lying around the common areas of Condor’s offices,” noting the files were replete with sensitive personal and financial information. Condor even “fails to adhere to the most basic information security policy, known as a ‘clean desk’ policy, which all businesses handling sensitive customer data must follow.” It also did not have adequate policies or practices for handling electronic files. The complaint alleged “Condor has failed – despite repeated directives from the department – to adopt basic policies, procedures, and controls to ensure that its information technology systems – and the customer

BY CHIP ZYVOLOSKI data they contain – are secure.” Although dealers are exempt from direct CFPB oversight, state regulators are obviously examining these types of compliance issues. And the compliance violations at issue clearly carry over to dealers. The focus on violations also clearly adds to lenders’ compliance concerns about the dealers they work with. An obvious takeaway from this lawsuit is the importance of having business cultures and practices that place the highest value on honesty and integrity. Other directly compliance-related issues include having policies and practices for organizing, managing and storing consumer information. Files cannot just be boxed up and stored on site on open shelves or in spare, unsecured rooms within the premises. But the larger issue is to ensure your dealership has policies and procedures to address all of the important federal and state consumer protection requirements. Establish clear, documented compliance responsibilities and communicate those responsibilities to your employees with proper training. Incorporate these into internal business process responsibilities, ensure those responsibilities are carried out and regulatory requirements are met through frequent reviews and compliance audits and enable and implement corrective action. Be sure to take a comprehensive approach to the compliance health of your dealership. Monitor compliance from your initial advertising/marketing programs through post-closing collection processes. Compliance should be integrated into the dealership’s overall framework and applied to its entire operations. Ultimately, compliance management should be a part of the daily routine for management as well as employees. What is the overarching message here? If you haven’t done so already, it is time to take action to make sure you have enough focus on compliance and compliance management. Your programs will help expose any intentional wrongdoing at your dealership as well as any unintentional violations. Showing that you have solid compliance programs in place will also help your lender relationships. It is easy to take a chance and adopt a “wait and see” attitude with respect to enforcement actions, but these recent headlines may prompt dealers to consider simple actions to help avoid having to learn lessons the hard way. Moreover, it is simply the right thing to do for your business and your customers. CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

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ASSOCIATION

NEWS

Looking Beyond Election Day THE ROAD AHEAD

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If you’re paying attention, you know this year we get to enjoy a fifth season that comes along every two years. Nestled between the dog days of summer and fall – as the leaves begin to change colors – is what we all know and love as election season. The airwaves are filled with political ads (especially if your state has a U.S. Senate seat up for grabs) and pundits of all sorts making predictions about whether that swing state is going red or blue and which party will control Congress during the last two lame-duck years of Mr. Obama’s presidency. Forget baseball. Politics is our national pastime. Elections have everything. Drama, comedy, heroes, foolish debates, arguments, competition, you name it. But when the election is over, there’s still plenty to do. Which brings us to Nov. 11-14, 2014, a mere week after the big mid-term election day. That’s when NIADA goes to work in Washington D.C., arriving in the nation’s capital for our annual National Leadership Conference and Legislative Summit, including a Day on Capitol Hill. Of course, NIADA has a strong presence

BY STEVE JORDAN in the nation’s capital all year long, with Sante Esposito and his Federal Advocates lobbying team monitoring legislation and keeping communications open with lawmakers and regulatory counsel Shaun Petersen working with federal regulators. But that week is particularly important for our association, our industry, and its relationship with the federal government. It represents an opportunity for NIADA’s state and national leadership, industry partners and, of course, our dealers to hear directly from legislators and regulators. And more important, the legislators and regulators will hear directly from you. That last part is crucial – indeed, it’s the number one reason for taking this show on the road to D.C. As I noted in space a few months ago, building relationships with legislators and regulators is the single most effective way to get across our message. Nobody can tell your story better than you. Not only can we make sure they understand the issues we face every day and how their actions in Washington affect our small businesses nationwide, they are also much more likely to listen and pay attention when that message comes directly

