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magazine

FEATURE STORY ON PAGE 6

Legacy of INDEPENDENCE FOR THESE DEALERS, FAMILY DRIVES A LIFELONG PASSION FOR THE CAR BUSINESS

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• NIADA CONVENTION • INSIGHTS INTO CUSTOMER EXPERIENCE • COMPLIANCE OVERDRIVE

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

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SAFET Y WATCH

Nissan Recalling Nearly 1M Units for Airbag Issue RECALL TO CORRECT SOFTWARE ISSUE

INSIDE

06 Legacy of Independence 10 Structural Disclosure Policy 12 NIADA Convention 14 CR Names Best, Worst Used Cars 15 Insights into Customer Experience 18 Compliance Overdrive

WHAT’S NEW Tire Safety Week

The National Highway Traffic Safety Administration said Nissan North America is recalling nearly one million units to correct a software issue associated with the airbag system. The vehicles included in the campaign are Nissan’s Altima, LEAF, Pathfinder and Sentra from the 2013 and 2014 models years, the 2013 NV200 also known as the Taxi as well the 2013 Infiniti JX35 and 2014 Infiniti Q50 and QX60 vehicles. NHTSA indicated the total amount of vehicles to be recalled totals 989,701. “In the affected vehicles, the occupant classification system (OCS) software may incorrectly classify the passenger seat as empty, when it is occupied by an adult,” federal officials said. “If the OCS does not detect an adult occupant in the passenger seat, the passenger airbag would be deactivated,” they continued. “Failure of the passenger airbag to deploy during a crash (where deployment is warranted) could increase the risk of injury to the passenger.” Nissan told NHTSA it will notify owners, and franchised dealers will update the OCS software, free of charge.

BE TIRE SMART

Mark your calendars for the 2014 National Tire Safety Week June 1-7. The event is sponsored by the Rubber Manufacturers Association to raise consumer awareness about tire safety. Help consumers keep their tires safe and demonstrate your commitment to motorist safety. Sign up for free materials at www.rma.org/tire-safety/tire-safety-week.

ADVERTISERS INDEX 4

ABC Baton Rouge.................Inside Front Cover ADESA....................................Inside Back Cover Ally .......................................................................7 AutoZone...........................................................10 Black Book ..........................................................3 Dealer Funding..................................................15 Manheim.com.....................................................5 Manheim Pennsylvania ....................................11 NextGear Capital................................................9 United Acceptance.............................................8 VAuto..................................................Back Cover West Insurance Center ....................................14

ASSOCIATION NEWS

NIADA, AFSA Form Strategic Alliance FINANCIAL SERVICES ASSOCIATION, CAR DEALERS SHARE A UNIQUE LINK In March, the NIADA executive committee met with members of the American Financial Services Association’s Independent Auto Finance Executives Group in Dallas to discuss areas of mutual interest. As a result of the meeting, the groups have formed an alliance to share ideas and coordinate activities related to legislative, regulatory and educational issues of mutual interest and to find ways to create opportunities for both financing sources and independent dealers to improve operational efficiency, reduce costs and improve consumer satisfaction. Members of AFSA and NIADA are uniquely linked. Many AFSA vehicle finance division members provide financing to customers of independent vehicle dealers. Additionally, NIADA members work closely with their indirect vehicle finance sources to obtain financing for their inventory, real estate and capital equipment requirements.

MIADA OFFICE

1705 Old Whitfield Road • Suite A Pearl, MS 39208 Phone: 601-939-9866 email: missautodealers@yahoo.com website: www.mississippiiada.com

N IADA HEADQUARTERS

BOARD OF DIRECTORS

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 Spark Plug is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 760065203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of The Spark Plug, the Mississippi Independent Automobile Dealers Association, or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright 2014 by NIADA Services, Inc. All rights reserved. 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

LEFT TO RIGHT: TREASURER STEVEN WATKINS, SECRETARY DAVID HILL, VICE PRESIDENT ROBERT DOWE, PRESIDENT AARON WILLIAMS AND CHAIRMAN OF THE BOARD JIMMY BOLING.

Printing Nieman Printing

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INDEPENDENT

Legacy of Independence FOR THESE DEALERS, FAMILY DRIVES A LIFELONG PASSION FOR THE CAR BUSINESS Throughout 2014, NIADA’s Used Car Dealer Magazine is celebrating the independence of NIADA’s members by featuring a different segment of the independent used vehicle industry each month. This segment, we highlight second- and third-generation dealers, who grew up around car lots watching their parents, grandparents, uncles and aunts operate dealerships – and, of course, pitching in themselves. With car sales in their blood, these dealers couldn’t imagine doing anything else, operating their independent dealerships with a passion that can only come from family.

