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Oklahoma Independent Automobile Dealers Association

DEALERS’ RESOURCE September 2012

It’s time...

L A

W E N

E R In This Issue

• Bond Renewal Schedule • CFPB Expands Supervision • Risk Based Pricing Reminder

Change Service Requested DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

OIADA, P.O. Box 6905, Moore, OK 73153

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MAGAZINE CONTENTS 04 CFPB Expands Supervision 10 Risk Based Pricing Reminder 12 Bond Renewal Schedule

71B Auto Auction...................................................... 11 ADESA...............................................Inside Back Cover Albright Insurance...................................................... 7 Ally........................................................................... 15 AutoTrader.com.......................................................... 5 Chickasha Auto Auction............................................ 21 Dealer’s Auto Auction of OKC......................Back Cover Dodah.com............................................................... 23 Jordan Insurance Group............................................. 9 Loftis Wetzel Insurance............................................ 20 Manheim.com.......................................................... 19 Manheim North Texas...................... Inside Front Cover Nowcom................................................................... 13 Oklahoma Auto Exchange........................................ 24 Protective..................................................................17 United Acceptance................................................... 25 Voisys....................................................................... 34

WHAT’S NEW NIADA.TV Now available at www.niada.tv: • Building an Effective Dealership Website

with Shaun Petersen and panel

• Avoiding The Potholes with Ken Shilson •F  eel Unstoppable in 60 Minutes with Ruben Gonzalez

NIADA Dealer 20 Groups

NIADA’s new 20 Groups program is designed for NIADA’s independent dealers as they do business today in BHPH, retail or both. Take your profits to the next level. Visit www.niada20groups.com

813 NORTHWEST 34TH MOORE, OK 73160

EMAIL: odell.morgan@sbcglobal.net

JARED MORGAN, Electronics/ Software Technician

CHAIRMAN OF THE BOARD

John Easttom Auto Mart of Elk City P.O. Box 981 Elk City, OK 73648 580-225-1100 automart@cableone.net

SECRETARY/ TREASURER

Bruce Beam Dealers Auto Auction of OKC 1028 S. Portland Oklahoma City, OK 73147 405-947-2886 www.daaokc.com John T. Longacre, IV Taft Motors, Inc. 722 S. Linden St. Sapulpa, OK 918-224-7700 taftmotorsinc@msn.com Julian Codding Reliable Motors, Inc. 9201 S. Shields Oklahoma City, OK 405-912-5000 juliancodding@msn.com Monte Shockley Shockley Auto Sales 2605 N. Broadway Poteau, OK 74953 918-647-3999 sas@clnk.net

OIADA OFFICE

JACKIE GARNER, Office Manager

Chris Goad Regal Motors 3515 N. May Oklahoma City, OK 73112 405-917-5800 managerokc@regalcars.com

VICE PRESIDENTS

with Michael D. Jackson

• Tracking Devices with Jay Rose • L egislative/Regulatory Scene

AMBER SNOOK, Administrative Assistant

V I S I T W W W. D R C O L O R C H I P. C O M .

PRESIDENT

ADVERTISERS INDEX

ROSE & ODELL MORGAN, Executive Directors

OIADA BOARD OF DIRECTORS

LYNNA KAY, Programmer STEVE MORGAN, Consultant MIKE MORGAN, Technical Aide

FOR INFORMATION ON HOW TO BECOME A MEMBER OF OIADA PLEASE CONTACT ROSE OR ODELL MORGAN AT 405-232-2947.

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.

Dealers’ Resource is a publication of Automotive Dealers Resource of Oklahoma (ADR) produced on behalf of the Oklahoma Independent Automobile Dealers Association (OIADA), P.O. Box 6905, Moore, OK 73153. The Dealers’ Resource is published monthly by the National Independent Automobile Dealers Association Services Corporation. Periodical postage paid at Arlington, TX, and at additional offices. POSTMASTER: Send address changes to OIADA, P.O. Box 6905, Moore, OK 73153. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of ADR of Oklahoma, the Oklahoma Independent Automobile Dealers Association or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of OIADA or NIADA does not constitute an endorsement of the products or services featured. Copyright © 2011 by O&R Morgan, Inc. dba OIADA. All rights reserved. Dealers’ Resource is a publication of Automotive Dealers Resource of Oklahoma on behalf of the Oklahoma Independent Automobile Dealers Association (OIADA), but is mailed to all dealers in the state in an effort to educate and encourage non-members to join the Association and support our efforts to improve the image and profit potential of the industry. For 55 years, we have worked to represent the independent motor vehicle dealer in Oklahoma. We need your support.

Dr. ColorChip Introduces Systems for Dealers

Dr. ColorChip, a nationwide provider of automotive touch-up paint, has introduced a new line of commercial automotive paint chip repair systems catered to dealership owners looking to decrease the cost of cosmetic reconditioning of used car inventory. Dr. ColorChip now offers an entry-level basic commercial system designed for dealers with fewer than 40 used car sales per month. It is a customizable 30-color system that enables small dealerships and dealers specializing in the resale of a particular make of vehicle to effectively touch up their inventory. Dr. ColorChip’s standard commercial system is a more comprehensive 80-color system meant to accommodate a dealer serving from 40 to 100 cars per month. Large dealers, chain dealers and auction houses will benefit most from the 160-color deluxe system, which covers the full spectrum of car colors. “The option of bringing this system in-house is extremely attractive and makes great financial sense” to dealerships, Dr. ColorChip co-owner/developer Dan McCool said. “Its impact is immediate – driving cash to the bottom line and generating higher profits.” For more information, contact (561) 845-6122 or sales@ drcolorchjp.com, or visit www.drcolorchip.com.

Glenn McDaniel I-35 Credit Auto 1113 SE 51st St. Oklahoma City, OK 73129 405-670-4100 gtamcd@aol.com David McQuerry McQuerry Motors, Inc. 1302 N. Harrison St. Shawnee, OK 74801 405-273-8171 mcquerrymotors@yahoo.com

OIADA CONTACT INFO

FRONT COVER BY Mike Morgan 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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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 supervisory 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.”

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IRS STEPPING UP FORM 8300 COMPLIANCE AUDITS

IRS Form 8300 Reporting Shaun Peterson, legislative counsel for NIADA, recently reported that the IRS is stepping up compliance audits regarding Form 8300, “Report of Cash Payments Over $10,000 Received in a Trade or Business.” The law requires trades and businesses to report cash payments of more than $10,000 to the federal government by filing Form 8300, a joint form issued by the IRS and the Financial Crimes Enforcement Network (FinCEN). The information provided on the form assists law enforcement in its antimoney laundering efforts. Transactions that require Form 8300 include, but are not limited to: • Pre-existing debt payments. • Making or repaying a loan. • Sale of goods/services. • Sale of real property. • Rental of real or personal property. • Exchange of cash for other cash. Businesses must report cash payments received, if all of the following criteria are met: • The amount of cash is more than $10,000. • The business receives the cash as one lump sum of more than $10,000, installment payments that cause the total cash received within one year of the initial payment to total more than $10,000, or previously unreported payments that cause the total cash received within a 12-month period to total more than $10,000. • The establishment receives the cash in the ordinary course of a trade or business. • The same agent or buyer provides the cash. • The business receives the cash in a single transaction or in related transactions. Cash Includes Cash includes the coins and currency of the United States and foreign countries. Cash may also include cashier’s checks, bank drafts, traveler’s checks and money orders with a face value of $10,000 or less, if the business receives the instrument in a designated reporting transaction, as defined below, or in any transaction in which the business knows the customer is trying to avoid reporting of the transaction on Form 8300. Example: Tom Greenwood purchases a used car from XYZ Auto Dealership for a total of $12,000. He pays with a cashier’s check having a face value of $12,000. The cashier’s check is not treated as cash because its face value is more than $10,000. The business does not need to file Form 8300. A designated reporting transaction is the retail sale of any of the following: • A consumer durable, such as an automobile, boat or property other than land or buildings that is suitable for personal use, can reasonably be

