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NOVEMBER 2013

inside u • IMPORTANT NOTICE TO OIADA MEMBERS • TAX LIENS CAN DELAY LICENSE RENEWAL • UMV&PC WARNING – DON’T BE MISLEADING

Change Service Requested DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

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Important Notice to OIADA Members Tax Liens Can Delay License Renewal Advertising Guidelines UMV&PC Warning – Don’t Be Misleading Washington Update Compliance Overdrive

What’s New u

M A K I N G YO U R V O I C E H E A R D

2013 National Leadership Conference & Legislative Summit Nov. 11-14 in Washington, D.C. NIADA’s Legislative Committee, Association Executives Council, State Presidents Council and state officers frame the NIADA legislative and regulatory agenda for 2014 and beyond, and meet face-to-face with legislators and federal regulators to discuss the present and future of the used vehicle industry.

Advertisers Index

71B Auto Auction....................................................13 ADESA, Inc...................................Inside Back Cover Albright Insurance, Inc.............................................7 Ally...............................................................................11 DealerMatch...............................................................5 .. Dealer’s Auto Auction of OKC............ Back Cover Jordan Insurance Group..........................................9. Loftis Wetzel Insurance........................................18 Manheim Dallas........................ Inside Front Cover Oklahoma Auto Exchange...................................16. Protective..................................................................15 United Acceptance.................................................19. VAuto..........................................................................17

OIADA Office For information on how to become a member of OIADA please contact Rose or Odell Morgan at 405-232-2947.

Rose & Odell Morgan, Amber Snook, Administrative Executive Directors Assistant Jackie Garner, Jared Morgan, Office Manager Electronics/ Software Technician

Lynna Kay, Programmer Steve Morgan, Consultant Mike Morgan, Technical Aide

813 Northwest 34th • Moore, OK 73160 Email: odell.morgan@sbcglobal.net

NIADA Headquarters National Independent Automobile Dealers Association

www.niada.com • www.niada.tv 2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838

For advertising information contact:

Troy Graff (800) 682-3837 or troy@niada.com. 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 © 2013 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 nonmembers to join the Association and support our efforts to improve the image and profit potential of the industry. We have worked to represent the independent motor vehicle dealer in Oklahoma. We need your support.

State Magazine MGR./Sales Troy Graff • troy@niada.com

Editors

Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com

Art Director

Christy Haynes • christy@niada.com

Printing

Nieman Printing

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OIADA BOARD OF DIRECTORS PRESIDENT Chris Goad Regal Motors 3515 N. May Oklahoma City, OK 73112 405-917-5800 managerokc@regalcars.com 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 VICE PRESIDENTS 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 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

ASSOCIATION

NEWS

Notice to All OIADA Members u

D  ECEMBER 2013 IS THE FINAL PRINT ISSUE OF DEALERS RESOURCE

OIADA material is available online at the association website www.e-oiada.com. The OIADA/ADR of Oklahoma staff has relied for years upon this magazine, Dealers’ Resource, to help you keep up with federal and state laws, rules and regulations. It has served this purpose reasonably well. However, the pace of change in business events in recent years has bypassed our ability to get this information to you in a timely fashion. More often than not, we find that by the time the information gets from our staff to your desk, conditions have changed and the information is less relevant and consequently less useful to you than if you could have had it in a more timely fashion. OIADA/ADR of Oklahoma material in this issue of Dealers’ Resource is also available on the OIADA website, including: • UMV&PC Report for September 10, 2013, meeting • License Renewal Schedule • UMV & PC Is Concerned About Misleading Advertising • Peer-to-Peer Software Allows Data Breach The OIADA website address is www.e-oiada.com.

BY OIADA STAFF

LICENSING

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NEWS

Tax Liens Can Delay License Renewal u

B  EGIN PROCESS NOW TO RESOLVE OKLAHOMA TAX LIENS FOR DEALERS AND SALESPERSONS

All dealers and salespersons should be aware that an outstanding Oklahoma income tax lien can delay renewal of licenses. Oklahoma statutes require state licensing agencies – such as the Used Motor Vehicle and Parts Commission – to provide a list of all licensees to the Oklahoma Tax Commission. The OTC uses that list to ensure collection of taxes. Any licensed individual who is not in compliance with Oklahoma state income tax laws will be notified of such noncompliance by the tax commission. The notification will include: 1. A statement that the licensee’s license will not be renewed or reissued until the taxpayer is deemed by the OTC to be in compliance. 2. The reasons that the taxpayer is considered to be out of compliance, including a statement of the amount owed. 3. An explanation of rights and the procedures to come into compliance. A licensee who has entered into and is abiding by a payment agreement or who has requested relief as an innocent spouse, which is pending or has been granted, shall be deemed to be in compliance. If a licensee fails to respond to the OTC notification or fails to come into compliance, the OTC will notify the licensing agency of the noncompliance. Upon such notification, the UMV & PC shall not renew the licensee’s license. The UMV & PC will notify the licensee that the license will not be renewed. A list of steps outlining the dealer and salesperson license renewal process can be found elsewhere in this publication. NOVEMBER 2013

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REGULATORY

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COMPLIANCE

DEALER COMPLIANCE REVIEW u

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COMPLIANCE WITH STATE AND FE DE RAL REGUL ATION S I S CRUCIAL

The importance of complying with state and federal regulations cannot be overemphasized. Agencies at both levels are publicizing their intent to increase oversight and enforcement activities. Further, they are openly stating that the existence and adequacy of compliance documentation, including written policies and procedures, will influence the outcome of investigations. Accordingly, dealers are urged to review and update any and all compliance procedures. The summary provided below may help dealers review their compliance of relevant federal acts and regulations. As background, the Federal Trade Commission and the Consumer Financial Protection Bureau share authority for a number of acts. The CFPB has rulemaking authority with respect to Buy Here-Pay Here and Lease Here-Pay Here dealers for the financial regulations, i.e. ECOA, TILA, FCRA, and the Privacy Rule. Other than that specific rulemaking authority, the FTC retains its role as primary regulatory agency for the used dealer industry, including enforcement of any rules authored by the CFPB. The CFPB has no specific authority over non-BHPH/non-LHPH dealers. Equal Credit Opportunity Act Description: This act (Title VII of the Consumer Credit Protection Act) prohibits lending practices discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance or good faith exercise of any rights under the Consumer Credit Protection Act. The act also requires creditors to provide applicants, upon request, with the reasons underlying decisions to deny credit. Scope: BHPH; third-party finance dealers Rulemaking: CFPB, Federal Reserve Board Dealer Relevancy: 1. Prohibits discriminatory actions in credit transactions. 2. Requires adverse action notices when credit is denied. The Fair Credit Reporting Act also requires DEALERS’

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adverse action notices in limited cases. For any given customer, requirements of both acts may be satisfied by a single, appropriately formatted notice. Truth in Lending Act Description: This act (Title I of the Consumer Credit Protection Act) requires all creditors who deal with consumers to make certain written disclosures concerning finance charges and related aspects of credit transactions (including disclosing an annual percentage rate). The act also establishes certain requirements for advertisers of credit terms. Scope: BHPH; third-party finance dealers Rulemaking: Oklahoma (Oklahoma is one of five states exempt from certain sections of the TILA), CFPB, Federal Reserve Board Dealer Relevancy: 1. Oklahoma dealers are governed by the state’s version of certain sections of the TILA. 2. Requires specific disclosures on retail installment sales contracts such as APR, finance charge, amount financed, total of payments, total sale price and payment schedule. Credit term disclosures must be clear and conspicuous. 3. Governs advertising of credit terms. If certain credit terms are mentioned in the advertising piece, then other terms such as APR must also be disclosed. The rule is intended to ensure that all important terms of a credit plan, not just the most attractive ones, appear in an ad. 4. The TILA applies to credit transactions in which the amount does not exceed a certain threshold. The threshold for 2013 is credit extended of $53,000 and is adjusted for inflation January 1 of each year. Consumer Leasing Act Description: This act, amending the Truth in Lending Act, regulates personal property leases that exceed four months in duration and are made to NOVEMBER 2013