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For many independent dealers, the car business is a family business. Independent dealers across the country tell stories about growing up sweeping the lot for their dad or selling cars during college for their grandfather, working with their mom, brothers or uncles. For them, the dealership was often a second home and selling cars was not just a job, it became a passion. And it’s one they continue to follow today – their own way. Independently. Jim Long, owner of Long’s Auto Place in St. Paul, Minn., grew up in the auto business with several relatives, including his father, Thomas, his uncles and his grandfather, owning and working at various dealerships. “I just fell in love with the car business,” he said. “I grew up in it and just loved it, even when my father tried to convince me to do something else.” Neal Coleman began working for his uncle, Steve Nosser, in 1977 at Steve Nosser Ford in Quincy, Ill., and it didn’t take long for selling cars to get into his blood. “From there, I really just took an interest in it,” Coleman said. “It was always more than a job to me.” He opened his own store, Mr. Deal’s Auto Center in Quincy, as an independent dealership in 1988. “I’m the quintessential dealer’s kid,” added Gordon Tormohlen, owner of Tormohlen’s Good People Automotive. “It’s the biggest family business there is.” Tormohlen’s father, Paul, started in the industry cleaning grease racks at a Hudson dealership and, after serving in World War II, he became the youngest Hudson dealer in the United States. As a 13-year-old in 1973, Tormohlen began working for 50 cents an hour at his dad’s Chevy dealership. Before he could even drive, he was already using money he earned at the dealership to buy and sell cars. The bug had bitten him. Tormohlen now owns two independent dealerships, one T H E S PA R K P L U G

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in Freeport, Ill. and one in Monroe Wis., with a third in the planning stages. His son, Barrick, and daughter, Karina, a graduate of Northwood University, are in the business with him. Starting out as a child at a family-owned car business doesn’t mean you get an easy ride, however, as many legacy independent dealers will attest. “I worked my way through every part of a dealership growing up,” Tormohlen said. “I learned early on the only way to earn respect from the other employees was to outwork them. I was the first one in and the last one out every day. I ate my lunch in 20 minutes and didn’t take breaks. “I did everything from serving as a detailer to doing lot duty to running parts and working the parts counter. I eventually made my way into sales. Other employees saw I had a good work ethic.” Long’s career history also includes working in all aspects of a dealership, in franchises as well as independent dealerships. Eventually, he said, he found his true calling in sales. “It’s really the sales I love,” he said. “I love talking to people and get an absolute high from putting together a deal. An automobile is a very emotional sale, especially a first car. There are good days and bad days, but I still love the people and love to see what we can accomplish.” Why Independent? The freedom to run a business on your own terms, rather than by a corporation’s rules, is one of the most basic reasons most dealers go independent. Mike Jones’ father, Royce, was an independent dealer who had several opportunities over the years to be a franchise owner but declined. “He liked the freedom of having his own store and not having anyone to report to,” said Jones, now the owner of Auto Expo in Dothan, Ala. “He could do as he pleased and didn’t have the pressures that came with massive payroll and overhead.” Coleman’s reasons for going independent after growing up with a franchise legacy were similar. “I didn’t want the factory telling me what I needed to sell and what I needed to have in inventory,” he said. “You spend more time in meetings than out working with the public selling cars. This way you can control your own destiny and have more one-on-one interaction with the customers. You and your employees control customer satisfaction.” The ability to sell the exact cars your customers want instead of a specific brand