expected to last at least one year under ordinary use, has a sales price of more than $10,000 and can be seen or touched (tangible property). • A collectible such as a work of art, rug, antique, metal, gem, stamp or coin. • Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction or related transactions is more than $10,000. The total sales price of all items sold for a trip or entertainment event includes the sales price of items such as airfare, hotel rooms and admission tickets. Example: Ed Johnson asks a travel agent to charter a passenger airplane to take a group to a sports event in another city. He also asks the travel agent to book hotel rooms and admission tickets for the group. He pays with two money orders, each for $6,000. Since each money order was less than $10,000, the travel agent has received more than $10,000 cash in the designated reporting transaction and must file Form 8300. Cash Does Not Include Cash does not include personal checks drawn on the account of the writer. Example: Jim Roberts purchases an automobile from ABC Auto Dealers for $19,000. He pays with $4,000 in currency and a personal check in the amount of $15,000. Since a personal check is not considered cash, ABC Auto Dealers does not need to file a Form 8300. Cash does not include a cashier’s check, bank draft, traveler’s check or money order with a face value of more than $10,000. When a customer uses currency of more than $10,000 to purchase a monetary instrument, the financial institution issuing the cashier’s check, bank draft, traveler’s check or money order is required to report the transaction by filing FinCEN Form 104, “Currency Transaction Report.” Cash does not include a cashier’s check, bank draft, traveler’s check or money order received in payment for a consumer durable or collectible if all three of the following statements are true: • The business receives it under a payment plan requiring one or more down payments and payment of the rest of the purchase price by the date of the sale. • The business receives it more than 60 days before the date of the sale. • The business uses payment plans with the same or substantially similar terms when selling to ultimate customers in the ordinary course of its trade or business. Definition of a Related Transaction The law requires trades and businesses to report transactions when customers use cash in a single transaction or related transactions. Related transactions are transactions between a payer, or an agent of the payer, and a recipient of cash that occur within a

24-hour period. If the same payer makes two or more transactions totaling more than $10,000 in a 24-hour period, the business must treat the transactions as one transaction and report the payments. A 24-hour period is 24 hours, not necessarily a calendar day or banking day. Example: A retail motorcycle dealer sells a motorcycle for $9,000 in cash to Gary Jones at 10 a.m. During the afternoon of the same day, Mr. Jones returns to buy another motorcycle for his son and pays $9,000 in cash. Since both transactions occurred within a 24-hour period, they are related transactions, and the motorcycle dealer must file Form 8300. Transactions are also related even if they are more than 24 hours apart when a business knows, or has reason to know, that each is a series of connected transactions. Example: A client pays a travel agent $8,000 in cash for a trip. Two days later, the same client pays the travel agent $3,000 more in cash to include another person on the trip. These are related transactions, and the travel agent must file Form 8300. Example: A customer purchases a vehicle for $9,000 and then within the next 12 months pays the dealership additional cash of $1,500 for items such as a new transmission, accessories, customized paint job, etc. The dealership is not required to file a Form 8300, if the additional transactions are not part of the original sales contract and the customer has no additional legal obligation to make such additional transactions. Reporting Suspicious Transactions There might be situations where the business is suspicious about a transaction. A transaction is suspicious if it appears a person is trying to prevent a business from filing Form 8300; if it appears a person is trying to cause a business to file a false or incomplete Form 8300; or if there is a sign of possible illegal activity. The business should report suspicious activity by checking the “suspicious transaction” box on the top line of Form 8300. Businesses are also encouraged to call the IRS Criminal Investigation Division Hotline at 800-800-2877 or the local IRS criminal investigation unit. If a business suspects a transaction is related to terrorist activity, the business should call the Financial Institutions Hotline at 866-556-3974. The business can voluntarily file a Form 8300 in situations in which a transaction is for $10,000 or less and suspicious. When to Report Payments Generally, a business must file Form 8300 within 15 days after the cash is received. If the 15th day falls on a Saturday, Sunday or holiday, the business must file the report on the next business day. C O N T I N U E D O N N E X T PA G E

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Multiple Payments In some situations, the payer can arrange to pay in cash installment payments. If the first payment is more than $10,000, a business must file Form 8300 within 15 days. If the first payment is not more than $10,000, the business adds the first payment and any later payments made within one year of the first payment. When the total cash payments exceed $10,000, the business must file Form 8300 within 15 days. After a business files Form 8300, it must start a new count of cash payments received from that buyer. If a business receives more than $10,000 in additional cash payments from that buyer within a 12-month period, it must file another Form 8300 within 15 days of the payment that causes the additional payments to total more than $10,000. If a business must file Form 8300 and the same customer makes additional payments within the 15 days before the business must file Form 8300, the business can report all the payments on one form. Example: On January 10, a customer makes a cash payment of $11,000 to a business. The same customer makes additional payments on the same transaction of $4,000 on February 15, $5,000 on March 20, and $6,000 on May 12. By January 25, the business must file Form 8300 for the $11,000 payment. By May 27, the business must file another Form 8300 for the additional payments that total $15,000. Required Written Statement for Customers When a business files a Form 8300, the law requires the business to provide a written statement to each person named on Form 8300 to notify them that the business has filed the form. The statement must include the name and address of the cash recipient’s business, the name and telephone number of a contact person for the business, the total amount of reportable cash received in a 12-month period and a statement that the cash recipient is reporting the information to the IRS. The only exception to the customer’s notice requirement is when the Form 8300 was filed for suspicious activity. In that event, it is actually illegal for the business to notify the customer the Form 8300 was filed. When to Provide a Statement to the Customer The business must provide the written statement to its identified customers on or before January 31 of the year after the year in which the customer made the cash payment that caused the business to file Form 8300. A business that chooses to mail the statement must mail the statement in a timely manner to ensure the customer receives the statement by January 31. IRS Form 8300 and additional instructions can be found at www.irs.gov.

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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 )

IN THE INDUSTRY

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. R  eporting 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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IN THE INDUSTRY

V O T E R R E G I S T R AT I O N I N F O R M AT I O N

Election 2012 OKLAHOMA VOTER REGISTRATION To be eligible to register to vote in Oklahoma, you must be at least 18 years old, be a U.S. citizen and a resident of the state of Oklahoma. To register, you must fill out a voter registration application form. The applications are available at your county election board, post office, tag agencies, libraries and many other public locations. You can also download a fillable pdf version of the application from the Oklahoma State Election Board website www.ok.gov/ elections. You can mail your voter registration application to the state election board. The card is already addressed, but you must add a first-class postage stamp. OKLAHOMA BALLOT The Oklahoma ballot will include six state questions: Property Tax Amendment: would prevent annual increases in property taxes. Affirmative Action Ban Amendments: would ban affirmative action programs in the state and would prohibit special treatment based on race or sex in public employment, education and contracts. Parole Process Amendment: would remove the governor from the state parole process.