consumers for personal, family or household purposes. The statute requires that certain lease costs and terms be disclosed, imposes limitations on the size of penalties for delinquency or default and on the size of residual liabilities and requires certain disclosures in lease advertising. Rulemaking: Oklahoma (Oklahoma is one of five states exempt from certain sections of the TILA), CFPB/Federal Reserve Board Scope: LHPH Dealer Relevancy: 1. Requires specific lease term disclosures such as amount due at delivery, total of payments, payment calculation, payment schedule, and early-termination information. Like the TILA disclosures, certain formatting requirements apply. 2. Governs advertising of lease terms in a manner similar to the TILA for credit sales. 3. Applies to leases for a period of more than four months and with a total contractual cost falling under a specified threshold. The threshold for 2013 is $53,000 and is adjusted for inflation January 1 of each year. Fair Credit Reporting Act Description: The act protects information collected by consumer reporting agencies such as credit bureaus. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the act. Companies that provide information to consumer reporting agencies have specific legal obligations, including the duty to investigate disputed information. Also, users of the information for credit, insurance or employment purposes must notify the consumer when an adverse action is taken on the basis of such reports. Scope: BHPH dealers; thirdparty finance dealers; any dealer involved in the credit process. Rulemaking: CFPB with respect to Risk-Based Pricing Rule for BHPH dealers; FTC with

respect to Risk-Based Pricing Rule for non-BHPH dealers; FTC with respect to Red Flags Rule and Disposal Rule for all dealers. Dealer Relevancy: 1. The FCRA is implemented through a number of regulations or rules that apply to dealers. 2. The Risk-Based Pricing Rule requires a risk-based pricing notice be provided to the customer if you or your third-party finance entity use(s) information from a credit report, such as a customer’s payment history, to establish the price and other terms, specifically the APR of the credit being offered or extended. 3. The FTC has issued specific guidance which states that the Risk Based Pricing Rule requirement applies to dealers whose thirdparty finance entity uses information from a credit report to establish the buy-rate. The dealer, not the third-party finance entity, is responsible for providing the notice. 4. The Red Flags Rule applies to dealers that offer financing or that collect or process credit applications for third-party lenders. The rule requires covered dealers to develop, implement and maintain a written identity theft prevention plan. 5. The Disposal Rule dictates that consumer personal private financial information, including consumer credit reports, be disposed of in a particular fashion. The rule applies to both paper and digital information. 6. Both the FCRA and the Equal Credit Opportunity Act require adverse action notices be provided consumers in the event credit is denied. The FCRA notice requirements may be satisfied through appropriate use of sample notices defined by the ECOA. C O N T I N U E D O N PA G E 6

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DEALER COMPLIANCE REVIEW

Gramm-Leach-Bliley Act Description: Title V, subtitle A, of this act generally governs the protection of consumers’ personal financial information by financial institutions. The Privacy Rule and the Safeguards Rule implement portions of subtitle A. The Privacy Rule requires financial institutions to develop and provide notice of their privacy policies to their customers. The Safeguards Rule requires financial institutions to implement a plan to physically safeguard consumers’ personal private financial information. Scope: BHPH Dealers; thirdparty finance dealers; any dealer involved in the credit process. Rulemaking: CFPB with respect to Privacy Rule for BHPH dealers; FTC with respect to Privacy Rule for non-BHPH dealers; FTC with respect to Safeguards Rule for all dealers. Dealer Relevancy: 1. The FTC recently settled its first action again a dealership for violations of both the Privacy Rule and the Safeguards Rule. That dealership is now subject to 20 years of auditing, reporting and FTC oversight. 2. The Privacy Rule requires covered dealers provide notice outlining their activities involving the collection, protection and sharing of consumers’ personal financial information. Customers must be afforded an avenue to opt out of having information shared with certain parties. The notice must be specific to the particular dealership and should reflect the actual practices of the dealership. 3. The Safeguards Rule requires covered dealers develop and maintain a written plan outlining their procedures to safeguard or physically protect consumers’ private financial information. The plan must be specific to the dealership and should accurately reflect the policies in place. Unfair and Deceptive Acts or Practices/Unfair, Deceptive, or Abusive Acts or Practices Description: UDAP/UDAAP is regulated at both the state and federal levels. At the federal level, section 5(a) of the FTC Act provides that “unfair or deceptive DEALERS’

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acts or practices in or affecting commerce…are…declared unlawful.” “Unfair” practices are defined as those that cause “substantial injury to consumers which is not reasonably avoidable by consumers themselves…” When determining “deception,” the FTC considers whether a certain representation, omission or practice is likely to mislead when viewed from the perspective of a reasonable consumer. The CFPB enforces violations of an “abusive” nature in addition to unfair and deceptive acts. “Abusive” is defined by the CFPB on a caseby-case basis. State UDAP laws generally follow the federal FTC UDAP statute with emphasis on consumer protection. Scope: All retail and wholesale dealers. Rulemaking: Oklahoma; CFPB; FTC Dealer Relevancy: 1. Broadly prohibits unfair and deceptive practices. 2. Examples of UDAP activities include selling a vehicle without disclosing certain known damage; installing a GPS tracking device without disclosure and misleading advertising. 3. Oklahoma UDAP specifically forbids misleading advertising statements regarding price, price reductions, availability of product and using “bait and switch” techniques. 4. Oklahoma UDAP specifically prohibits the use of obscene or profane language when contacting a debtor for debt collection. Holder in Due Course Rule Description: Formally titled “Preservation of Consumers’ Claims and Defenses,” the rule was developed under the FTC’s authority to regulate unfair and deceptive acts or practices and was designed to protect consumers involved in certain third-party finance situations. The rule ensures that any holder of a loan contract or consumer credit contract is subject to all claims and defenses the debtor could assert against the seller. Scope: Third-party finance dealers Rulemaking Authority: FTC Dealer Relevancy: 1. The rule requires sellers to include specific “Holder” language in the text of any consumer credit contract NOVEMBER 2013

which they execute with a buyer. The language must be in at least ten-point, bold-faced type. 2. The rule applies to any transaction that is subject to the Truth in Lending Act. Used Car Rule Description: Formally titled “Used Motor Vehicle Trade Regulation Rule,” the rule was developed under the FTC’s authority to regulate unfair and deceptive acts or practices. The rule was designed to prevent dealers from misrepresenting the mechanical condition of a used vehicle as well as the terms of any warranty offered. The rule also requires dealers to disclose, prior to sale, that a used vehicle is sold without any warranty and to make available the terms of any written warranty. Scope: All dealers Rulemaking: FTC Dealer Relevancy: 1. Requires FTC “As Is” Buyer’s Guide be posted prominently and conspicuously in the vehicle prior to offering it for sale. 2. If sale is conducted in Spanish, a Spanish Buyer’s Guide must be posted. 3. Applies to used vehicles with a GVWR of less than 8,500 pounds, a curb weight of less than 6,000 pounds and a frontal area of less than 46 square feet. 4. Motorcycles, agricultural equipment and vehicles sold for scrap are exempted. Magnusson-Moss Warranty Act Description: Title I of this act authorizes the FTC to develop regulations for written and implied warranties. The act directs the commission to establish disclosure and designation standards for written warranties, specifies standards for full warranties and establishes consumer remedies for breach of warranty or service contract obligations. Scope: All dealers Rulemaking: FTC Dealer Relevancy: 1. The FTC “As Is” Buyer’s Guide (required by the Used Car Rule) does not serve as a written warranty. The buyer’s guide tells the customer whether or not a warranty is offered. 2. Any warranties offered must be written, be titled as either “full” or “limited”

and clearly state what is covered and what is not, the period of coverage, action you will take to correct problems, how the customer can obtain warranty service and how state law affects your customer’s rights. 3. Written warranties must be available to consumers before they buy. 4. Tie-in sales provisions are generally prohibited. 5. Deceptive warranties are prohibited. 6. The act makes breach of warranty a violation of federal law and enables consumers to recover attorneys’ fees. 7. The act does not address warranty advertising. However, deceptive warranty advertising would be considered a violation of the Unfair and Deceptive Acts or Practices section of the FTC act. Federal Odometer Act Description: This act is intended to prohibit tampering with motor vehicle odometers and to provide safeguards to protect purchasers in the sale of motor vehicles with altered or reset odometers. Scope: All retail and wholesale dealers; auction houses Administered by: Federal Transportation Department; Oklahoma UMV&PC Dealer Relevancy: 1. Requires Odometer Disclosure Statement be completed for any transferred vehicle. 2. Federal law is satisfied by completion of disclosure on space provided on vehicle title. 3. Oklahoma UMV&PC wants the disclosure statement prepared at the time the deal is transacted. Since the title often isn’t available, a separate form may be required. IRS Form 8300 Reporting Requirement Description: The law requires that trades and businesses report cash payments of more than $10,000 to the federal government by filing IRS/FinCEN Form 8300. The information provided on the form assists law enforcement in its anti-money laundering efforts. Scope: All retail and wholesale dealers; auction houses Rulemaking: IRS and FinCEN w w w. e - o i a d a . c o m 10/19/13 1:44 PM