BY LAURIE PONDER

is also a draw. “As an independent, we have the capability of selling everything from a $10,000 car to a $100,000 Hummer,” Long said. “We can sell a much wider range of vehicles, cars our customers want, and not deal with the politics of a franchise.” And though most independent dealers admit to working long hours, doing business as an independent means they can set their hours as needed and not necessarily worry about some of the other burdens big business can bring. “My dad wanted to have the freedom to come and go as he pleased and not have to worry about a huge payroll every month,” Jones explained. “He made a comfortable living and enjoyed what he was doing, and that is the track I have taken as well. “I may not get rich, but I have a good lifestyle and I can be home when I need to. It’s all about balance.” Independent Challenges Being independent does not come without its challenges, however. In today’s marketplace, independent dealers may be able to sell a wider range of cars, but they also have to go out and get them from auctions and other sources – and they have to know each car individually. “We have to work harder to find the inventory,” Long said. “[Franchise dealers] have the same inventory coming in at the same quality. With our cars, no two are ever alike, even in the same model with the same mileage.” Knowing how to manage people – both customers and employees – is another issue faced by independent dealers. “We have to know how to handle very demanding customers, which is an art,” Tormohlen said. “But to do that, you have to properly take care of and train employees first. This is a fundamental part of any plan. If you take care of employees, they will take care of your customers and build your reputation and business.” And because they are usually smaller than franchise dealerships and lack the corporate backing, independents more often find themselves forced to become knowledgeable in all areas of their business. “I wear a lot of hats,” Jones said. “I know a little bit about a lot of things. It can be overwhelming to try to be the lawyer, the accountant, the marketing and advertising guru and salesperson.” Developing relationships with local banks and credit unions can also be more challenging for independent dealers. CONTINUED ON PAGE 8 W W W. M I S S I S S I P P I I A D A . C O M

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CONTINUED FROM PAGE 6

Legacy of Independence

NEAL COLEMAN

MIKE JONES

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GORDON TORMOHLEN

“Banks don’t always favor an independent business,” Long said. “They sometimes assume we and our customers are more of a credit risk, that we might just close up shop and leave. We have had to show them our staying power.” And of course, independents have to deal with the many laws and regulations imposed on the used car business – but they have to do it on their own. While it can be difficult to keep up with ever-changing rules, many dealers believe doing so shows which dealers are reputable. “There are good state and federal regulations out there that protect the consumer and protect the reputation of reliable car dealers,” Coleman said. “Anyone who is going to survive in this business has to take care of the customer more and more and work really hard at customer satisfaction, regardless if you are a new or

JIM LONG

used car dealer.” That is where many independent dealers say they are not completely independent. They rely on their contacts with other independent dealers and on the National Independent Automobile Dealers Association (NIADA) and their state associations to help educate and advocate for them. “This is where it is important to get involved in more than just your store,” said Tormohlen, who serves as NIADA’s Region III vice president. “Get involved in your community and local politics. Get involved in your associations and 20 Groups. The more connections you have, the more you will learn, and you will be a better, stronger entrepreneur.” Jones agreed, saying the information and assistance he gets from NIADA and the Alabama IADA is invaluable.

“State and national associations keep us informed with various changes to rules and regulations,” Jones added. “When you are independent, you have to rely on those systems and checkpoints to keep up with everything because you may have limited personnel. As important as it is, it is a lot to remember and keep up with.” So with all the challenges, why do you do it? Why do you operate your own independent used car business? There might be many reasons, but often it is simply the love of the business. And often that love has been passed down through several generations of family. “The nature of this business is just fascinating,” Tormohlen said. “It has always been fun. My dad passed away this past year at age 90, and he always said if you are having fun at work, it’s a lot less like working.”

UNITED

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ARBITR ATION CORNER

ARBITR ATION CORNER

Piecing Together the Structural Disclosure Policy Puzzle

CFPB Names New Regulator to Oversee Auto Finance

A FEW CLARIFYING POINTS

JEFFREY LANGER TAKES LEAD

Although the revised NAAA Arbitration Policy has been effective since last September, some questions linger about structural disclosures, said Manheim Director of Arbitration Matt Arias, who serves as co-chair of the NAAA Standards Committee. “There are just a few basic points to remember that can help our members clarify which disclosures we recommend be used in what conditions,” he said. First, the Structural Damage Disclosure should be used when a component that is deemed structural has existing permanent damage with poor prior repairs that exclude refinish only, Arias stated. “This damage includes kinked metal, but not bent,” he pointed out. “This disclosure is eventually replacing frame damage and frame/unibody.” Apply the Certified Structure Repair/Replacement Disclosure to situations when the structure of the vehicle has been repaired or replaced according to OEM guidelines, Arias explained. “But it must also fall within NAAA’s Used Vehicle Measurement

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Standard, and the disclosure supersedes the Certified Frame Repaired Disclosure,” he noted. “If the structure has poor prior repairs, please continue using the Structural Damage Disclosure.” For any modifications made to the structure, use the Structural Alteration Disclosure, Arias said. “This includes but is not limited to lengthening the structure, shortening the structure, welding to the structure, brazing to the structure (excluding exhaust hangers), drilling new holes to the structure and enlarging or elongating the existing born-with (OEM) holes.” He added that the disclosure applies to all modifications made to the structure only, even if aftermarket parts are included on the vehicle. Aftermarket part examples include, but aren’t limited to, fifth wheel brackets, gooseneck brackets, receiver hitch brackets, snowplows, utility bumpers or suspension equipment. If you have questions about the Arbitration Policy, please send them to naaa@naaa.com.