IF YOUR REPRESENTATIVE OR SENATOR KNOWS YOU TOOK THE TROUBLE TO COME TO WASHINGTON D.C. TO DISCUSS THE ISSUES FACING YOUR DEALERSHIP, HE OR SHE KNOWS THOSE ISSUES ARE A BIG DEAL TO YOU. from a living, breathing, person – also known in their business as a voter – rather than a paid lobbyist. Look at it this way. If your representative or senator knows you took the trouble to come to Washington D.C. to discuss the issues facing your dealership, he or she knows those issues are a big deal to you. In addition, if a large group shows up to discuss those issues, it means their association – in this case NIADA – is comprised of a whole lot of motivated voters who care about issues. And that means concerns expressed by NIADA will be taken more seriously. And all of that means we need you to come to Washington D.C. and show Congress the face of NIADA and to tell your story. We need to continue letting them know who we are. We are the one-man single point operator, the second-generation dealer who has been an integral part of a small hometown for 50 years, the large operation with several locations in a major metro area, and the young entrepreneur trying to build a business from scratch. In short, we are the backbone of America’s small business. So while you’re listening to those seemingly endless campaign ads and watching the debates, be thinking beyond the election as well. I mean, I love elections as much as the next guy – in fact, NIADA is involved in that part of the political process through the NIADA-PAC (and, by the way, for information about the PAC and how you can contribute to the PAC fund, visit www.niada. com/PAC.php). And we surely understand the importance of exercising your right to help choose the direction of our nation. But as crucial as election day is, what happens a week later in Washington will be every bit as important for the future of your business and our industry. For more information on NIADA’s 2014 National Leadership Conference and Legislative Summit or to register, visit www. niadaleadershipconference.com. See you in Washington! STEVE JORDAN IS EXECUTIVE VICE PRESIDENT OF NIADA, PRESIDENT OF NIADA SERVICES, INC., AND PUBLISHER OF USED CAR DEALER MAGAZINE. HE CAN BE REACHED AT STEVE@NIADA.COM.

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NOW MORE IMPORTANT THAN EVER NOW MORE IMPORTANT THAN EVER BHPH

PERSPECTIVES

HITTING THE MOVING TARGET OF COMPLIANCE BY BRENT CARMICHAEL

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Ever get the feeling that compliance is like trying to hit a moving target? Well you are not alone. In light of recent events, the target might have just become even harder to hit. The hottest topic with all Buy Here-Pay Here dealers has to be the new Consumer Financial Protection Act that recently passed. It has replaced inventory acquisition to give you an idea of how hot the topic is. Not a day goes by I’m not answering multiple emails and phone calls from dealers asking what the bill means for BHPH dealers. Let me start by saying that I am not an attorney, nor do I play one on TV, but I have recently stayed at a Holiday Inn Express. Having said that, I don’t think my understanding of the bill is any more insightful than anyone else’s. I have read parts of the bill (2,000 pages – great insomnia cure) and can’t make heads or tails of what the full impact will be for BHPH. At this time, I don’t think anyone honestly can. A few things we do know for sure. We BHPH dealers are smack dab in the middle of it. Automobile dealers were exempted, but sorry to say those engaging in BHPH weren’t so lucky. This is true whether the dealer has a related finance company or not. I get this belief from industry attorneys and industry insiders whose pay grades are at least two levels above mine. At one time we in the BHPH industry welcomed the affiliation with the alternative finance industry. I’m afraid that affiliation has cost us our exemption since it is one of the main targets of the bureau. There are a couple areas of our industry that could be affected that concern me the most, at least initially. One is arbitration agreements. They may be a casualty of the regulation suggested by the bureau. The other is pricing. It’s not clear whether this will be credit pricing via interest rates or retail pricing of the vehicles. It could very realistically be both. Either way, it’s a loselose from a profitability standpoint. Another thing we know is the government has committed some pretty substantial financial resources to its enforcement. Figures in the $500 to $700 million range are not out of the realm of possibility. For that price tag, I think enforcement will be a fairly high priority. There is even talk some 3,500 attorneys have been added to the new agency to aid not only in defining the new regulations but enforcing them. Insert your own lawyer joke here. Will the CFPB end BHPH as we know it? I don’t believe so. I think it has the potential to significantly change some of DRIVELINE