(Financial Crimes Enforcement Network, Dept of Treasury) Dealer Relevancy: 1. Applies to vehicle sales when $10,000 or more in cash is received from the same buyer in a single transaction or in related transactions. 2. Cash does not include a cashier’s check, bank draft, traveler’s check or money order. 3. Generally, Form 8300 must be filed within 15 days after the cash is received. 4. A written statement must be sent to each subject customer notifying them of the Form 8300 filing by January 31 of the year after the year in which the customer made the cash payment. 5. Special reporting provisions are made for suspicious activity cash payments. Executive Order 13224 Description: Executive Order 13224 was signed into law by President George W. Bush in the days shortly after the terrorist attacks on September 11, 2001. The order declares all properties of specifically “listed” persons to be blocked and forbids any U.S. person from engaging in any transaction or dealing of those assets. The Office of Foreign Assets Control, Dept. of Treasury, maintains a list of persons (termed “Specially Designated Nationals” or “SDNs”) whose assets are blocked. Violators of the order may be subject to civil fines as well as criminal prosecution and multi-year imprisonment. Scope: All retail and wholesale dealers; auction houses. Administered by: OFAC (Dept of Treasury). Dealer Relevancy: 1. All dealers are prohibited from selling a vehicle to or buying a vehicle from any person or entity included on the SDN list. 2. To ensure compliance, dealers must first identify the individual involved in the transaction, typically by collecting information such as name, address, date of birth and tax identification number. Second, dealers must determine whether the individual is “listed” by reviewing the OFAC SDN list. 3. The list is available online through the OIADA website www.e-oiada.com. Select menu item “Resources” then ‘Blocked Persons List.”

OUR INSURANCE PROGRAMS HAVE SET THE PACE FOR OTHERS TO FOLLOW

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BY ADR STAFF NOTE: This article is provided for informational purposes only. It is not legal advice. For its application to your situation, please consult your attorney.

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ACCURATE ADVE RTI SING PRE VE NT S LEGAL SCRUTINY

It is ultimately the dealership’s responsibility to ensure their advertising complies with the law. Do not rely on the agency preparing the ad to ensure compliance. Both in spirit and in fact, your advertising should be truthful and non-deceptive; you should have evidence to back up any claims and your advertisements should not be unfair. When preparing your advertising material for correctness, look at the ad from the point of view of the “reasonable consumer” – the typical person looking at the ad. Rather than focusing on certain words, look at the ad in context – words, phrases and pictures – to determine what it conveys to consumers. General Advertising An ad may be considered deceptive if it contains a statement or if it omits a statement that: • Is likely to mislead consumers acting reasonably under the circumstances and • Is “material” – that is, important to a consumer’s decision to buy or use the product. For example, an advertisement might read “2007 Chevy, only $75 per month.” Whether this is a bargain depends upon information missing from the advertisement, such as the down payment and the number of payments. The ad also omits the annual percentage rate and does not state whether the transaction is a credit sale or a lease. The ad needs to tell the whole story. Under the law, advertisers must have proof to back up both “expressed” and “implied” claims that consumers take from an ad. An “expressed” claim is made literally in the ad. For example, “We finance anyone” is an expressed claim that any consumer can obtain financing through your dealership. An implied claim is one made indirectly or by inference. “No money – no problem” contains an implied claim that anyone, regardless of financial position, can obtain financing DEALERS’

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for a vehicle purchase. “Bait and Switch” advertising is a violation of the law. It is illegal to advertise a product if you have no intention of selling that item but instead plan to sell a consumer another product, usually at a higher price. Rebate offers may be particularly scrutinized. Ads that include rebate promotions should prominently state the before-rebate cost as well as the amount of the rebate. Only then will consumers know their actual out-of-pocket cost and have the information they need to comparison shop. Rebate promotions also should clearly disclose any additional terms and conditions that consumers need to know, including the key terms of any purchase requirements, additional fees and when consumers can expect to receive their rebate. If an ad mentions that a product comes with a guarantee or warranty, the ad should clearly disclose how consumers can get the details. Any conditions or limits on the guarantee or warranty (such as a time limit or a requirement that the consumer return the product) also must be clearly disclosed in the ad. Finally, the law requires companies to make copies of any warranties available to consumers before the sale. Pricing is another area of advertising that can receive scrutiny from regulators. One common practice is to offer a reduction from a former price. If the former price is the actual, bona fide price at which the vehicle was offered for sale for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison. The “former” price should not be an artificial, inflated price established for the purpose of advertising a bargain “reduced” price. If the former price is not set forth in the ad, as when the ad merely states “sale,” the amount of the reduction must not be so insignificant as to be meaningless. For instance, a NOVEMBER 2013

claim that a vehicle has been “Reduced to $9,999” when the former price was $10,000 is misleading the consumer. Advertising Credit and Leases Certain rules apply only to creditors and lessors. Keep the following principles in mind when you design or review an ad promoting consumer credit or consumer leases. All advertising disclosures must be printed “clearly and conspicuously.” This means that disclosures must be legible and reasonably understandable. You may advertise only credit or lease terms that are actually available to the consumer. “Bait and switch” credit or lease promotions are not allowed. For example, no advertisement may state that a specific installment payment or a specific down payment can be arranged unless the creditor is prepared to make those arrangements. However, you may advertise terms that will be offered only for a limited time or terms that will become available at a known future date. You need not, of course, promote every credit or lease plan that you offer. The main requirements governing advertising of closedend credit concern “triggering terms” and “finance rates.” These requirements may apply to a single ad. If you advertise closed-end credit with a “triggering term,” you also must disclose other major terms, including the annual percentage rate. This rule is intended to ensure that all important terms of a credit plan, not just the most attractive ones, appear in an ad. The triggering terms for closed-end credit are: • The amount of the down payment (expressed as either a percentage or dollar amount) in a “credit sale” transaction. Examples: “10% down” “$1000 down” “90% financing” “trade-in with $1000 appraised value required” • The amount of any payment (expressed as

either a percentage or dollar amount). Examples: “Monthly payments less than $250 on all our loan plans” “Pay $23.44 per $1000 amount borrowed” “$210.95 per month” • The number of payments or the period of repayment. Examples: “Up to four years to pay” “48 months to pay” “30-year mortgages available” • The amount of any finance charge. E xamples: “Financing costs less than $300 per year” “Less than $1200 interest” “$2 monthly carrying charge” Some statements about credit terms are too general to trigger additional disclosures. Examples of terms that do not trigger the required disclosures are: “No down payment” “Easy monthly payments” “Loans available at 5% below our standard APR” “Low down payment accepted” “Pay weekly” “Terms to fit your budget” “Financing available” General statements, such as “take years to pay” or “no closing costs,” do not trigger further disclosures because they do not state or suggest the period of repayment or down payment cost. In contrast, the statement “drive it home for $199,” which implies that the required cash down payment is no more than $199, does trigger full disclosure. Similarly, a statement such as “up to 48 months to pay” lists the period of repayment and triggers disclosure. In general, the more specific the statement, the more likely it is to trigger additional disclosures. If your ad for closed-end credit uses a triggering term, it also must include the following information: • The amount or percentage of the down payment w w w. e - o i a d a . c o m 10/19/13 1:44 PM


G GUIDELINES • The terms of repayment • The “annual percentage rate,” using that term or the abbreviation “APR.” If the annual percentage rate may be increased after consummation of the credit transaction, that fact must also be stated. The amount or percentage of the “down payment” need not be shown directly as long as it can be determined from the ad. For example, “10% cash required from buyer” or “credit terms require minimum $1000 trade-in” would satisfy the disclosure requirement. The “terms of repayment” may be expressed in a variety of ways, as long as they convey the required information. For example, an automobile finance company might use unit cost to disclose repayment terms: “48 monthly payments of $23.44 for each $1000 borrowed.” Similarly, the length of the loan can be expressed as the number of payments or the time period of the loan.