Oklahoma Water Resources Board Fund Amendment: would create the Water Infrastructure Credit Enhancement Reserve Fund. Public Welfare Department Amendment: would create department to provide for public welfare for state residents. Intangible Tax Ban Amendment: would abolish property taxes on intangible personal property. SMALL BUSINESS ISSUES Surveys show a variety of topics to be of prime interest to small business owners. The U.S. Chamber of Commerce reports the following small business survey responses: Regulatory burden and oversight: 78 percent of small business owners simply want Washington to “get out of the way”. Taxes: Almost 60 percent of small business owners surveyed believe the expiration of 2001 and 2003 tax rates and other business provisions will directly impact their business’ growth. Fiscal cliff: 90 percent of small business owners are concerned about the federal government’s rising debt and Washington’s inability or unwillingness to deal with it. Free enterprise: 90 percent of small

businesses consider a candidate’s support for free enterprise to be “very important.” Health care: 72 percent of small businesses believe the recent health care law makes it harder for their businesses to hire more employees. PayChex, Inc., a leading provider of payroll services to small businesses, ranked the top five election issues for small businesses: 1. Taxes, including deficit reduction and tax reform. 2. O  verall regulatory burden, including an appropriate balance between business and consumer priorities. 3. E  mployment regulations, such as an increase in the federal minimum wage, oversight of the hiring process and steps to ease formation of labor unions. 4. Immigration, particularly regarding the role businesses play in policing immigration policy. 5. R  etirement security, including possible mandates concerning employee IRA benefits. We encourage you to exercise your privilege to vote in Election 2012.

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FINANCE NEWS

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 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 third-party 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 three-party 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 risk-based pricing rules. The Federal Trade Commission disagrees. The automobile dealer must provide the consumer with a risk-based pricing notice. “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 non-member dealers in preparation of your risk-based pricing notices. Feel free to contact us at 800346-4232 or 405-232-2947. 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 Oklahoma nor OIADA 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.

BY ADR STAFF

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

Volvo to Pay $1.5 Million for Delayed Reporting of Recalls The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) announced that Volvo Cars North America, LLC has agreed to pay $1.5 million in civil penalties in response to the agency’s assertion that the automaker failed to report safety defects and noncompliances to the federal government in a timely manner. The National Traffic and Motor Vehicle Safety Act requires all auto manufacturers to notify NHTSA within five business days of determining a safety defect exists or that the manufacturer is not in compliance with federal motor vehicle safety standards – and to promptly conduct a recall. “With millions of vehicles traveling our highways every single day, we take our responsibility to safeguard the driving public very seriously and we expect automakers to do the same,” Secretary of Transportation Ray LaHood said. “Manufacturers are required to handle safety issues both quickly and appropriately.” In January 2011, NHTSA launched an investigation to determine whether Volvo met its obligation under the law to notify the agency of a safety defect and conduct a recall in a timely manner. NHTSA’s evaluation of six recalls issued in 2010 and one recall announced in 2012 found evidence that Volvo failed to report known safety defects and non-compliances to the agency in accordance with federal law. As part of the settlement, Volvo Cars North America, LLC and its parent company, Volvo Car Corporation, agreed to make internal changes to its recall decision-making process to ensure timely reporting to consumers and the federal government in the future. “It’s critical to the safety of everyone on our roadways that automakers promptly report safety defects – and take immediate action to resolve the issue,” NHTSA administrator David Strickland said. “NHTSA expects all manufacturers to obey the law and address automotive safety concerns without delay.” The fines received from the automaker will be paid into the general fund of the U.S. Treasury.

R E N E WA L N E W S

Bond and License Renewal Schedule

In Oklahoma, all used dealer bonds and licenses expire Dec. 31 of each year. That includes used dealer licenses, salesman licenses, dealership bonds and salesman bonds. Your dealer plates, issued by the Oklahoma Tax Commission, also expire Dec. 31. And, unlike public vehicle license plates, there is no grace period for dealer plates. You cannot do business without proper bonding and licensing, so it’s to your benefit to submit completed renewal applications in a timely manner and follow up on the status of each until you receive approval. Here’s a schedule of steps to help guide you through the bond and license renewal process: D AT E

ACTION

C O N TA C T

NOTE

BY ADR STAFF

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T H E B E N E F I T S F O R T H E D E A L E R , R F C A N D T H E C U S T O M E R A R E R E A L LY C O M P E L L I N G .

LHPH vs. BHPH: Should My Dealership Switch? In recent years, the Lease Here-Pay Here (LHPH) model has generated some buzz in the world of subprime auto sales – and for good reason. LHPH is an offshoot of the Buy Here-Pay Here (BHPH) concept, but it involves a dealer retaining the title to each vehicle and charging usage fees to customers. While the difference might seem subtle at first, it can radically change how the vehicle transaction is managed, taxed and regulated. Among the advantages of LHPH: •Deferred sales tax. •A federal income tax deduction for depreciation of your assets. •It doesn’t require a related finance company (RFC). •Less burdensome regulations. •Faster repossession times. •Vehicles can’t be claimed in a bankruptcy. Probably the most commonly cited advantage of switching to a lease program is the ability to defer sales tax payment on your vehicles. Instead of paying sales tax up front – long before you’ve received all of the customer’s money – you’re allowed to pay the sales tax in installments, every time your customer pays you. That lessens your risk of losing money when a customer defaults, and it makes cash flow more even and manageable. George Klinke, vice president of business development for the San Diegobased company LHPH, LLC, called that the greatest advantage of the model. “There are 32 states where there’s a real cash flow incentive,” Klinke said. “When you buy a car in California, you pay an 8.75 percent sales tax on that vehicle. On a $20,000 car, you’re paying $1,750. That’s money that comes out of the dealer’s or the consumer’s pocket today.” But in California and 31 other states,

dealerships can pay the sales tax on each vehicle as payments are collected, rather than at the lease’s inception. Additionally, lessors can collect a security deposit, which is not subject to taxation. “This is a pool of money where if there are other expenses that come up in the lease, the security deposit can be applied against those,” Klinke said. Unless state law mandates otherwise, the only up-front tax on a lease is paid on the cap cost reduction. For years, BHPH dealers have avoided income taxes on “phantom income” through the use of a related finance company. An RFC is a legally separate corporation an auto dealership establishes to handle financing, often for customers who have difficulty obtaining credit from traditional lenders. Usually, the dealership sells the note from each vehicle transaction to its RFC at a discount, eliminating most of the dealership’s profit on the sale, which would have been taxable income even though no payments had yet been collected from the consumer. The RFC’s income on the note purchase, however, is taxed as the payments are collected, avoiding a large income tax on profits that haven’t been earned yet and creating a substantial cash flow advantage. If executed correctly, this setup is entirely legal. The IRS has even written a guide for it, available at www.irs.gov/ businesses/article/0,,id=137739,00. html. But the IRS also examines RFCs carefully for evidence that they’re substantive businesses that remain at “arm’s length” from dealerships, rather than thinly disguised shell corporations. One small misstep could place you in line for an audit. For dealers wanting to avoid this compliance headache and the difficulty