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I HOPE THE NEW CFPB REGULATIONS, WHEN THEY ARE FINALLY HAMMERED OUT, WILL BE FAIR AND I BELIEVE THEY WILL HAVE EVERYONE’S BEST INTEREST IN MIND. the landscape. I think the dealers trying to do things the right way will be just fine. Those dealers pushing the envelope and playing in the gray areas will be weeded out, which is not necessarily a bad thing. As we have seen from some other industries, a purging is sometimes needed and quite often overdue. CFPB is just one compliance landmine we face in our industry. Uniform Commercial Code, Fair Credit Reporting Act, Risk Based Pricing, 1099-C, and Red Flag are just a few others. And don’t get me started on HIPAA, Privacy or The Patriot Act. You certainly don’t have to look far to find some sort of regulation in our industry. Now more than ever compliance needs to be a priority. The key to compliance in today’s environment is effort. At one of our recent BHPH 20 Group meetings, our guest speaker was a former OSHA inspector now working for an insurance provider. The speaker candidly commented no business can be 100 percent compliant in all aspects. There are simply too many changing rules and regulations, and other variables such as personnel turnover, to be able to stay in complete compliance at all times. It’s the effort and attempt to play by the rules that will be the difference between being fined or just given a warning.

Effort is defined by having a written policies and procedures manual. It doesn’t have to be a professionally done manual. It can be a simple handbook provided to all employees outlining the basic policies and procedures for each aspect of your business. The manual should cover things such as collections and underwriting practices, sales process and general company policies. You must make effort to continually update and train on the manual. Simply creating and having one is not good enough. All businesses change over time. Therefore policies and procedures will change. Effort should also be made in seeking out professional help. Document reviews on a regular basis are a must, not necessarily every year but at minimum every other year. Not every document you use in the normal course of business would need to be reviewed. An example would be a retail installment contract provided or purchased from Banker’s Systems. They have ensured its compliance and will notify you of any changes necessary. Regular review is needed for any self generated internal documents used. An example of this would be a warranty form. A letter stating that your documents are in compliance from an accredited attorney can literally be a get out of jail free card. If you are looking for a regulation friendly industry, BHPH is certainly not it. But even with the moving targets of industry regulation, it is still a very lucrative one for those who try to do it the right way. I hope the new CFPB regulations, when they are finally hammered out, will be fair and I believe they will have everyone’s best interest in mind. I think it’s too early for the Chicken Little mentality. No doubt the cost of compliance will go up. As always, the burden is on us to not only know the rules, but play by them to the best of our ability. In today’s electronic age, the availability of information is almost endless so ignorance is definitely no excuse. Here’s hoping that on your next compliance review you receive an “E” for effort and not an “O” for out of business. BRENT CARMICHAEL IS ONE OF THE INDUSTRY’S MOST WELL RESPECTED BUY HERE-PAY HERE EXPERTS. HE IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES, INC. PRIOR TO JOINING NCM, BRENT WORKED 17-PLUS YEARS IN SUBPRIME FINANCE AND COLLECTIONS.

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F&I

MATTERS

FEATURE STORY

CONSUMERS NOT JUST CHOOSING

VEHICLES ONLINE, BUT PAYING ONLINE TOO The Increasing Demand to Pay Online and Possible Solutions B Y M A R YA L A N G , B H P H R E P O R T

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According to the most recent study from the Federal Reserve, the average new-vehicle loan in the U.S. stands at more than $26,700 with a loan to value ratio of a huge 80 percent. So the volume of payments there to be collected is vast. Auto finance companies from huge captives down to smaller Buy Here-Pay Here dealers in the subprime market are facing this challenge with consumers increasingly using multiple payment methods in other areas of their consumer life and, therefore, bringing the same expectations to auto finance. Across all other industries, multiple payment options are available to consumers – whether that’s paying your cell phone bill online, scanning a QR code on your most recent electricity bill or paying your healthcare bill over the phone. Statistics from Fiserv’s sixth annual Billing Household Survey 2013 show that 83 percent of consumers use more than one bill payment method monthly – covering e-billing, mobile, check, walk-in and phone. And while the number of auto finance bills paid via the traditional method of mail has reduced by around 50 percent according to the Aite Group, there has only been a slight increase in the number of bills being paid online. However, in mobile payments, although the overall volume is still significantly lower than other channels, there was more than a doubling in the number of bills paid via this channel in 2013. But perhaps the biggest opportunity for the auto finance industry lies in paperless electronic bills. Currently, according to the Fiserv survey, auto loan e-bill penetration DRIVELINE