The Consumer Financial Protection Bureau has tapped a replacement regulator whose main jurisdiction is the auto finance market. Jeffrey Langer, who most recently served as senior counsel at Macy’s in Mason, Ohio, joined the CFPB as the assistant director of installment and liquidity lending markets in the bureau’s research, markets and regulations division. Langer also has served as a partner in several law firms, including Jones Day and Dreher Langer & Tomkies. He is a founding fellow and treasurer of the American College of Consumer Financial Services Lawyers and is a former chair of the Consumer Financial Services Committee of the American Bar Association Business Law Section. Langer’s appointment to the CFPB post was one of three recent hires. Christopher Carroll also joined the CFPB as the assistant director and chief economist for the office of research in the bureau’s research, markets, and regulations division. The bureau also announced Daniel Dodd-Ramirez joined the agency as the assistant director of financial empowerment in the bureau’s consumer education and engagement division. “I’m pleased that these incredibly talented individuals have joined the bureau,” CFPB director Richard Cordray said. “All three offices play an essential role in making sure that consumers are being treated fairly. These experts will lead the teams that help us monitor the marketplace and provide tangible benefit to consumers.”

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M ARKET WATCH

CR Names BEST, WORST Used Cars LIST BASED ON ANNUAL AUTO SURVEY Consumer Reports compiled a Best & Worst Used Cars list for model years 2004 through 2013, available in the magazine’s annual auto issue and at the 2014 Autos Spotlight page on ConsumerReports.org. Highlighted are the best small cars, sedans and SUVs available in four price ranges. Each performed well in CR’s testing when new and had above-average reliability for the model years shown, based on CR’s annual auto survey. And all models came standard with electronic stability control. In the $15,000-$20,000 price range, the following cars made Consumer Reports’ list of best used cars:

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• Small Cars: 2012-13 Hyundai Elantra and 2011-13 Subaru Impreza
 • Sedans: 2011-12 Toyota Camry, 2010-11 Toyota Camry Hybrid, and 2008 Acura TL
 • SUVs: 2006-07 Lexus RX and 2009-10 Subaru Forester (nonturbo) 
 The Consumer Reports “used cars to avoid” list includes 2004 to 2013 models that have had multiple years of muchworse-than-average overall reliability, according to CR’s annual auto survey. Among the more than 20 models that made the list are the BMW X5 (6-cyl.), Chrysler Town & Country, Ford Fiesta and Volkswagen Beetle.

PRODUCTS

& SERVICES

Carfax Adds Vehicle History Search UNIQUE VEHICLE LISTINGS SITE HELPS CONSUMERS FIND THE RIGHT CAR WITH THE RIGHT HISTORY FROM DEALERS Carfax has unveiled a new online car shopping tool that helps consumers find the right car with the right history. At carfax.com, online shoppers now can search for used cars with specific vehicle history details – such as no accidents reported to Carfax, service records and Carfax 1-Owner. Used cars for sale from thousands of dealers on the new listings site all come with free Carfax vehicle history reports. Plus, vehicles are shown based on the history attributes shoppers want, making the shopping process for carfax.com visitors easier and faster. “I found a great car on Carfax,” said used car shopper Nathan Walker from Washington. “I called the dealer immediately and he said the car was not listed in their inventory yet because it was still in detail and undergoing inspection. I already knew from the information in the Carfax listing that I wanted to see it. I drove forty miles to the dealership and bought the car.” Key vehicle history details seen in every vehicle listing help save time while sifting through search results. At carfax.com, visitors begin their search of more than one million used cars by selecting the vehicle history attributes they want. Listings from Carfax Advantage Dealers also include price, photos and a detailed description of the vehicle. Once potential buyers find the car they want, they easily connect with the dealer directly from the vehicle listing. “We’ve made sure our inventory is included on carfax. com for years,” said Jeff Best, vice president of used cars for Brown’s Car Stores. “It’s an easy way for us to get in front of ready-to-buy shoppers. Consumers trust Carfax, which helps build their trust in the cars we list on Carfax.”