of establishing a legitimate RFC, LHPH is an attractive option. Because of the inherent tax advantages of leasing, it is not necessary to have a related finance company to handle LHPH deals – though dealers may still choose to keep their RFCs as a buffer against bad publicity, lawsuits and financial risk. Because the dealer is the lessor and therefore the owner of the asset (vehicle), he can claim depreciation over the term of the lease based on IRS guidelines and use it as an income tax deduction, reducing the overall tax bill. Jason Berger, managing partner of AK Acceptance, an RFC in Pittsburgh, said LHPH deals are not constrained by the tougher regulatory requirements that affect BHPH dealers. At the federal level, LHPH deals fall under the less restrictive Regulation M rules that govern auto leasing, rather than the notoriously tough Regulation Z rules that govern auto sales. Under Reg M, a dealer is not obligated to disclose an annual percentage rate because there is no interest rate in a lease – just a “rent” or “lease” charge. The lack of an interest rate also means you are is not encumbered by state usury limits. You can impose mileage overage charges to protect the value of the vehicle. And if the lessee declares bankruptcy after starting an LHPH deal, he won’t be able to avoid repossession because he never had ownership of the vehicle. For the same reason, if a lessee breaches the contract, there’s no mandatory grace period to comply with for repossessions. “We pull the trigger faster,” Berger said, noting dealerships can technically repossess a vehicle if a payment is even one day late – though that might not be a great way to build goodwill in the C O N T I N U E D O N PA G E 1 6

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I I A D A

G O L F

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community. “My target turnaround time is 21 days from the time of default [to when the car is available to lease again]. With a loan, we’d usually let it go a little bit longer.” LHPH has some appeal for consumers, too. Because they aren’t paying for full, lifetime ownership of the vehicle, drivers can normally afford a better quality automobile than if they insisted on purchasing. Like the dealer, customers can usually pay less cash up front. And when the customer is done with the car, he can simply return it and get another car, or become the owner by paying or financing the agreed-on residual value. Klinke said given the choice, customers should prefer to pay the security deposit on their lease rather than a down payment on a loan. “If the lessee does everything correctly,” Klinke said, “he can roll that [sum] over into a new lease or get his money back [at end of term].” Many dealers cite those reasons when attempting to explain the rising national interest in the LHPH model. Berger’s dealership partner had operated on the BHPH model since 1999, but never experienced the growth it has since it switched to LHPH. “Year-over-year, I’ve seen a 73 percent jump in originations,” Berger said. “The primary reason for that is leasing.” But before you take the plunge, you should also consider the challenges of LHPH. •An expensive retraining process. •It requires more advanced dealer management software. •Vicarious liability issues that require contingent liability insurance. •Less liquidity than BHPH. As advantageous as LHPH can be, it is not a simple change for dealerships to make. LHPH deals require more advanced dealership management systems that can perform complex lease calculations like depreciation schedules and payments that include rental charges, depreciation and sales tax. Those programs often cost more than basic deal software. Allen Lentsch, CEO of Northland Dealers and executive director of the Northland Independent Auto Dealers Association, said there is also some liability risk involved.

D A Y - T R A D E

S H O W

| LHPH vs. BHPH: Should My Dealership Switch?

“When you do LHPH, you own the title of the car, so you can be held responsible for things your customers do with it,” Lentsch said. That includes causing an accident. The concept is called vicarious liability. To be protected against vicarious liability and the risk of lawsuits, dealers must purchase contingent liability insurance, which many turnkey LHPH solutions provide for their dealers. The Graves Amendment, passed by Congress in 2005, was written to prevent unlimited vicarious liability lawsuits, but the law has been challenged frequently. And despite the Graves Amendment, there is still potential vicarious liability for the dealer/lessor up to the state minimum financial responsibility limits. Because of that risk, it’s incumbent on dealers to make certain each lessee has proper insurance coverage. “We always make sure a customer has insurance, just as much as we make sure they’re keeping up with payments,” Berger said. “We disable vehicles if [a customer’s] insurance lapses.” If you’re a BHPH dealer who sells loan portfolios to investors, you might have a tougher time drumming up interest in your LHPH leases, partially because the product is less commonly understood. “Some lenders are opening up to this,” Berger said. “From what we see, there are going to be more in the near future.” To dodge potential complications, many LHPH dealers use consulting organizations, such as Northland Dealers, LHPH, LLC and Lease It Own It, to advise them on compliance issues and provide training materials, forms and access to specialized insurance. The services can assume various levels of responsibility for a dealer’s compliance with lease regulations. LHPH, LLC even goes so far as to adopt the responsibilities of the lessor, shielding the dealership from some legal risks. Before switching, it’s a good idea to contact some LHPH services to learn the different approaches and costs associated with outsourcing LHPH implementation. Working with experts of some kind could be the smartest way to go. Implementing a LHPH Program If LHPH sounds like the right way forward for your business, there are a

few things you should focus on right out of the gate. “I would recommend to any dealer to try to set the most accurate residual [value] possible,” Berger said. “If you do that, you’ll get that vehicle back and put that vehicle back on the road. [You] can get eight years out of it and lease it three times.” However, dealers should also remember the IRS imposes limits on how low residual values can be set and still remain a true lease. Because dealers should keep leased vehicles in good condition for the next lessee, high-maintenance autos are not recommended for an LHPH program. In addition to requiring lessees to purchase comprehensive coverage for their vehicles, many LHPH dealers package in a warranty or service agreement so they’re able to keep their vehicle in good shape while profiting from the reconditioning. Berger said the biggest challenge for the dealership he works with is persuading customers – and employees – to go along with the LHPH plan. “Your customers need to understand that the vehicle isn’t really an asset, it’s an expense for them,” Berger said. “At the end of [a three-year lease], how much will this vehicle actually be worth?” Berger recalled employees at the dealership he works with took about two months to get fully used to the terminology differences between BHPH and LHPH. “When you have people who have been selling cars for 16 or 17 years and all of a sudden you hand them a new model, of course there’s a transition,” he said. “But when they see how much this helps us sell cars, they really want to learn it.” To many dealers, the challenges involved in switching to the LHPH model are far outweighed by its rewards. “I’ve never seen anybody switch back,” Klinke said. “The benefits for the dealer, RFC and the customer are really compelling, and to switch back would just be a real headache for everybody.”

BY ALEX BRAUN

ALEX BRAUN IS MARKETING MANAGER OF AUTOMANAGER, A PROVIDER OF INTEGRATED DEALER MANAGEMENT SOFTWARE, DEALER WEBSITES AND ONLINE VEHICLE MARKETING FOR MORE THAN 25 YEARS. HE CAN BE REACHED AT ALEX@AUTOMANAGER.COM.