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Sample Disclosure: The following disclosure of car financing offered by the dealer would comply with the law if printed clearly and conspicuously: “Special close-out sale this weekend. Any in-stock Chevy Citation, only 5% down, 5.9% APR on approved credit. Example: 48 monthly payments of $224.95.” The second basic requirement for advertising closed-end credit is that if your ad shows the finance charge as a rate, that rate must be stated as an “annual percentage rate,” using that term or the abbreviation “APR.” Your ad must state the annual percentage rate, even if it is the same as the simple interest rate. So, if you are a car dealer who wants to advertise low-rate financing made available by the manufacturer, your advertisement would read, for example, “5.9% annual percentage rate” or “5.9% APR.” If you want to show only

LEGAL

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a rate, the APR is stated in the ad, no other credit information need be included. The “triggering term” requirement does not apply in this case because the rate and APR are not triggering terms. Your advertisements will be noticed and will undoubtedly draw a response from someone. Fair and truthful ads will be appreciated by consumers and will typically result in a positive response. Deceptive and misleading ads, however, will be noticed by the Used Motor Vehicle and Parts Commission and could result in a very negative response for your dealership. More indepth guidance on preparing compliant advertising pieces is available on the Federal Trade Commission website, www.ftc.gov.

BY ADR STAFF NOTE: Neither OIADA or ADR of Oklahoma offers legal advice. This article was prepared for informational purposes only. For its applicability to your business, please consult your legal counsel.

NOVEMBER 2013

NIADA 20 Group

NIADA Dealer 20 Groups are about dealers learning from each other. But what’s more important is what they’re learning from each other. How to create and manage a better, more efficient dealership. How to save and make money. How to be more profitable. “I want to see how much better or worse someone else is doing than I am,” explained Craig Durrett of Houston’s Durrett Motor Company. “You look at their numbers and now you ask the questions. Why are theirs so much better? … What are they doing? And they can give you the answers.” The next 20 Group meeting, moderated by NIADA director of dealer development Joe Lescota, is scheduled for Dec. 9-10 in Dallas. For information on NIADA Dealer 20 Groups and how to join, contact Georgia Brown at 800-682-3837 or georgia@niada.com.

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Don’t Be Misleading u

Dealers should expect increased scrutiny of their advertising material and marketing campaigns by the Used Motor Vehicle and Parts Commission. At the September 2013 monthly meeting, commissioners voiced concerns regarding misleading and deceptive claims made in particular marketing pieces. Commissioners noted that misleading and deceptive advertising by dealers harms not only consumers, but other dealers and the industry as a whole. In accordance with commissioners’ concerns, commission staff will likely place additional emphasis on monitoring and investigating possible violations associated with misleading or deceptive marketing. All media are subject to oversight. Online marketing venues such as Craigslist and social media sites are specifically included. Commission staff continually

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

monitors those type sites and are particularly alert for dealer “by owner” postings. Separately, the Federal Trade Commission recently announced agreements with two franchise dealerships to settle false advertising charges. The proposed orders settling the FTC’s charges place constraints on the dealerships’ advertising efforts and remain in effect for the next 20 years. In the first complaint, the FTC had charged that Timonium Chrysler, Inc. of Cockeysville, Md., had violated the FTC act by advertising discounts and prices that were not available to a typical consumer. The dealership’s website indicated specific “dealer discounts” and “Internet prices,” but allegedly failed to disclose adequately that consumers would need to qualify for a series of smaller rebates not generally available to them. The complaint further alleges that, in many instances, even if a consumer qualified for

all the rebates, the cost of the vehicle was still greater than the advertised price. In the second complaint, Ganley Ford West, Inc., in Cleveland, was also charged with misrepresenting that vehicles were available at a specific dealer discount when the discounts only applied to specific, and more expensive, models of the advertised vehicles. Ganley Ford West advertised its discounted vehicles on its website and in local newspapers. It is ultimately the dealership’s responsibility to ensure their advertising complies with the law. Do not rely on the agency preparing the ad to ensure compliance. Both in spirit and in fact, your advertising should be truthful and non-deceptive; you should have evidence to back up any claims and your advertisements should not be unfair. When preparing your advertising material for correctness, look at the ad from the point of view of the

LEGAL MATTERS

When preparing your advertising material for correctness, look at the ad from the point of view of the “reasonable consumer” – the typical person looking at the ad. Rather than focusing on certain words, look at the ad in context – words, phrases, and pictures – to determine what it conveys to consumers. u

“reasonable consumer” – the typical person looking at the ad. Rather than focusing on certain words, look at the ad in context – words, phrases, and pictures – to determine what it conveys to consumers.

BY ADR STAFF

Bond and License Renewal Schedule

In Oklahoma, all used dealer bonds and licenses expire December 31 of each year. This includes used dealer licenses, salesman licenses, and dealership bonds. Your dealer plates (issued by the Oklahoma Tax Commission) also expire on December 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 your completed renewal applications in a timely manner and then follow-up on the status of each until you receive approval. Following is a schedule of steps that will help guide you through the bond and license renewal process.

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COMMISSION UPDATE

USED MOTOR VEHICLE AND PARTS COMMISSION REPORT

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Chairman John Longacre convened the September 10, 2013, session of the Used Motor Vehicle and Parts Commission. Following roll call, approval of the August meeting minutes and approval of the executive session minutes at the August meeting, Longacre called on commission director John Maile for his report. Director Maile noted that expenditures reports for July and August were included in the agenda packet. With regard to the Allen’s Auto Sales case, Maile reported that the 30 day time period for Allen to appeal the ruling had expired. Investigator John Lancaster’s recent inventory showed 16 vehicles remaining. Those vehicles must be transferred to an individual’s name and are consequently subject to excise tax. Allen paid the fines associated with the case and the issue can be considered resolved. Nick Allen indicated his intention to go into the repair business. The commission has not received an application for a used dealer license from Harry Allen. Director Maile then reported on the bankruptcy of Wheeler Mobile Homes. The dealer had three locations but was only required to carry one bond. At the time of bankruptcy, the dealer had customer deposits on a number of active transactions that now cannot be completed. Consumers will suffer a loss of $80,000 and the commission has received 16 associated complaints. There is no statute or rule regarding who the bond accrues to. However, under current commission practices, the bond accrues to the dealer rather than to the lot. Director Maile suggested the commissioners revisit that issue at some point. If the bond accrued to the lot rather than the dealer, consumers would be better protected. Commissioner Ross noted that the insurance companies hesitate to assume such extended exposure to a single entity. Chairman Longacre then called on John Lancaster for the chief investigator’s report. Lancaster reported that during the preceding month four informal hearings had been held. Five fines had been levied: Hoffman Auto Sales of Oklahoma City was fined $500; Legacy Motors of Oklahoma was fined $250; Dave’s Dip Stick Used Cars of Ardmore was fined $250 for advertising violations; Auto Emporium of Oklahoma City was fined $100 for late delivery of a title and Midwest Muscle/Motor Sports of Moore was fined $250 for a Craigslist posting violation. In addition, staff had completed 14 inspections during the previous month and handled 21 complaints. Of the complaints, seven were related to title issues, 10 to contract issues, one to mechanical, and three to miscellaneous. Seventeen dealers attended the education program. Applicants for a new license and dealers involved in significant rule violations are required to attend the commission’s education program to acquire or maintain their state license. Sessions are held at 9 am the second Monday of each month – one day prior to the commission meeting – in the conference room at 2401 NW 23rd, Oklahoma City. Attendees are asked to call 405-521-3600 to make reservations so staff can plan appropriately.