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SALES

MATTERS

Insights Into Customer Experience IT’S A RELATIONSHIP-DRIVEN BUSINESS We are all consumers. As a consumer, what is it that you truly desire when doing business with a company? Sure, you expect to pay a fair price for whatever product or service you purchase. Moreover, you should perceive value for the money you are spending. Isn’t there a lot to be said about the overall customer experience? Your basic expectation is a successful transaction, but shouldn’t you expect more? If the answer to this question is yes, then you should take into account your overall customer experience with the individuals and companies you do business with. Everyone wants to feel like they matter, and most people seek a certain degree of satisfaction that inspires repeat business. What do you do to create a positive customer experience? Most people like it when someone genuinely cares about their best interests. However,

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how many people like it when someone tries to sell them something? Essentially, people love to buy, but hate to be sold. This holds true for the car buying experience, which is consistently ranked as one of the most stressful purchases someone will make. Customers don’t want to feel like they are being pressured into buying a certain vehicle or add-ons. In general, most of them know what kind of car they want and what they want to pay. If they have contacted you about a car or come to your lot, the hardest part – getting them onto your lot – is done. Now the key is to provide the experience that enables you to close the deal. Two weeks ago, I decided to get a new car. I found the dealership that had the best selection of the car I wanted. I set clear expectations with the salesperson of what they could expect from me. I told them exactly what I wanted from them

BY GARRETT JOREWICZ

and I asked if they would like to proceed. I was assured that they would work with me under those terms. While I may be in the industry, on this day I was a consumer seeking a hassle-free experience at a fair price. In reality, they just wanted to get me in the door, upon which they then proceeded to change their initial agreement. Unable to resolve the issue, I walked out of the dealership. This experience sums up how important a good customer experience is to me as a consumer. Had they upheld their initial agreement, they would have gotten my business. Instead, not only did they lose a sale, but they also lost the potential for a loyal customer. Ultimately, I was able to get the same deal from the dealer down the street I had purchased my last four cars from. In retrospect, I should have gone to them first due to my past positive customer experience with them.

There are some very basic principles to enhance the overall customer experience. Following these guidelines will help earn repeat business and referrals! • Put yourself in the shoes of your customer. • Be empathetic to the process. • Educate your customer and be consultative. • Care. Understand that this is a relationship-driven business and providing a good customer experience can help you stand out from your competition, leading to loyal, repeat customers. GARRETT JOREWICZ IS THE REGIONAL DIRECTOR OF NEXTGEAR CAPITAL, INC.

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Mississippi’s Used Auto Dealer Pre-licensing Seminar Required by the Department of Revenue Seminar Location: MIADA Home Office 1705-A Old Whitfield Road Pearl, MS 39208 Office: (601) 939-9866 Fax: (601) 939-9882

$395.00

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Aimee Smith Pruitt is MIADA’s Pre-licensing education specialist. With more than five years experience in pre-owned dealership management and more than four years in education development and instruction for MIADA, she is our greatest asset. She has made major contributions to the curriculum that was first offered in July 2007. Education class participants continually rate this class as superior.

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ASSOCIATION NEWS

February Class Attendees

Amos, Archie – Auto Connection Black, Anthony – AB Autos Brown, Timothy – T.B. Apparel Buras, Jason Myles –Jay Jays Wholesale Cody, Verneshia D. Courteaux, Paula – Fresh Start Used Vehicles Demby, Sherry D. – Demby Auto Sales Dickson, Robert – Dickson’s Auto Sales Elder, Correy Karneil – Elder’s Investments Ishee, Nicholas – Let Good Times Roll Auto Sales Jaber, Williams – Willies Wheels Khan, Amir B. – Khan Auto LLC Lippman, Raymond – G.O. Auto Ngwudike, Benjamin Chimalu Norman, Mitchell – Mitch Norman Properties Poupart, Alexander L. – A&A Auto Sales Reed, Jono K. – Reed 7 LLC Rowcliff, James M. – Rowcliff Auto Sales Stampley, Richard Taylor, James –Hillside Auto Turner, Jim – Gator Auto Sales Usner, Bryan J. – B&R Auto Sales