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stands at just 19 percent, compared to 58 percent of cell phone bills viewed online. So why the hold-up of using multiple payment channels in the auto finance industry? In the BHPH market or the subprime auto market, a lot of consumers pay by actually going to the dealer, often more than once a month. But they are increasingly demanding and using the convenience of paying online or via a mobile device. Personalization vs. Productivity Many consumers already perform price comparisons on their phones while visiting a car lot, and dealerships are in fact operating in a true omni-channel environment, whether they like it or not. But there’s a huge dichotomy the smaller BHPH dealerships in particular are now facing between taking a personalized approach of making payments in store, and becoming more efficient in taking payments via the alternative channels suggested above. In the case where dealers have a large number of subprime borrowers, there can be a resistance to changing payment methods. Many of these dealers actually like to see the borrowers come in to make a payment, and see the car that is the collateral for the loan. But concerns over risk can be countered by the fact that the technology of more advanced payment channels can assist with PCI compliance and other risk management. Possible Solutions Improving efficiency in the auto finance industry is all about relieving pressure in collecting loan payments, as well as making the process more convenient for customers. BHPH dealers don’t have to jump straight

to the latest technology – such as mobile payments – but need to focus on using tried and tested technology that is relatively new to the auto finance market. For example, interactive voice response solutions are very popular in other markets in offering an interactive, personalized experience over the telephone, and are easy to implement for auto financiers. IVR allows the caller to interact with an automated telephonepayment system to make ACH, debit and credit card payments 24/7. This can be a great option for customers who want to control their finances through efficient self-service, offering them the opportunity to review balances and receive immediate payment verification at any time, day or night. A customer-facing payment ecosystem has evolved, particularly within auto finance, and while we may be seeing greater adoption of this payment technology in the larger independent dealers, the smaller subprime and BHPH markets are still lagging behind other consumer markets. There are of course concerns of compliance issues and understanding the regulation around using different payment channels, but these new channels are tried and tested in terms of compliance. It’s essential that these smaller dealerships recognize the potential of using multiple payment channels to grow their businesses and to attract new customers who want to pay through different channels, and to pay at a time convenient for them. MARYA LANG IS THE GENERAL MANAGER OF AUTO FINANCE AT BILLINGTREE.

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MARKET

WATCH

Used Cars to Recommend to Parents LIST HELPS FIND RIGHT VEHICLES FOR NEW DRIVERS

• YOUNG DRIVERS SHOULD STAY AWAY FROM HIGH HORSEPOWER. • BIGGER, HEAVIER VEHICLES PROTECT BETTER IN A CRASH. • E SC IS A MUST. • V EHICLES SHOULD HAVE THE BEST SAFETY RATINGS POSSIBLE.

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When parents step onto the used car lot to help their teen pick out a first car, many have two top concerns: affordability and safety. And many parents struggle with how to satisfy both those needs in the same used vehicle. In response to this need, the Insurance Institute for Highway Safety recently released a few lists helpful for both parents and dealers trying the find the right vehicles for those new to the driver seat. One list IIHS released was of the safest used vehicles for teens. Research showed “many aren’t driving the safest ones,” the organization stated. This marks the organization’s first-ever list of recommended used vehicles for teens. “A teenager’s first car is more than just a financial decision,” said IIHS president Adrian Lund. “These lists of recommended used vehicles can help consumers factor in safety, in addition to affordability.” There are two tiers of recommended vehicles with options at various price points, ranging from less than $5,000 to nearly $20,000, “so parents can buy the most safety for their money, whatever their budget,” said IIHS. The list compiles recommended used