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S O U R C E : W W W. N H T S A . G O V

NHTSA Recalls Acura ILX, MY 2013 Honda CR-V, MY 2012 NHTSA ID number: 12V338000 Latches locks linkages: Doors: Latch Units affected: 172,837 Honda is recalling certain model year 2012 Honda CR-V and model year 2013 Acura ILX vehicles. If the manual or power door lock is activated while an interior front door handle is being operated by an occupant, the cable connecting the interior door handle to the door latch mechanism may become loose and move out of position. There is a possibility the cable can move far enough out of position to prevent the door from properly latching. If the door is not fully latched, the door can open while driving or in a crash, increasing the risk of personal injury to the vehicle occupants. Honda will notify owners and dealers will replace the front door latch assemblies in the affected vehicles free of charge. Additionally, the interior front door handles in certain Honda CR-Vs will also be replaced free of charge. The safety recall is expected to begin on or about Aug. 16, 2012. Owners can contact Honda Customer Service at 1-800-999-1009. Honda recall campaign numbers are S45 S46 S47. Ford Escape, MY 2013 NHTSA ID number: 12V336000 Fuel system, gasoline: Delivery: Hoses, lines/piping and fittings Units affected: 9,320 Ford is recalling certain model year 2013 Escape vehicles manufactured from Oct. 5, 2011 through July 11, 2012 and equipped with a 1.6L engine. These vehicles have an engine compartment fuel line that can split, resulting in a leak. If this leak occurs in the presence of an ignition source, there is an increased risk of a fire and/or personal injury. Ford will notify and instruct owners to stop driving their vehicles and contact a Ford or Lincoln dealer to arrange pickup of their vehicle. Customers will be provided with a rental vehicle if needed. The dealer will replace the engine compartment fuel line free of charge. The recall is expected to begin July 20, 2012. Owners can contact Ford at 1-866-436-7332. This is Ford recall number 12S35.

Volkswagen Beetle, MY 2102 NHTSA ID number: 12V331000 Tires Units affected: 83 Volkswagen is recalling certain model year 2012 Beetle vehicles. Some vehicles may be equipped with summer tires that fail to comply with Federal Motor Vehicle Safety Standards 110 “Tire Selection and Rims” and 139 “New Pneumatic Tires for Light Vehicles.” Improper tires can lead to the tires being overloaded and/ or underinflated, increasing the risk of a vehicle crash. Volkswagen will notify owners and replace the non-compliant tires free of charge. The safety recall is expected to begin in September 2012. Owners can contact Volkswagen at 1-800-822-8987. Volkswagen’s safety recall number is 44K8/ W4. Porsche Cayenne, MY 2012 Porsche Panamera, MY 2011-2012 NHTSA ID number: 12V329000 Engine and engine cooling: Engine: Gasoline: Turbocharger Units affected: 270 Porsche is recalling certain model year 20112012 Panamera Turbo, 2012 Panamera Turbo S and 2012 Cayenne Turbo vehicles. The turbine wheel of a turbocharger can fracture due to a casting defect. If a fracture occurs, vehicle performance will be decreased and the turbine shaft could fracture. If the shaft fractures, oil can be drawn into the exhaust system, resulting in smoke and the increased risk of a fire. Porsche will notify owners and dealers will replace the turbine wheels free of charge. The recall is expected to begin in July 2012. Owners can contact Porsche at 1-800-7677243. Porsche’s safety recall number is AC04. Nissan Juke, MY 2012 NHTSA ID number: 12V328000 Seats Units affected: 11,076 Nissan is recalling certain model year 2012 Juke vehicles manufactured from Feb. 3, 2012 through May 26, 2012. Due to an incomplete weld penetration, the rear seat

back striker can partially separate in a crash. In the event of a crash, the rear seat back might not be secured, increasing the risk of injury to the rear seat occupants. Nissan will notify owners and dealers will replace the affected seat back strikers free of charge. The recall is scheduled to begin at the end of July 2012. Owners can contact Nissan Customer Service at 1-800-647-7261. Ford F-650, MY 2012 Ford F-750, MY 2012 NHTSA ID number: 12V318000 Visibility: Windshield Units affected: 783 Ford is recalling certain model year 2012 F-650 and F-750 vehicles manufactured from Feb. 1, 2012 through March 16, 2012. The clear and black primer may be missing on certain windshields, which can result in an insufficient bond between the glass and cab structure. An insufficient bond can result in a separation of the windshield from the cab, increasing the risk of personal injury or death. Ford will notify owners and dealers will remove and inspect the windshield for urethane adhesion and replace or reinstall the windshield as required free of charge. The recall is expected to begin July 16, 2012. Owners may contact Ford at 1-866436-7332. Ford’s recall campaign number is 12S33. Volvo S80, MY 2011-2013 NHTSA ID number: 12V317000 Power train: Automatic transmission: Control module (TCM, PCM) Units affected: 1,469 Volvo is recalling certain model year 20112013 S80 vehicles. A software error can prevent the transmission from downshifting, such as shifting from fifth to fourth gear, when coasting. This can result in decreased engine RPMs and possible engine stall, increasing the risk of a crash. Volvo will notify owners and dealers will upgrade the software to the transmission control module free of charge. The safety recall is expected to begin on or about July 19, 2012. Owners can contact Volvo Cars at 1-800-458-1552. The Volvo recall campaign number is 255. C O N T I N U E D O N PA G E 2 0

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C O N T I N U E D F R O M PA G E 1 8

| NHTSA Recalls

Isuzu Amigo, MY 1998-2001 Isuzu Rodeo Sport, MY 2001-2002 NHTSA ID number: 12V306000 Suspension: Rear Units affected: 11,221 Isuzu is recalling certain model year 1998-2000 Amigo and model year 2001-2002 Rodeo Sport vehicles that were originally sold or are currently registered in the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, the District of Columbia, West Virginia, Ohio, Indiana, Michigan, Illinois, Wisconsin, Minnesota, Iowa, Missouri and Kentucky. These vehicles can experience excessive corrosion in the vicinity of the forward mounting point bracket for the left or right rear suspension lower link. Excessive corrosion can result in the left or right rear suspension lower link bracket becoming detached from the frame, which can affect vehicle handling and increase the risk of a crash. Dealers will inspect the rear suspension lower link bracket area. For vehicles in which little or no corrosion is found, the area will be treated with an anti-corrosive compound. For vehicles in which corrosion has damaged the rear suspension lower link bracket and affected its connection to the vehicle frame, a reinforcement bracket will be installed. In the rare event the corrosion is so severe that the

reinforcement bracket remedy would not be appropriate, Isuzu will offer to repurchase the vehicle for an amount based on the Kelley Blue Book “Private Party” price. All inspections and remedies will be provided free of charge for vehicles 10 years old or less. For vehicles older than 10 years, Isuzu will offer a free remedy, but only if the vehicle is presented to an Isuzu service facility dealer within 12 months of when owner notifications were issued. The recall is expected to begin during late July 2012. Isuzu owners can contact Isuzu at 1-800255-6727. BMW Active E, MY 2011 BMW Z4, MY 2012 NHTSA ID number: 12V302000 Steering: Electric power assist system Units affected: 162 BMW is recalling certain model year 2011 1-Series Active E and model year 2012 Z4 vehicles. Variations in electrical current can occur within the electric power steering assistance system, leading to sudden loss of power steering assistance. Sudden loss of steering assistance can increase the steering effort required to control the direction of a vehicle, increasing the risk of a crash. BMW will notify owners and dealers will replace the steering assistance module free of charge. The safety recall is expected to begin during July

2012. Owners can contact BMW Customer Relations at 1-800-525-7417. Chevrolet Captiva Sport, MY 2012 NHTSA ID number: 12V301000 Parking brake Units affected: 2,070 General Motors LLC (GM) is recalling certain model year 2012 Chevrolet Captiva Sport passenger vehicles manufactured from April 26, 2012 through May 17, 2012. These vehicles fail to conform to the park brake performance requirements Federal Motor Vehicle Safety Standard No. 135, “Light Vehicle Brake System.” The park brake cable might not be fully seated in its connector and can separate from the connector. If that occurs, the park brake will become inoperative and will not hold the vehicle. If the vehicle is on an uneven surface, that could result in unintended vehicle movement and a crash. GM will notify owners and dealers will inspect and ensure the park brake cables are connected and secure free of charge. The safety recall is expected to begin on or about July 18, 2012. Owners can contact the Chevrolet Owner Center at 1-866-6946546. GM’s recall campaign number is 12127. For more information, go online to www. NHTSA.gov or www.SaferCar.gov.