March Class Attendees

Allen, Ashley De’niece – GuWop Beal, Timothy Blake – Beal’s Auto Sales & Rentals Bembry, Terrance – Bembry Motors LLC Brown, Alonzo – Brown’s Auto Sales Bryant, Eric F. – Bryants Auto Carrubba, Joel A. Castile, Brad Curry, Jesse C. – CALS Dorsey, Miranda Lynette – U-Ride Used Cars Frazier, Geno – Geno Motors Gholson III, Harris – Oakland Hills LTD. Gransinger, Thomas Peter – Thomas Motor Company Green, Curtis – CG Holding Company Grigsby, Charles Gray Grigsby, Gabrielle Hamilton, Juwan – Heavenly Auto Jones, Charlette – C&N Auto Sales Keithley, Sanatra Lewis, Lesha Linton, Philip – Champion Auto Repair Morton, Lionel V. – Automotive Deals of the South Parker, Darrell Heath – P&R Auto Sales Parker, Jamie – P&R Auto Sales Patridge, Jeffery – Car Source INC. Phillips, Brian C. – Spankys Truck Parts LLC Samander, Jiries – Battle Field Auto Sales Samuel, Dusty Fontenot – Dusty’s Auto Smith, Amy – Barnes Crossing Auto Watson, Derrick – Sunshine Auto Werner, Anne Lorraine – Werner Auto Sales Whitfield Jr., Ernest M. – Triton Auto Sales Wilkins, Nick – LonWay LLC Williamson, Jessica V. Wilson, Jimmie – Browns Automotive

MIADA Auction Members

ADESA Memphis 5400 Getwell Road Memphis, TN 38118 901-365-6300

Dixie Auto Auction 15673 Highway 8 West Grenada, MS 38901 662-226-5637

ABC Baton Rouge 3960 Blount Road Baton Rouge, LA 70807 (225) 778-3737

Insurance Auto Auction 100 Beasley Road Jackson, MS 39206 601-956-2787

Dealers Auto Auction 6723 Highway 51 North Horn Lake, MS 38637 662-393-0500 W W W. M I S S I S S I P P I I A D A . C O M

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ASSOCIATION NEWS

MIADA Class Attendees

Membership Application Membership dues are $295 your first year. Use your coupon book and other discounts and the membership pays for itself! There is so much more… All the help you need could be a phone call away. We look forward to serving you and helping make your dealership a SUCCESS!

Dealership Name_____________________________ Owner (s) __________________________________ Address_____________________________________ City,________________State_______Zip__________ Mailing Address______________________________ City,________________State_______Zip__________ Phone_________________Cell__________________ 17

Fax________________________________________ Email_______________________________________ Payment Method: Cash Visa

Check

#_____________

MC

Credit/Debit Card#___________________________ Exp.__________________ Can associate members contact you for services? Yes ___ No ______

The Association You Can Count On!

MIADA 1705 Old Whitfield Rd., Suite A, Pearl, MS. 39208 Phone 601-939-9866 Fax 601-939-9882

Long Beach Auto Auction 8494 County Farm Road Long Beach, MS 39560 228-452-2030 Louisiana’s 1st Choice Auto Auction 18310 Woodscale Road Hammond, LA 70401 985-345-3302

Manheim Mississippi 7510 US Highway 49 Hattiesburg, MS 39402 601-269-7550

Oak View Auto Auction 13451 Florida Blvd Baton Rouge, LA 70815 225-272-5139

Manheim New Orleans 61077 St. Tammany Slidell, LA 70460 985-643-2061

Tupelo Auto Auction 717 Westmoreland Drive Tupelo, MS 38801 662-841-0622

Mid-South Auction 1657 Old Whitfield Road Pearl, MS 39208 601-956-2700 M AY / J U N E 2 0 1 4

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COMPLIANCE

OVERDRIVE

How a Compliance Management System Can Help Your Dealership CONFIDENTLY MANAGE AND MAINTAIN YOUR DEALERSHIP’S COMPLIANCE - BY CHIP ZYVOLOSKI