REPORT OF CEASE AND DESIST LETTERS ISSUED These letters direct the individual or business to cease violations of laws or rules ENTITY TYPE VIOLATION CITY A.J. Used Dealer Nowata Kevin Adair Insurance Pool Moore Brahim Amachouch Insurance Pol Oklahoma City California Tires & Wheels Used Dealer Tulsa Freddie Chastain Used Dealer Henryetta El 7 Marez Club Used Dealer Tulsa Jose Flores Used Dealer Tulsa Jerry Hamesley Used Dealer Bennington Jaime Hoffman Used Dealer Oklahoma City Preston Holder Used Dealer Kingston Mike Cycle Salvage Dismantler Oklahoma City Guy Nwanko Used Dealer Oklahoma City Poe Boy Fleming Auto Salvage Used Dealer Tulsa Poe Boy Fleming Auto Salvage Rebuilder Tulsa Sateea Al Rawe Insurance Pool Oklahoma City Teddy Stevens Used Dealer Tulsa Fred Tavangar Used Dealer Warr Acres Ken Traylor Used Dealer Arcadia Jim Wicks Used Dealer Vinita Jim Wicks Rebuilder Vinita

DATE ISSUED 08/29/2013 08/27/2013 08/27/2013 08/02/2013 08/15/2013 08/03/2013 08/02/2013 08/14/2013 08/07/2013 08/21/2013 08/21/2013 08/20/2013 08/28/2013 08/28/2013 08/27/2013 08/06/2013 08/07/2013 08/08/2013 08/29/2013 08/29/2013

CLOSED COMPLAINT REPORT

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 COMPLAINT Ada’s Eastside Auto’s, Inc. Ada Miscellaneous Auto Emporium Oklahoma City Title Automax Hyundai of Norman Norman Contract Bob Howard Automall Oklahoma City Contract Bob Howard Automall Oklahoma City Contract Bob Howard Dodge Used Cars Oklahoma City Title Cheap Dependable Auto Sales, LLC Oklahoma City Title Classic Chevrolet, Inc. Owasso Miscellaneous Conner Auto Group Waurika Contract David Stanley Chevrolet, Inc. Oklahoma City Contract Eskridge Chevrolet, LLC Guthrie Contract Everest Auto Oklahoma City Title Fowler Toyota Norman Title Howerton Auto Sales Stillwater Mechanical Iron Horse Motors Oklahoma City Title Joe Cooper Ford of Yukon, LLC Yukon Miscellaneous Maxey Homes, Inc. Oklahoma City Contract Norman Mitsubishi Norman Contract Riverside Autoplex/Holdenville, LLC Holdenville Contract United Auto Liquidators, LLC Tulsa Title VIP Auto, Inc. Oklahoma City Contract

RESOLVED 08/05/2013 08/02/2013 08/22/2013 08/06/2013 08/05/2013 08/05/2013 08/20/2013 08/14/2013 08/06/2013 08/22/2013 08/09/2013 08/06/2013 08/06/2013 08/06/2013 08/02/2013 08/22/2013 08/12/2013 08/22/2013 08/22/2013 08/01/2013 08/09/2013

LICENSES SUSPENDED OR ABANDONED

In other action, the following licenses were suspended or abandoned. BUSINESS NAME LOT CITY REASON Auto Connection Oklahoma City Out of business; change of ownership James Baker Auto Sales Oklahoma City Out of business; per owner, Jami Baker Midwestern Motors, Inc. Tulsa Out of business; failure to complete requirements for change of location S & G Motors, LLC Oklahoma City Out of business; per owner, Shawn Davis

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SAFETY NEWS

NHTSA RECALLS u

S O U RC E: H T T P : / / W W W. SA F E RCA R . G OV /

A partial listing of vehicle recalls issued by NHTSA is below. For more information or to subscribe to weekly email recall notifications, go to www. NHTSA.gov or www.SaferCar.gov. To access the full list of recalls for recent periods or to search for specific recall notices, go to www.SaferCar.gov and select the desired option under “Quick Clicks.”

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September 16, 2013 NHTSA ID Number: 13V405000 Component: Air Bags Units: 193,936 Product: Suzuki Grand Vitara, MY 20062011 Suzuki SX4, MY 2007-2011 Suzuki Motor of America, Inc. is recalling certain model year 2006-2011 Grand Vitara and 2007-2011 SX4 vehicles. In the affected vehicles, over time, the OCS sensor mat installed in the front passenger seat may fail due to repeated flexing of the mat from use of the seat. As a result, during a crash necessitating deployment, the air bag will deploy regardless of whether the front seat occupant is an adult or a child.

September 9, 2013 NHTSA ID Number: 13V383000 Component: Suspension Units: 780,584 Vehicles: Lexus HS 250 Hybrid, MY 2010 Toyota RAV4, 2006-2011 Toyota is recalling certain model year 2006 through 2011 RAV4 and 2010 Lexus DEALERS’ OK_1113.indd 14

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September 9, 2013 NHTSA ID Number: 13V396000 Component: Hybrid Propulsion System Units: 133,081 Vehicles: Lexus RX400H, MY 2006-2008 Toyota Highlander Hybrid, MY 2006-2010 Toyota is recalling certain model year 2006-2010 Highlander hybrid vehicles manufactured February 16, 2005, through July 29, 2010, and model year 2006-2008 Lexus RX400h vehicles manufactured February 23, 2005, through December 2, 2008. The Intelligent Power Module inside the inverter module may contain transistors that have higher operating temperature than the solder can support and the transistors may be heat damaged by the solder. If this occurs, various warning lamps, including the malfunction indicator lamp, slip indicator light, brake system warning light and master warning light, will be illuminated on the instrument panel. The vehicle may enter a fail-safe/limp-home mode that limits the drivability of the vehicle. It is possible that the hybrid system will shut down while the vehicle is being driven, causing the vehicle to stall unexpectedly, increasing the risk of a crash. NOVEMBER 2013

September 9, 2013 NHTSA ID Number: 13V395000 Component: Engine Units: 101,584 Vehicles: Lexus GS 350, MY 2007-2011 Lexus IS 350, MY 2006-2011 Lexus IS 350C, MY 2010-2011 Toyota is recalling certain model year 2007-2011 Lexus GS350 vehicles manufactured June 19, 2006, through July 12, 2011, model year 20062011 Lexus IS350 vehicles manufactured May 27, 2005, through July 13, 2011, and model year 2001-2011 Lexus IS350c vehicle manufactured November 25, 2009, through July 19, 2011. These vehicles, equipped with the 2GR-FSE engine, use bolts to secure the housing and sprocket of the Variable-Valve Timing system gear assembly. These bolts could become loose due to abnormal impacts generated within the gear assembly immediately after a cold startup. The loose bolts could cause the VVT gear housing and sprocket to separate and result in the engine stopping while the vehicle is being driven, increasing the risk of a crash.

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September 11, 2013 NHTSA ID Number: 13V380000 Component: Engine and Engine Cooling Units: 37 Vehicles: Ford F350, F450, F550, MY 2012 Manning Equipment Inc. LLC is recalling certain model year 2012 Ford F350, F450 and F550 gasoline engine dual rear wheel chassis vehicles manufactured October 2011 through June 2012. The tailpipe on the exhaust system does not extend out beyond the edge of the body, allowing heat to build up in rear curbside storage compartment. Excessive heat buildup in rear compartment could result in fire.

HS250h passenger vehicles manufactured from October 2005 through September 2010. If the nuts for adjusting the rear wheel alignment are improperly tightened during service, the rear suspension arm (rear tire rod) may develop unwanted movement and rust leading to thread damage and eventual failure. Failure of the rear tire rod will cause an abrupt change in the vehicle’s alignment. Failure of the rear tie rod could cause a loss of vehicle control, increasing the risk of a crash.