BY ADR STAFF

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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 1-800917-8637, EMAIL JFITZPATRICK@FITZADV.COM OR VISIT FITZPATRICKADVERTISING.COM.

“CHICKASHA AUTO AUCTION...WHERE SERVICE SELLS!”

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T H E Y ’ R E N O T N E C E S S A R I LY O N E A N D T H E S A M E

Advertising or Marketing? Webster’s defines advertising as the action of calling something to the attention of the public, especially by paid announcement. Webster’s defines marketing as the process or technique of promoting, selling and distributing a product or service. Similar, but different. Just like the lifelong struggle between good and evil, whether to put resources into advertising to increase traffic (and thus sales) or apply efforts to marketing to increase traffic (and thus sales) is a constant battle for today’s Buy Here-Pay Here dealer. As with life, both have their place and, to some extent, are necessary. Deciding which basket you should put the most eggs in depends on a few factors. If the goal is to increase overall market share, advertising gets most of the eggs. If building through repeat and referrals is the goal, marketing gets the eggs. And for those wanting the best of both worlds, the eggs should be split equally between the two baskets. When it comes to the advertising basket, as with the marketing basket, how the eggs are distributed within plays an integral part in the overall effectiveness. There are four main types of advertising media that seem to be the most effective for the BHPH industry: television, radio, Internet and print. Television seems to be the most popular among BHPH dealers. The keys to effective television advertising are not only being on the right stations, but also on the right programs at the right times. That’s especially true when running commercials on local stations. Having a large number of cheap spots appearing between midnight and 6 a.m. will likely only be seen by a select few, who might not be your idea of the few you want to select. In markets where satellite service is prominent, local stations are the best bet. Again, pick the station or stations that offer programming your customers are watching. A spot airing during Judge Judy will probably produce more business than the same spot airing during 60 Minutes. In markets where cable service is more prominent, there is usually more bang for the buck. Most cable providers offer packages of channels in which any combination of channels

offered can be chosen. As with local stations, timing and program selection are key. A spot airing during Ultimate UFC Fight Night is likely to produce more than the same spot during SportsCenter. As with all television advertising, choose programming and times that fit your customers’ viewing habits, not yours. Radio is the next as far as popularity. As with television, pick the times and stations that fit your customers’ listening habits. A simple way to gauge that is by making note of what stations are programmed into the radio when a vehicle is traded in, or noting which station the customer turns on during a test drive. Doing that costs nothing and tends to be more reliable than expensive radio surveys. Use of the Internet has picked up drastically in the past year. Gone are the days when only big BHPH dealers had websites – websites have become the rule, not the exception. The Internet is proving to be the best way to reach the new credit-challenged customer – the customer who previously received bank financing but now, due to economic challenges, must seek alternate financing. That customer has a tendency to be a web shopper, so not only having a website, but an effective one is paramount to capturing him. Just to put Internet usage in perspective, a recent study by AutoTrader and the National Alliance of BHPH Dealers revealed 80 percent of customers in the BHPH market surveyed had done significant research online prior to purchasing. Our customers are online. At least 80 percent of them, anyway. Last on the advertising list is print. While print has been a staple for the new car industry, it hasn’t produced the same success for BHPH dealers. Beside the cost factor, overall circulation is substantially down, as witnessed by some very prominent newspaper closings recently – thanks in part to the emergence of the Internet. For BHPH, what are known as “throwaways” – free publications found at the local grocery store, such as The Thrifty Nickel and Star Shopper – seem to be most effective. Billboards can also be classified in this category, but as with most things in business, location is the key. When it comes to the marketing basket, a few methods have proven effective for BHPH

dealers, including repeat and referral programs, promotions, giveaways and the Internet. All BHPH dealers should have some eggs in this basket. The most popular form of marketing is repeat and referral programs. Some examples of repeat programs are lower interest rates, lower down payments and a free vehicle after a certain number of vehicles have been purchased. Referral programs include cash for each customer referred, scratch-off cards with varying rewards for each customer referred and a free vehicle after a certain number of referrals. With the current state of the auto industry, BHPH dealers are extending their referral programs to new car dealers to capitalize on the lack of funding available. Those tend to be a little more costly, but are worth it as the customers turned down are definitely in the market to buy. Promotions and giveaways are becoming more and more prevalent and are proving to be effective. They include everything from drawings for cash or gift certificates to incentivizing ontime payments to promotions in which paying off a vehicle is the grand prize. Five years ago, only a handful of BHPH dealers were doing any of those. Now very few dealers aren’t involved in that type of marketing. The Internet has become a good marketing source as usage has increased in the last few years. Where once it seemed very few BHPH customers had access to the worldwide web, it now seems just about all do. Online payments and online application options are the two most prevalent web offerings. Dealers are also taking advantage of their websites to tell their story – a chance to explain some basic policies and procedures and set customers’ minds at ease that their credit history is understood. Advertising and marketing play valuable roles in building and maintaining a successful BHPH operation, and both of those baskets need some eggs. Just remember, both should be geared to your customer base, not you.

BY BRENT CARMICHAEL EXECUTIVE CONFERENCE MODERATOR NCM ASSOCIATES INC. BCARMICHAEL@NCM20.COM

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MARKET NEWS

Report: Expect to See More Hybrids Expect to see more hybrids cruising around the world’s highways in the next few years. According to market research report distributor ReportStack.com, the global hybrid car market is expected to grow at a rate of 18.92 percent over the next three years. The cause for the potential double-digit growth: increasing global oil consumption, the report, titled “Global Hybrid Car Market 2011-2015,” explained. Moreover, as governments around the world try to cut down on fuel emissions, the hybrid car market has “been witnessing an increase in initiatives by governments to create awareness and acceptance of hybrid cars,” the report said. The report also cites labor arbitrage, such as the various advantages offered

by the hybrid car to the end user, such as energy efficiency, less pollution, better performance, reduced dependency on natural resources and more, as reasons for the hybrid market expansion. That said, even with the push from politicians, the high cost of hybrid cars is acting as a barrier to the market growth, the report said. ‘’With the time and research on the development of the battery systems of hybrid cars, the overall cost of batteries and total cost of ownership will decrease,” an analyst from the publishing automotive team said. “By 2014, the total cost of ownership of plug-in hybrid electric vehicles with a battery of 10 kilowatthours will be below that of an internal combustion engine vehicle, and by 2017, the total cost of ownership of plug-in

hybrid electric vehicles with a battery of 15 KWh will be lower than an internal combustion engine vehicle. “The total cost of ownership of battery electric vehicles will be less than an internal combustion engine vehicle by 2020 with the development of batteries. This reduction in cost will fuel the growth of the global hybrid car market.” Who will benefit most from this potential growth? The vendors currently dominating the hybrid market space include Toyota Motor Corp., Honda Motor Co., Ford Motor Co., and Nissan Motor Co. Ltd., the report noted. General Motors Co., BMW AG and Volkswagen Group are also expected to play a role in the future fuel-efficient vehicle market.