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s

ASSOCIATION

Buying for Teens

BY AUTO REMARKETING STAFF

vehicles for teens starting under $20,000, as well as a separate list for those searching for a vehicle under $10,000. The lists break the vehicles up by segment and provide modelyear suggestions. The more expensive list includes vehicles such as the 2009 model year and later Lincoln MKS, as well as the Toyota Prius v in the midsize cars segment, for example. In the $10,000 and under list, dealers will find older models, such as the 2005 and later Acura RL and the 2009 Ford Taurus. IIHS also offered a little more insight into why lists like these can save parents time, money, and the potential injury of their teens. The organization fielded a series of studies, one which showed mini-cars or small cars were the most commonly purchased type of vehicle for teens, among the 500 parents surveyed. A little over 28 percent of the responders were buying for their teens from this category, which tends to not hold up as well as larger models during a crash. Furthermore, a little more than half of newly purchased vehicles for teens, according to the survey, were from the 2006 model-year or earlier. IIHS pointed out this can be a problem

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because older vehicles are much less likely to have safety features such as electronic stability control and side airbags. IIHS also offered a list of four factors to consider when selecting vehicles for teens: • Young drivers should stay away from high horsepower. •B  igger, heavier vehicles protect better in a crash. • ESC is a must. • Vehicles should have the best safety ratings possible. And though this may be difficult for some families, IIHS said parents may want to consider shelling out a bit more for vehicles bought for their teens. In the parent survey, the mean purchase price for a teen’s vehicle was about $9,800, while the median was just $5,300. “Unfortunately, it’s very difficult to get a safe vehicle for a teenager at the prices most people are paying,” says Anne McCartt, IIHS senior vice president for research. “Our advice to parents would be to remember the risks teens take and consider paying a little more.” To view the complete lists of recommended vehicles for teens from IIHS, visit www.iihs. org/iihs/news.

NEWS

DEALER 20 GROUP THE POWER COMES FROM THE DEALERS THEMSELVES The power of NIADA’s Dealer 20 Group comes from the dealers themselves – working and sharing their ideas and real world experiences with each other. If you’re tired of constantly reinventing the wheel and enjoy the sharing of ideas and best business practices with dealers like yourself, the NIADA Dealer 20 Group is for you. Dealers are matched with other dealers of like size and sales volume (outside of the other dealers’ selling area) all with one goal in mind – to be more successful and to learn how to improve day to day operations, increase sales and make more profit. While the NIADA Dealer 20 Group traditionally meets three times a year, dealers have access to their financial performance each and every month of the year. These unique groups are designed for NIADA’s independent dealers as they do business today: retail, BHPH – or a little bit of both. Sessions are moderated by Joe Lescota, NIADA Director of Dealer Development.

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LEGAL

NEWS

Important Notice for Businesses with Consumer Clauses RULES FOR THE ARBITRATION OF DISPUTES ARISING FROM CONSUMER AGREEMENTS The American Arbitration Association has announced the upcoming launch of the Consumer Arbitration Rules (“Consumer Rules”). Effective September 1, 2014, it is the AAA’s first stand-alone set of rules developed specifically for the arbitration of disputes arising from consumer agreements. The Consumer Rules will apply to all applicable cases filed on or after September 1, 2014, and as of that date will replace the Consumer-Related Disputes Supplementary Procedures.

This advance notice is to alert you to one of the important provisions of the rules: A business currently providing for or intending to provide for the AAA to administer its consumer arbitrations under the Consumer Rules or another set of AAA rules in a consumer contract must register its consumer arbitration clause with the newly-created AAA Consumer Clause Registry.

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The procedure is simple: The business submits the clause, accompanied by the

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consumer review and registry fee. The AAA reviews the clause for compliance with the Due Process Protocol. If the clause is compliant with the protocol, the AAA will administer disputes arising out of that clause, and the business will be included on the publicly-accessible Consumer Clause Registry, which contains the name and address of the business, the consumer arbitration clause and additional documents that may be related to the clause. The AAA may decline to administer a case if a business does not comply with the Due Process Protocol and/ or registration requirement as per this notification. Notes about Fees: • The consumer review and registry fee represents the cost of reviewing the clause and maintaining the clause on the registry. This fee is non-refundable. • For clauses submitted to the AAA within the 2014 calendar year: The fee is $650 per clause, which covers the cost of appearing