LEXUS GS 350, MY 2007-2011 LEXUS IS 350, MY 2006-2011 LEXUS IS 350C, MY 2010-2011

BY ADR STAFF

September 6, 2013 NHTSA ID Number: 13V382000 Component: Engine Units: 270 Vehicles: Honda Odyssey, MY 2013 Honda Pilot, MY 2013 Honda is recalling certain model year 2013 Pilot 2WD and 4WD vehicles and certain model year 2013 Odyssey vehicles. During manufacturing of the engine piston, it is possible that the heat treatment process was not properly applied, resulting in the piston having an insufficient hardness level, making it more susceptible to premature wear. A worn piston may suddenly fail, causing the engine to stall, increasing the risk of a crash. September 3, 2013 NHTSA ID Number: 13V385000 Component: Steering Units: 355,000 Vehicles: Ford Crown Victoria, MY 20052011 Lincoln Town Car, MY 20052011 Mercury Grand Marquis, MY 2005-2011 Ford is recalling certain model year 2005-2011 Ford Crown Victoria (including Crown Victoria Police Interceptors), Mercury Grand Marquis and Lincoln Town Car vehicles. The affected vehicles are currently registered or were originally sold in Connecticut, Delaware, the District of Columbia, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia and Wisconsin. Severe corrosion can seize the lower intermediate shaft which may cause the upper intermediate shaft to collapse and the steering column lower bearing to separate. w w w. e - o i a d a . c o m 10/19/13 1:44 PM


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SECURIT Y WATCH

Peer-to-Peer Software Causes Data Breach

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If your dealership maintains any sensitive or critical data on your computer network, you should be aware that installation of certain software enabling online gaming or sharing of large volume data files (such as music and video) carries an extreme data security risk. Such applications often make use of what is known as Peer-To-Peer (P2P) software and it is an issue the Federal Trade Commission watches very closely. In a recently released complaint against a medical testing laboratory, the FTC charges that in two separate incidents the company collectively exposed the personal information of approximately 10,000 customers. According to the complaint, billing information for 9,000 consumers was found on a P2P file-sharing network. Additionally, in 2012, company documents containing sensitive personal information of at least 500 consumers were found in the hands of identity thieves. Although the subject company is not a dealership, the lessons are applicable and provide insight into FTC requirements for data security. Primarily, the complaint alleges that the company failed to take “reasonable

and appropriate” measures to safeguard consumer information. Among other things, the complaint alleges that the company: • Did not implement or maintain a comprehensive data security program to protect this information; • Did not use readily available measures to identify commonly known or reasonably foreseeable security risks and vulnerabilities to this information; • Did not use adequate measures to prevent employees from accessing personal information not needed to perform their jobs; • Did not adequately train employees on basic security practices and • Did not use readily available measures to prevent and detect unauthorized access to personal information. The case is part of an ongoing effort by the commission to ensure that companies take reasonable and appropriate measures to protect consumers’ personal data. In 2012, the FTC settled a similar complaint against a Georgia dealership. In that case, the FTC charged that the dealership compromised consumers’ personal information by allowing P2P software

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BY ADR STAFF

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GData compromised through P2P software is an issue the FTC takes very seriously. In 2012, then-FTC Chairman Jon Leibowitz said, “Companies should take a hard look at their systems to ensure that there are no unauthorized P2P file-sharing programs and that authorized programs are properly configured and secure.” u

to be installed on its network, which allowed sensitive financial information for 95,000 consumers to be uploaded to a P2P network. The settlement involves FTC oversight of the dealership for 20 years. Data compromised through P2P software is an issue the FTC takes very seriously. In 2012, then-FTC Chairman Jon Leibowitz said, “Companies should take a hard look at their systems to ensure that there are no unauthorized P2P file-sharing programs and that authorized programs are properly configured and secure.” As the nation’s consumer protection agency, the FTC enforces laws that require companies in various industries to take reasonable and appropriate security measures to protect sensitive personal information, including the Gramm-LeachBliley Act and section five of the FTC act. Failure to prevent such information from being shared to a P2P network may violate such laws. If you have sensitive information stored on your dealership’s computer network, the following actions are suggested: • If you don’t know whether any P2P software is installed on your dealership’s computers, find out. • If your dealership is involved in vehicle financing – either as BHPH/LHPH or through third-party entities_be sure you have a written data safeguards plan as required by the Gramm-Leach-Bliley Act. • Ensure that your safeguards plan includes a policy addressing P2P software and be sure you enforce it. • Be sure the data security statements in your privacy notice accurately reflect the data security policies and procedures you actually have in place. For instance, if your privacy notice says “We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard non-public personal information,” your data security plan, as well as your everyday practices, should support that. More information on privacy and security issues surrounding P2P technology can be found online at the FTC’s business section of their website, www.ftc.gov/bcp. w w w. e - o i a d a . c o m 10/19/13 1:44 PM


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WASHINGTON

UPDATE

NIADA Government Report

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K E E P I N G YO U I N FO R M E D O N T H E L AT E S T G OV E R N M E N TA L I S S U E S A N D AC T I V I T Y I N T H E U S E D CA R I N D U S T RY

On Sept. 12, NIADA executive vice president Steve Jordan and regulatory counsel Shaun Petersen traveled to Washington and, along with D.C.-based lobbyist Sante Esposito of Federal Advocates, met with federal regulators and legislators to discuss issues affecting the used vehicle industry. This month, the Washington Update provides a report on some of those discussions.

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LEGISLATIVE REPORT Legislators The NIADA contingent met with the staff of Rep. Mike Kelly, a Republican from Pennsylvania’s Third District and the congressman representing NIADA treasurer Andy Gabler. Kelly is also an auto dealer – he owns Mike Kelly Automotive, a group of new car stores in Butler, Pa. Kelly is a member of the Congressional Auto

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Caucus, a group of House members with an interest in the automotive industry, and is scheduled to speak at NIADA’s National Leadership Conference this month. NIADA provided a history and explanation of its mission, particularly as it relates to its role as advocate for the independent dealer in D.C. NIADA also met with Josh Finestone, legislative assistant to Sen. Dean Heller (R-Nev.). Heller is the ranking member of the Subcommittee on Consumer Protection, Product Safety and Insurance, which has jurisdiction over S. 921, the bill that would prohibit the sale or lease of rental vehicles subject to a recall without the defect being cured. After receiving NIADA’s opposition letter to the bill, Heller’s office contacted NIADA and requested a meeting to become more

NOVEMBER 2013

familiar with the association. The meeting focused almost exclusively on the rental recall bill. It is NIADA’s belief that the bill will generate little movement in the Senate and will likely have even less traction in the Republicancontrolled House. REGULATORY REPORT Consumer Financial Protection Bureau Jordan and Petersen met with CFPB personnel to introduce themselves to Dan Smith, head of the CFPB’s new Office of Financial Institutions and Business Liaison. That office was created this year to connect the bureau with trade associations, financial institutions and businesses to enhance collaboration and communication. Eric Reusch of the CFPB’s Installment and Liquidity Lending Markets Division and bureau attorney Craig Crowie

also attended. Among the topics discussed was the bureau’s guidance regarding indirect auto lending. The CFPB staffers said unequivocally it was not their intent to regulate dealers by proxy, nor was it their intent to require finance companies to pay dealers a flat fee, saying the flat fee comment was intended to be merely a passing mention. We noted our concern that the flat fee was even mentioned in the bulletin in light of a statement on the CFPB’s website directing consumers to ask what the buy rate is and to offer to pay the buy rate plus a flat fee. We also asked if the bureau has any benchmark for the industry as to what would be considered a disparate impact across a financier’s portfolio. The CFPB confirmed it does not have a specific benchmark and will

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NIADA Government Report consider it on a case-by-case basis, examining the facts and circumstances unique to a particular lender. We expressed concern that that does not provide regulatory certainty. Perhaps the CFPB’s biggest point of emphasis was its desire to have NIADA preach to its members the importance of having a compliance management system in place. The CFPB looks more favorably on businesses that have invested in compliance, a key element of the bulletin on responsible business conduct the bureau issued this summer. The meeting ended with NIADA re-emphasizing its desire to partner with the CFPB on matters the association can assist with, including an offer to provide the CFPB data about the industry, particularly the Buy Here-Pay Here segment. Crowie and attorney Gerry Sachs will be the CFPB’s speakers at the National Leadership Conference. Federal Trade Commission NIADA met with James Reilly Dolan, acting associate director of the FTC’s Division

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In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yoyo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions. u

of Financial of Practices, and two staff attorneys, in order to get acquainted with the new appointee. Dolan has confirmed he will speak at the NIADA National Leadership Conference. After going over the history and mission of the association, we had a general discussion regarding some issues of concern to the FTC. The staff attorneys emphasized their recent settlement with two dealers over advertising issues and expressed concern that dealers are making offers and either not disclosing all of the terms and conditions of the offer or burying them in a manner that is not clear and conspicuous. In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yo-yo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to

NOVEMBER 2013

discuss its intentions. Also discussed were issues related to GPS/ starter-interrupt devices. NIADA provided the FTC with some information on how we understand the technology to be used and our position that the use of such devices should be clearly disclosed to the consumer. Again, the FTC declined to discuss what, if any, future requirements could be placed on dealers’ use of such devices. Just as the CFPB, the FTC also asked us to emphasize the need for dealers to have a viable compliance management system, including the tracking of consumer complaints. The FTC said the decision to impose a fine or the amount of the fine in compliance violations will be based in part on the dealer’s compliance management system. As with the CFPB meeting, we ended by reiterating our desire to partner with the FTC on matters where we could, including updates to the guide on complying with the Used Car Rule, once the final rule is released.