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Independent automobile dealers work in a unique environment where employees often have to wear many different hats and juggle a variety of responsibilities. With all the moving pieces, it is not uncommon for dealers to be challenged with operational or compliance risk on a day-to-day basis. Many dealerships lack the size and/or staff to establish the proper checks and balances needed to uncover any compliance breakdowns. Additionally, the Consumer Financial Protection Bureau and other federal regulators now want dealers to demonstrate how they will ensure compliance with the various consumer protection requirements. With all of this intense focus on fair consumer treatment, a customer complaint could be potentially devastating to your dealership, sparking added regulatory scrutiny to an already rigorous process. Although dealers are exempt from formal CFPB oversight, any improper decisions made by dealerships do not absolve their lenders of responsibility for the resulting compliance or fair lending violations. In the interest of protecting and maintaining those relationships, it may be wise for dealers to follow the CFPB’s guidance on these matters. To offset compliance or customer service issues, a robust and effective compliance management system should be an essential part of any well-run dealership. While regulators have long considered the concept of a Compliance Management System to be the standard framework for financial institutions, it is not often part of a dealership’s compliance program. But, as the regulatory landscape becomes more and more complex, adapting CMS to meet the needs of dealerships may make all the difference when it comes to meeting the evolving demands of federal and state regulators. Implementing a compliance management system will help your dealership address compliance requirements and help organize your response to regulator inquiries. Equally important is that it will help address your lenders’ compliance needs and concerns. Adapting CMS to Your Dealership The CFPB has also adopted the CMS concept, with some modification, as part of its supervisory approach for banks and nonbanks under their jurisdiction. Additionally, the CFPB has made it clear, dating back to the first release of its examination manual, that a robust CMS must be at the core of an organization’s compliance efforts. While a full-on compliance management T H E S PA R K P L U G

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system may be beyond the scope of what is financially and practically feasible for a dealership, the concepts behind CMS may benefit dealers as they struggle to stay current with numerous regulations. Implementing a CMS model can help ensure that the dealership’s policies and procedures remain in compliance with all federal and state consumer protection laws. An effective CMS establishes compliance responsibilities; communicates those responsibilities to the dealer’s employees and incorporates them into internal business processes responsibilities; ensures those responsibilities are carried out and regulatory requirements are met through frequent reviews and compliance audits and enables and implements corrective action. Using CMS, dealers should initiate a cradle-to-grave approach, meaning they must monitor compliance from their initial advertising/marketing programs through post-closing collection processes. CMS 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 of management as well as employees. An effective CMS will include components that address the following: Advertising and Marketing Promotions Dealership business is driven largely by advertising and marketing promotions, so dealers must exercise particular caution to avoid potentially unfair or deceptive acts or practices. A dealer must thoroughly review all advertisements and promotional materials to ensure that they fairly and adequately describe the terms, benefits and material limitations of the product or service being offered and that the special promotions or terms described in the advertisements are either available to all customers or very carefully and specifically identify the limitations of the offer. Dealer Rate Mark Ups In March 2013, the CFPB released a bulletin outlining its intent to hold indirect auto lenders responsible for compliance with fair lending requirements of the Equal Credit Opportunity Act related to dealer interest rate mark ups, participation and reserves. Although the CFPB did not altogether ban the practice of dealer mark ups, it did recommend lenders consider fairly compensating dealers using alternative methods, such as a flat fee per transaction, that do not result in discrimination

disparities. While it is unlikely that dealer mark ups will be entirely abandoned, a sound CMS will provide for having written policies in place outlining the circumstances that warrant pricing markups and how they will be consistently applied throughout the dealership. Disclosures State and federal law requires dealers to give consumers several written disclosures. These may include disclosures for the consumer’s rights concerning state lemon laws. A Buyer’s Guide disclosing warranty and defect information must also be posted on the windows of all used vehicles and given to the buyer. Additionally, consumers must be informed at the time of purchase that they are signing a legal contract and the possible ramifications. A CMS will help ensure the dealership is providing consumers with the required state and federal disclosures. It will also help ensure that the dealership has a process for identifying and implementing changes to required disclosures and any new disclosure requirements. Credit Application Process Make sure the credit application includes a disclosure informing the signing customer his or her credit report will be accessed and the information can be used to collect debt. Additionally, dealers must tell applicants their credit information sources and give the consumer a chance to notify the sources about any data he or she considers erroneous. CMS will guide a dealership in paying strict adherence to fair lending rules and privacy laws that apply to the credit application process. With increased regulatory oversight, compliance management activities should be a priority of every dealership. Therefore, implementing a CMS approach — even on a smaller scale — will help ensure that new laws and regulations are being embedded within a dealership’s business operations, while protecting the dealership from potential violations. A more formal, written policy and process for tracking and implementing compliance requirements will help your dealership manage and maintain its compliance. It will also give you, your lenders and regulators more confidence in your compliance programs.

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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