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David L. Nunn, Esq.

David L. Nunn heads the Edmond, Okla., law office of David L. Nunn, P.C., which serves the greater metro Oklahoma City area. We are pleased to include Mr. Nunn as an OIADA Select Provider of legal services to the industry. David L. Nunn, P.C. is located at 17 East First Street, Edmond, OK 73034. He can be reached at 405-330-4053 or by fax at 405-330-8470. Mr. Nunn is included as a Select Provider not because he asked to be, but because we know the quality of service that he provides to dealers.

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OIADA NEWS

OIADA New and Renewal Members The following list includes members who joined or renewed their OIADA/NIADA membership during June. We express our sincere appreciation for all the members of OIADA and extend our invitation to dealers who are not members. A membership application can be found elsewhere in this newsletter. We urge you to be an active part of maintaining a strong and effective used car industry voice in the legislative and regulatory environment. With the current administration’s attitude toward the motor vehicle sales industry, we need that voice more than ever! Chris Goad, President

R R R R R R R R R R R R R R R R R R R R R R N R R R R R

COMPANY

NAME

Oklahoma Foreign Auto Sales, Inc. Samuel C. Coffin Earl & Greg McQuerry Used Cars Greg McQuerry Universal MH/Used Cars Steve E. Ross Bud’s Salvage Rocky Anthony Collinsville Auto Sales Dan Perkins, Jr. Kasterke Auto Mart, Inc. Gary Kasterke Altus Auto Auction Austin E. Marsh, Jr. Marc Miller Buick-Pontiac-GMC, Inc. Marc Miller Fowler Honda Dallas McClary Doenges Bartlesville Brad Doenges Patriot Ford Sam Wampler Brookside Motorcycle Co. Paul Rogers Street Cars, Inc. Lynn Aylor Dealers Auto Auction of OKC Gary D. Smith Eldorado Motors Pauline Marks Max Credit Auto John Hobbs D & S Performance Autos, Inc. Douglas Tessier Sal’s Auto Sales Salim Salous Car Xpress Auto Tracker Integrity Auto Sales William Goslawski Taylor Motors, Inc. #2 Taylor Motors, Inc. Lindsey Street Motors, Inc. Timothy Jay Williams Backroad Autos, LLC David Bridges Alliance Auto Sales, LLC Tommy Gober TLC Motors Tom Cottrill Best Buy Auto Sales Junior Lorentz Superior Finance Company Superior Finance 71B Auto Auction Shane Wood

License Applicants Approved

JOINED CITY

1991 1991 1991 1991 2001 2003 1992 1991 1998 1991 2011 2009 2007 1991 1991 2005 1992 2010 2009 1999 1993 2001 2012 2010 2001 2010 2011 2010

Moore Shawnee Oklahoma City Aline Collinsville Shawnee Altus Tulsa Norman Bartlesville Purcell Tulsa Norman Oklahoma City Oklahoma City Oklahoma City Broken Arrow Oklahoma City Del City Edmond Skiatook Norman Velma Oklahoma City Tahlequah Ardmore Oklahoma City Springdale, AR

The following applicants, as listed in the agenda for the Used Motor Vehicle and Parts Commission regular meeting of July 10, 2012, were considered for issuance of used motor vehicle dealer licenses and wholesale vehicle dealer licenses. The applications were approved pending compliance with the state licensing laws and rules and subject to final approval by commission staff.

USED DEALER LICENSES COMPANY NAME

*Approved Auto Sales, LLC Big Red Sports/Imports Crown Auto World Dependable Cars Goal Line Auto KW Auto Sales McGee Auto Sales Motorwerx, LLC Superior Auto Sales, LLC The Key Cars #3 Uncle Kenny’s Pre-Owned Autos Unique Motor Sports

James Brumbaugh Juan Moreno Lindsay Marie Mayes Jami Longacre John Longacre Jerry A. Alvey Mary Lynn Alvey Erin Minnix Kendall Minnix Keenan Wingfield Danny McGee Eric Paysnoe Cherie Rose David Frayer Clinton Marshall Kenneth Deitrick Steven Davis Troy Mullenberg

CITY Tulsa

Norman Sapulpa Mannford Tulsa Madill Stroud Moore Terlton Moore Pryor Moore

*Subject to further investigation

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Used Motor Vehicle and Parts Commission Report Chairman John Longacre convened the July 10, 2012 session of the Used Motor Vehicle and Parts Commission. Following roll call and approval of the June 12 meeting minutes, Longacre called on director John Maile for the director’s report. Maile called the commissioners’ attention to the expenditure report, which was included in the agenda packet. Then Maile reported the 2013 budget was submitted last month. The budget includes a provision for a new investigator. The budget has not yet been approved. On approval, it will be emailed to appropriate persons. Maile announced there are several issues that need to be addressed in new rules and said that process needs to start soon. Disclosure of not having operational air bags and emissions controls that are part of the safety requirements are two of the areas that need to be addressed. The commission’s policy for emissions on dealer-to-dealer transactions has been that disclosure is not required. Disclosure is required for retail sales. However, air bags are different. The only disclosure the law requires is on new air bags, but on used cars, the commission has a provision that dealers must disclose anything material to the safety of the vehicle. There is the issue of whether air bags come under a warranty disclaimer, particularly dealer-to-dealer. Staff believes the lack of operational air bags should be disclosed. The commission could amend the rule on materiality, so if air bags have been deployed or replaced it would be subject to disclosure. Disclosure could be part of the bill of sale. Jim Davis pointed out there are dummy air bags and sensors to make the air bag light go off, the use of which can make it difficult for a dealer to know whether the air bag system is intact and operational. Longacre said he would be interested in what emission control rules would look like, particularly as they would apply to heavy trucks. There are dummy catalytic converters and sensors being placed on trucks as well as on smaller vehicles. Jim Holman expressed concern regarding the burden put on the dealer who has a vehicle that has been falsely rigged. Dealers face a significant risk in that situation. Rules should balance the dealer’s risk and the consumer’s protection. Maile suggested language such as, “to the best of the dealer’s knowledge” could be included in the rules. Longacre asked that the commissioners have an opportunity to review the draft proposal.