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Oklahoma Independent Automobile Dealers Association OIADA

Your Legisla�ve   “Watch Dog” In 2012, the OIADA successfully stopped:   A  proposed  amendment  requiring  extensive  disclosure  of  vehicle  damage,  whether  the  damage  could  be  known  to  the  dealer  or  not,  which  would  have  subjected  dealers  to  fraud  charges for failure to comply.   

Legisla�on  allowing  local  municipali�es,  coun�es,  or the Department of Public Safety to place holds  on  the  registra�on  renewal  for  motor  vehicles  associated with viola�ons. Serving the Industry Since 1955 

Yes! 20

PO Box 6905  Moore, OK 73153  Phone:  405‐232‐2947 or 800‐346‐4232  Fax: 877‐804‐3449  email: RoseMorgan@e‐oiada.com  Visit us at  813 NW 34, Moore, OK 73160  or go online to www.e‐oiada.com  for a full range of Oklahoma used dealer forms and  supplies. All forms are compliant with state and  federal laws and regula�ons.   Members receive 10% discount on most products. 

I want to receive the benefits of membership in the OIADA!  

Enclosed  are  my  annual  dues  of  $295  to  make  sure  that  my  business  has  all  the  advantages  membership  in  the  OIADA provides to help put me at the forefront of my industry.  By comple�ng this form, I agree to abide by the Code of Ethics. Also, I am giving OIADA, as well as its affiliates and  subsidiaries,  my  permission  to  contact  me  and  provide  informa�on  to  me  at  the  mailing  and  email  addresses,  telephone and fax number(s) I have provided (unless/un�l I give wri�en no�ce to discon�nue).  

OIADA ApplicaƟon for Membership Firm Name: 

Email: 

Address: 

Phone: 

City, State, Zip: 

Fax: 

Owner or Principle: 

Dealer Lic #: 

Credit Card #: 

CCV Code: 

Exp: 

Name on Credit Card (Please Print):  Credit Card Billing Address:  Signature: 

Referred By: 

Please include your email address, phone and fax numbers so that we can easily communicate with you.  Membership dues are $295 for 12 months from the date you join, payable by check, credit card, or telecheck.  Please send applica�on with payment to: OIADA, PO Box 6905, Moore, OK 73153 or fax toll free to 877‐804‐3449. 

It costs to join, but it pays to belong!

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OIADA Dealer Discount VIP Cards Join OIADA to Receive Your   2013 VIP Discount Cards Dealer Discount VIP Cards are just part of the many  benets of OIADA membership.   Their value alone is many �mes greater than the $295  annual membership fee.   Join OIADA today to get started saving with your own  Member Exclusive Dealer Discount VIP Cards! 

Yes!

OIADA

PO Box 6905  Moore, OK 73153  Office:   813 NW 34, Moore, OK 73160  Phone:  405‐232‐2947 or 800‐346‐4232  Fax: 877‐804‐3449  email: RoseMorgan@e‐oiada.com  www.e‐oiada.com 

I want to receive the benefits of membership in the OIADA!  

Join OIADA and trade with these vendors. The savings you get will more than cover the cost of your membership!  AutoMats, LLC  $100 off rst order    Floorplan Express  1 free oor fee, up to $75    Rent‐A‐Wreck  $1,000 discount off a rent‐a‐car franchise    166 Auto Auc�on  Thursday at 9:00 am  One sell fee, up to $100  One buy fee, up to $100    71B Auto Auc�on  Tuesday at 9:00 am  One sell fee, up to $100  One buy fee, up to $100    ADESA Tulsa  Friday at 9:00 am.  One sell fee, up to $50.  One buy fee, up to $50.    America’s Auto Auc�on, Inc. of Tulsa  Wednesday at 2:00 pm, dealers only, or  Saturday at 11:00 am, dealers & public  One buy fee, up to $50 

Dealers Auto Auc�on of OKC  Thursday at 8:30 am  One sell fee, up to $50  One buy fee, up to $50    I‐40 Auto Auc�on, Inc., Del City  Tuesday at 6:30 pm  One sell fee, up to $50  One buy fee, up to $50    Manheim Dallas  Wednesday at 8:45 am or   Friday at 10:00 am  One buy fee OR one sell fee up to $200    Manheim Dallas / Ft. Worth—Trinity Blvd. Loca�on  Thursday at 9:30 am  One buy fee OR one sell fee, up to $200    Route 66 Auto Auc�on  Friday at 12:00 pm.  One sell fee, up to $150  One buy fee, up to $150    Z66 Auto Auc�on  66 N. Mingo, Tulsa  One sell fee, up to $50  One buy fee, up to $50 

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It costs to join, but it pays to belong!

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NOVEMBER 2013

DEALERS’

RESOURCE 10/19/13 1:44 PM


Products & Services Selling Your Car? Advertise Its Fuel Economy!

Fueleconomy.gov Offers MPG Label for Used Cars

PRODUCTS

Fueleconomy.gov, the official U.S. government source for fuel economy information, has added a new tool to help you advertise your vehicle’s fuel economy to potential buyers. The free tool (http://www.fueleconomy.gov/feg/UsedCarLabel.jsp) helps you create both an electronic fuel economy graphic that you can download for your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the all-time fuel economy leaders among gasoline vehicles. The database supporting the tool includes most cars and light trucks sold in the United States since 1984.

& SERVICES

Selling Your Car? Advertise Its Fuel Economy! u

OIADA NEW AND RENEWAL MEMBERS

Both the electronic graphic and the paper label show the EPA fuel economy estimate (city,

F U E L E C O N O M Y. G OV O F F E R S M P G L A B E Lhighway F OandRcombined) U Sand E CO D emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions 2

and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially those that change the vehicle’s weight, aerodynamics, or wheel/tire size.

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Fueleconomy.gov, the official U.S. government source for fuel economy information, has added a new tool to help you advertise your vehicle’s fuel economy to potential buyers. The free tool (http:// www.fueleconomy.gov/feg/UsedCarLabel.jsp) helps you create both an electronic fuel economy graphic that you can download for your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the all-time fuel economy leaders among gasoline vehicles. The database supporting the tool includes most cars and light trucks sold in the United States since 1984. Both the electronic graphic and the paper label show the EPA fuel economy estimate (city, highway and combined) and CO2 emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially those that change the vehicle’s weight, aerodynamics, or wheel/tire size. The graphic/label provides a photo of the vehicle and some important information about the vehicle’s configuration - such as engine size, transmission type, and fuel type - to help identify it. There’s also a Smartphone QR Code that links directly to the vehicle’s information, which allows the potential buyer to verify the information on the graphic or label and look up other data such as personalized annual fuel cost, greenhouse gas emissions, and petroleum use estimates based on their annual mileage, driving conditions, and fuel costs. They can also view gas mileage estimates from other drivers with the same vehicle year, model, and configuration.