on the registry through 2015. A yearly fee of $500* will be charged to maintain each individual clause on the registry for each calendar year thereafter. • For clauses submitted within the 2015 calendar year: The fee is $500. A yearly fee of $500* will be charged to maintain each clause on the registry for each calendar year thereafter. • For a demand for consumer arbitration received by the AAA pursuant to an arbitration clause not previously submitted to the AAA for review and placement on the registry: The fee is $250, in addition to the review and registry fees described above, for an expedited review of the clause. *Future registry fees are subject to change. To register a consumer clause or view more information about the AAA’s Consumer Clause Registry, go to www.adr. org/consumerclauseregistry. For questions, please contact the AAA at consumerreview@adr.org.

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REGULATORY

NEWS

NHTSA Unveils Online Search Tool for Recalls Using Vehicle Identification Number

safercar.gov

CONSUMERS WILL BE ABLE TO TELL WHETHER VEHICLE IS IMPACTED BY A RECALL Every year, millions of vehicles are recalled in the United States due to safety defects or noncompliance with federal safety standards. To help car buyers, owners and renters know their vehicles are safe and their safety defects have been addressed, the U.S. Department of Transportation’s National Highway Traffic Safety Administration recently unveiled a free online search tool consumers can use to find out if a vehicle is directly impacted by a recall. The new tool is available on www. safercar.gov/vinlookup and provides consumers with a quick and easy way to identify uncompleted recalls by entering their Vehicle Identification Number. All major light vehicle and motorcycle brands can be searched. “Safety is our highest priority, and an informed consumer is one of our strongest allies in ensuring recalled vehicles are

VEHICLE RECALLS: WHAT YOU SHOULD KNOW

repaired,” said U.S. Transportation Secretary Anthony Foxx. “Starting today Your car isand important to you, your safety is important to us. But when your car or an item of motor car owners, shoppers, renters canand find equipment poses adefect safety risk to you, your passengers, or other motorists sharing the road with out if a specificvehicle vehicle has a safety you, then – it can be recalled. that needs to be fixed using our free online Determining whether there is a recall tool.” consumers need to take action on is easy. Under the new NHTSA After entering the VIN number into the WHAT ISmandate, A RECALL? all major light vehicle and motorcycleor the Nationalfield, results will appear if the consumer When a manufacturer Highway Traffic Safety Administration determines that a manufacturers are car now to provide hascreates an open recall on their vehicle. or required item of motor vehicle equipment an unreasonable risk to safety orIffails to meet VIN search capability for uncompleted there are will “No OpenThat minimum safety standards, the manufacturer is none, requiredowners to fix that carsee or equipment. be done by repairing it, offering a refund (for equipment), or (in rare cases) recalls on their owncan websites. This data it, replacingRecalls.” theNHTSA’s car. must be updated atrepurchasing least weekly. “Just as every single automaker should new VIN lookup tool directly relies on never hesitate to recall a defective vehicle, WHAT DOES THIS MEAN TO ME? consumers should never hesitate to get information from all major automakers, If there is a safety recall, will fix thevehicle car or equipment free NHTSA of charge. and regularly updated information fromyour themanufacturer their recalled fixed,” said automakers is critical to the efficacy of the deputy administrator David Friedman. HOW WILL I KNOW IF THERE’S A “By RECALL? search tool. making individual VIN searches If there is a vehicle safety recall, your manufacturer notify you we’re by Consumers can find their readilywill available, providing another sending you a letter the mail. The envelope looks like this: – the peace of mind identification number by looking at in the service to consumers SAFETY RECALL NOTICE dashboard on the driver’s sideregister of the your vehicle, that the vehicle You can also car so youknowing can receive NHTSA e-mail they own, or that or on the driver’s side door onorthe door post are thinking notifications alerts sent directly tothey your phone. NHTSA’sof buying or renting, is where the door latches when it isapp closed. free of safety defects.” Safercar mobile (see www.safercar.gov) is available for both Apple devices and Android devices, or RSS feed.