Maile reported another significant issue that needs to be addressed involves the many ways in which Oklahoma’s Title 42 statutes are being used to basically steal vehicles from dealers. Maile pledged to work with the associations interested in working on the issue. Terry Shreve reported Virginia put a $200 cap on charges that could be assessed as charges used to activate a Title 47-type procedure. Jim Holman agreed the Title 42 rules should be reviewed, indicating some tow companies were abusers. Holman’s dealership receives a number of the fraudulent Title 42 notices associated with vehicles the dealership has out on lease. Holman reported the OIADA Dealers Resource magazine recently published an article on the subject and recommended dealers be encouraged to follow the procedures in the article. Following is the article referenced: Oklahoma Statutes Title 47 §964 Report of Vehicles Parked or Stored More Than 30 Days By ADR staff “Whenever a vehicle that is subject to registration in this state has been stored, parked or left in a garage, trailer park or any type of storage or parking lot for a period of thirty (30) days, the owner of the garage, trailer park or lot shall, within five (5) days after the expiration of that period, report the make, motor and serial number of the vehicle to the Department of Public Safety. Provided, these provisions shall not apply where arrangements have been made for continuous storage or parking by the owner of the motor vehicle so parked or stored, and where the owner of said motor vehicle so parked or stored is personally known to the owner or operator of the garage, trailer park, storage or parking lot. Any person who fails to report a vehicle as required under this section shall forfeit all claims for storage of the vehicle, and shall be subject to a fine not to exceed twenty-five dollars ($25), and each day’s failure to make a report as required by this section shall constitute a separate offense.” When you are notified that a vehicle you own or have a financial interest in is stored and storage is being charged, you should contact the Department of Public Safety at 405-425-2312 to determine if the Thirty-Day Stored Vehicle Report has been filed in a timely manner. Recently, one of our members was advised that a vehicle the member had a financial interest in was stored and the storage fee was $700. The member recovered the vehicle and checked with the Department of Public Safety to ascertain if the Thirty-Day Stored Vehicle Report had been filed within the time

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OIADA REPORT

limit. The report had not been filed and the dealer member was able to regain his $700. Thought you might want to know. Maile said the commission would work with industry representatives. The OIADA will be involved in development of solutions to the Title 42 problem, and when the time comes we will ask members to contact their senators and representatives. Following a vote affirming receipt and approval of the expenditures report, chairman Longacre called on deputy director Kenneth Whitehead for his report. Whitehead reported there were no informal hearings or district court actions during the month. Whitehead’s written report indicated commission staff had issued 12 cease and desist letters and completed 23 inspections during the period. Staff also handled 21 written complaints – seven were title issues, five had to do with contract violations, six were related to mechanical issues and three complaints were of a miscellaneous nature. The education program had 24 in attendance. Applicants for a new license and dealers involved in significant rule violations are required to attend the commission’s education program as a part of acquiring or maintaining a state license. The education sessions are held at the commission conference room at 2401 NW 23, Oklahoma City. Classes are held on Monday prior to the commission meeting on the second Tuesday of each month. The sessions run from 9 a.m. to about noon or 1 p.m. You are asked to make reservations so staff can be prepared to accommodate you. Call the commission at 405-5213600 to make reservations.

REPORT OF CEASE AND DESIST LETTERS ISSUED

Randy Sutton Clauncey Walton Daryl Wilson Jamie Araiza Zenon

Used Dealer Used Dealer Used Dealer Insurance Pool

These are complaints that have been resolved one way or another. They do not necessarily reflect any wrongdoing on the part of dealers. ENTITY CITY A & G Auto, Inc. #2 Oklahoma City Ada Nissan, Inc. Ada Autohaus Sports Cars, Inc. Midwest City Big Red Sports/Imports Norman Buy Here Motors, Inc. Oklahoma City Calvin’s Auto Sales Bristow Cheap Dependable Auto Sales, LLC Oklahoma City Express Credit Auto Tulsa First Cash Auto Pawn #2 Oklahoma City Joe Cooper Chev Cad of Shawnee, LLC Shawnee Joe Cooper Easy Credit Auto Midwest City John Easttom Chev Dodge Chry Jeep Checotah Lake Country Chevrolet-Cadillac, LLC Muskogee Maxey Homes, Inc. Oklahoma City Mike Mowdy Autoplex Midwest City Nick & Paul’s Quality Car Corner Tulsa Robert Dodge Chrysler Jeep Pryor RS Used Cars Guthrie Stuteville Ford of Atoka, LLC Atoka Triple J Auto Ranch Tulsa Wheeler Rental & MH Sales, LLC Hinton

LICENSES SUSPENDED OR ABANDONED

ENTITY Jo Acevado Jimmy Douglas Estrada Mobile Home Serv Travis Felts Harris Custom Homes Jim Holt Gerla Palmour, Jr. Steve Sandoval

BUSINESS NAME Best’s Used Cars & Parts, Inc. Car King Motor Sports Eagle International Autos license Higgs Powersports Jim Lyons Motors

CITY Lawton Spiro Dumas Bokchito Amarillo Enid Fairfax Oklahoma City

DATE ISSUED 06/18/2012 06/19/2012 06/05/2012 06/06/2012 06/05/2012 06/19/2012 06/14/2012 06/08/2012

06/19/2012 06/19/2012 06/19/2012 06/08/2012

CLOSED COMPLAINT REPORT

These letters direct the individual or business to cease violations of laws or rules TYPE OF VIOLATION Used Dealer Used Dealer Installer Used Dealer Installer Dismantler Used Dealer Insurance Pool

Enid Spiro Arkoma Oklahoma City

COMPLAINT Title Title Miscellaneous Mechanical Title Mechanical Mechanical Mechanical Title Miscellaneous Contract Title Contract Miscellaneous Contract Mechanical Mechanical Title Contract Title Contract

RESOLVED 06/05/2012 06/08/2012 06/08/2012 06/18/2012 06/12/2012 06/08/2012 06/18/2012 06/04/2012 06/18/2012 06/25/2012 06/12/2012 06/14/2012 06/11/2012 06/21/2012 06/20/2012 06/04/2012 06/12/2012 06/18/2012 06/18/2012 06/11/2012 06/12/2012

In other action, the following licenses were suspended or abandoned: LOT CITY REASON Enid Out of business per owner Bobbie Best Oklahoma City Out of business per investigators report Oklahoma City Out of business; applied for wholesale Overbrook Pryor

Out of business per owner Jaret Higgs Out of business; phone disconnected

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OIADA Can Help Make

Your Path

Certain.

Oklahoma Independent Automobile Dealers Association For $295 You Get Membership In Both OIADA and NIADA Plus All Of The Following Benefits And Even More That Are Not Listed!

Programs for Extra Profit

• Access to Insured Warranty & Service Agreements • How to Structure a Related Finance Company • Networking Opportunities With Other Dealers

Programs to Help Keep Profit

• NADA Guide Books – single copy or subscription • Black Book Guide Books – single copy or subscription • Dealer Bonds - Salesmen’s Bonds • Discount on complete line of State approved Business Forms • Discount on Dealer supplies National Dealer Network Skip Tracing Contacts

Publications Public

• OIADA Magazine/Newsletter • Federally Required Safeguards Policy Document • Federally Required Red Flags Rules Policy Documents • IRS Audit Technique Guide For the Independent Used Car Dealer • Current Industry Information • Legislative Alerts • NIADA Monthly Magazine • NIADA Annual Buyer’s Guide

Professional Development

• Dealer Educational Seminars • Certified Master Dealer Program • Regional Professional Development Compliance Seminars • Free Access to NIADA.tv Training at Your Business • Access to IndependentDealer.com where dealers go for answers • NIADA Membership and Window Decal • OIADA “Symbol of Integrity” Logo, Window Decal and Membership Plaque • NIADA Annual Convention and Trade Show • Individual Assistance by phone • Code of Ethics

Representation

• State Lobby and Consultant Services • State Legislative and Regulatory Tracking and Reporting • Federal Lobby and Consulting Services • Federal Legal, Legislative and Regulatory Tracking and Reporting • Used Motor Vehicle and Parts Commission Liaison • Oklahoma Tax Commission Liaison • Oklahoma Department of Consumer Credit Liaison • Full Time Professional Staff to assist you when problems arise

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Join OIADA online at http://www.e-oiada.com/join 31

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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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Oklahoma Dealers Resource Sept 2012