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WHAT DO I DO IF MY CAR IS RECALLED? When you receive a notification, follow any interim safety guidance provided by the manufacturer and contact your local dealership. They will fix the recalled part or portion of safercar.gov your car for free.

safercar.gov

CAN I FIND OUT NOW IF THERE’S A RECALL ON MY CAR?

VEHICLE RECALLS: WHAT YOU SHOULD KNOW Your car is important to you, and your safety is important to us. But when your car or an item of motor vehicle equipment poses a safety risk to you, your passengers, or other motorists sharing the road with you, then it can be recalled. WHAT IS A RECALL? When a manufacturer or the National Highway Traffic Safety Administration determines that a car or item of motor vehicle equipment creates an unreasonable risk to safety or fails to meet minimum safety standards, the manufacturer is required to fix that car or equipment. That can be done by repairing it, replacing it, offering a refund (for equipment), or (in rare cases) repurchasing the car.

You can also download WHAT IS THEthe VIN Safercar LOOKUP? mobile app and search for all vehicle recalls. The Safercar mobile is available forSafety iPhones (https://itunes.apple.com/us/app/safercar/ Theapp National Highway Traffic Administration offers this tool for people to look up Vehicle Identification (VINs)(https://play.google.com/store/apps/details?id=gov. to see if they are covered by a safety recall that has yet id593086230?ls=1&mt=8) andNumbers Androids to be remedied. It reflects information provided to NHTSA by vehicle manufacturers required nhtsa.safercar&hl=en.). to have their own public VIN-specific recall Web sites. WHERE CAN I FIND IT? The tool is available online at www.safercar.gov/vinlookup.

See page 2 for more information on looking up your VIN.

WHY SHOULD I USE IT?

WHAT DOES THIS MEAN TO ME? If there is a safety recall, your manufacturer will fix the car or equipment free of charge. HOW WILL I KNOW IF THERE’S A RECALL? If there is a safety recall, your manufacturer will notify you by sending you a letter in the mail. The envelope looks like this:

Yes. You can look up your car on NHTSA’s Web site – www.safercar.gov/vinlookup – or your manufacturer’s Web site, to see if it’s under a recall. You willVEHICLE need your Vehicle Identification DEALER TIPS FOR VIN LOOKUP AND RECALLS Number (VIN) to do the lookup.

SAFETY RECALL NOTICE

You can also register your car so you can receive NHTSA e-mail notifications or alerts sent directly to your phone. NHTSA’s Safercar mobile app (see www.safercar.gov) is available for both Apple devices and Android devices, or RSS feed. WHAT DO I DO IF MY CAR IS RECALLED? When you receive a notification, follow any interim safety guidance provided by the manufacturer and contact your local dealership. They will fix the recalled part or portion of your car for free.

Before purchasing a used vehicle or taking in a trade, this tool can help identify recalled vehicles. It can also be used to learn if used vehicles in inventory are subject to unremedied safety recalls. Lastly, you can help prospective purchasers/lessees to learn more about how they can use this new tool. HOW TO USE THE VIN-LOOKUP TOOL Use this tip sheet to train your staff on the existence of the new NHTSA VIN-lookup tool and how and when to use it. Direct prospective customers to the www.safercar.gov Web site if they have questions on recalls or on other issues involving motor vehicle safety. HOW TO FURTHER DIALOGUE WITH CUSTOMERS ABOUT RECALLS Inform and educate your customers by making available the NHTSA recalls fact sheet. Suggest that customers sign up for recall alerts on www.safercar.gov for the vehicles they own or that they may be interested in buying or leasing.

CAN I FIND OUT NOW IF THERE’S A RECALL ON MY CAR? Yes. You can look up your car on NHTSA’s Web site – www.safercar.gov/vinlookup – or your manufacturer’s Web site, to see if it’s under a recall. You will need your Vehicle Identification Number (VIN) to do the lookup. You can also download the Safercar mobile app and search for all vehicle recalls. The Safercar mobile app is available for iPhones (https://itunes.apple.com/us/app/safercar/ id593086230?ls=1&mt=8) and Androids (https://play.google.com/store/apps/details?id=gov. nhtsa.safercar&hl=en.).

See page 2 for more information on looking up your VIN. 10974b-081914-v2

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