TEMPORARY TAGS

ORDER

WEATHERPROOF

 

The following list includes members who joined or renewed their OIADA membership during August 2013. We express our sincere appreciation for all the members of OIADA and extend a sincere invitation to dealers who are not members. A membership application can be found elsewhere in this magazine. 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! R R R R N R R R R R R R R N R R R R R R R R

COMPANY

NAME

Glen Rabe Motors Glen Rabe Bob Moore Cadillac of Norman Mark P. Moore Brookside Motorcycle Co. Paul Rogers Len Roberts Enterprises, Inc. Len E. Roberts American Used Car Sales, LLC Dee Angle I-40 Auto Auction, Inc. Jeff Haley Enlow 66 Auction, Inc. Rodney D. Enlow Discount Auto Sales John Sharp L & A Wrecker Service Professional Towers, Inc. John Thomas Auto Sales, Inc. John Thomas Tompkins Motor Co., Inc. Joe Dale Tompkins #9 Auto Sales John Fletcher Blazer Motors I-35 Paul James, Jr. Lumpy’s Auto Sales W.G. Auto Collection William Edward Glover Car Nation Massoud Goli Ben’s Auto Sales Abi Golsorkhi CSTK Motors Mike Nelson O & R Morgan, Inc. Odell Morgan OIADA Rose Morgan Frazer Computing, Inc. Michael Frazer CarMax The Auto Superstore Tyler Kidd

FROM OIADA Prices as low as $0.60 cents per tag in Quantities of 2500 or more

Here’s what’s included in the price of the temporary tags:  Temporary tags that meet or exceed all state requirements.  Four drilled holes in each tag.  Enough double sided tape to anchor two corners of each tag.  An approved tag log that continues sequentially with each order.  One approved marker for each 500 or fewer tags ordered.

 

1993 2005 2009 1995 2013 1991 2007 1992 1991 2009 2000 2000 2010 2013 2005 2006 2009 2011 2000 2000 2004 2005

 

Ardmore Norman Tulsa Bethany Durant Del City Tulsa Broken Arrow Norman Cordell Pauls Valley Tecumseh Moore Oklahoma City Edmond Oklahoma City Warr Acres Oklahoma City Moore Moore Canton, NY Richmond, VA

  O&R Morgan, Inc.

CHECK WITH OIADA FOR YOUR BONDS DEALER BOND RATES Used Dealer Bond $15,000.00 Wholesale Dealer Bond $25,000.00 Used Car Auction Bond $25,000.00 Used Car Auction Bond $50,000.00 Used Car Salesman $ 1,000.00 Mobile Home Dealer $30,000.00 •   • • • •

THESE TEMPORARY TAGS CAN BE SHIPPED SAME DAY IF ORDERED BEFORE 2:00 PM

JOINED CITY

$105.00 $175.00 $250.00 $500.00 $ 50.00 $300.00

QUICK TURNAROUND SERVICE EASY ONE PAGE APPLICATION NO FINANCIAL STATEMENTS REQUIRED IN MOST CASES FOR USED DEALER BOND NO FINANCIAL STATEMENT REQUIRED FOR SALESMAN’S BOND CHECKS OR CREDIT CARDS ACCEPTED

  FOR INFORMATION ON THESE AND OTHER BONDS: CALL OIADA at 1-800-346-4232 FAX: 405-799-3367 EMAIL:rosemorgan@e-oiada.com

FOR PRICES AND TO ORDER, CALL 405-232-2947 OR 800-346-4232 EMAIL ROSEMORGAN@E-OIADA.COM OR FAX 1-877-861-0363   DEALERS’ OK_1113.indd 22

RESOURCE

NOVEMBER 2013

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OIADA ORDER FORM  

Mail: PO Box 6905, Moore OK 73153 Call: 405-232-2947 or 800-346-4232 Fax: 1-877-804-3449

Visit our website at: www.buyadr.com

 

 

Wolters Kluwer Financial Services/Bankers Systems, Inc.

Retail Installment Contracts & Security Agreements (RS – SI – MV – State Specific)

   

New Lower Pricing

Simple Interest Without Late Fee

Quantity* 50

Dealer Pricing Through ADR of Oklahoma $45.00

100

$87.00

$

200

$170.00

$

Larger quantity quotes available upon request

Quantity

Simple Interest Without Late Fee

Subtotal $

Total

Tax and Shipping Added Separately

$

23

Simple Interest With Late Fee

Quantity* 50

Dealer Pricing Through ADR of Oklahoma $45.00

100

$87.00

$

200

$170.00

$

Larger quantity quotes available upon request

 

Subtotal $

Total

Tax and Shipping Added Separately

SHIPPING INFORMATION

PAYMENT INFO

SHIP TO NAME

CREDIT CARD ACCOUNT NUMBER

ADDRESS

EXP. DATE

IS THIS A RESIDENTIAL ADDRESS? YES__ NO__

$

ORDER DATE

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SIGNATURE

w w w. e - o i a d a . c o m OK_1113.indd 23

Quantity

Simple Interest With Late Fee

NOVEMBER 2013

DEALERS’

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NOVEMBER 2013

DEALERS’

RESOURCE 10/19/13 1:44 PM


COMPLIANCE

OVERDRIVE

Dealer Lending Practices Remain in the Spotlight. u

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IT’S TIME TO TAKE ACTION

In the last Compliance Overdrive column I discussed how indirect lending practices had recently come into the regulators’ spotlight, citing the March Bulletin issued by the Consumer Financial Protection Bureau. In the months since, news headlines have continued to illustrate how dealer lending practices face heightened scrutiny by banks and other lenders as a result of pressure from regulators. Strong lender relationships are among a successful dealership’s most valuable assets. In an effort to maintain good relationships, dealers can benefit from a better understanding of the regulatory landscape within which its lenders are making day-to-day credit decisions. Lender rules and restrictions have an impact not only on approvals but also on how quickly a customer’s loan application goes from origination to completion. In July, Wolters Kluwer Financial Services conducted a survey to identify top regulatory issues facing the industry. The survey of over 400 banking professionals showed the number one issue keeping them up at night from a regulatory standpoint was fair lending and other compliance concerns. Forty-six percent of the bank and credit union executives who responded indicated they have an overall concern with regulatory reform in general. Specific concerns cited include regulatory pressures from the Dodd-Frank Act, the CFPB and the vast landscape of ongoing rules and requirements taking effect across the industry. More than a third of respondents cited evolving consumer lending regulations as a primary concern. Recent enforcement actions offer further evidence that Equal Credit Opportunity Act or other potential fair lending violations are at the forefront on most lenders’ list of concerns. In September, the U.S. Department of Justice announced that it had settled a lawsuit alleging ECOA violations by an auto dealer. The case provides some insight into where regulators and enforcement DEALERS’

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RESOURCE

agencies stand on enforcement of the ECOA. The suit involved an auto dealer and one of its lenders. The DOJ alleged that the dealer violated the ECOA by charging higher interest rate markups on car loans to a certain class of customers (race/national origin) than to others over a three year period. The case was settled and the dealer in question went out of business before the settlement was reached. But, in the consent decree the DOJ indicated if the dealer or its main shareholder decides to go back into business within a defined time period, it will be required to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA, and establish appropriate fair lending training for its employees and officers.” Note that the enforcement path went through the auto dealer’s lender. The lender’s regulator, the Federal Reserve Board, noted issues as part of its examination of the lender’s indirect lending program. The FRB then referred the case to the DOJ. In 2009, the DOJ announced that the lender resolved allegations against it through a partial consent decree under which it is “prohibited from discriminating on the basis of race or national origin in any aspect of its automobile lending.” Now, four years later, the DOJ reached a settlement with the dealer involved. Recent industry publications have also reported that the CFPB and DOJ are probing the lending operations of some of the nation’s largest auto finance companies for possible lending discrimination under the ECOA. If true, it confirms regulator focus on ECOA and on auto lenders. Because any discrimination found in a lender portfolio will likely have taken place at the auto dealership, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. The CFPB’s March Bulletin outlines concerns over dealer discretion in setting consumer interest rates by auto lenders. The principal concern is the increased risk of dealers either

NOVEMBER 2013

intentionally discriminating against certain groups through higher rate markups or unintentionally discriminating against certain groups by its rate markups practices. Both could be ECOA violations for which dealers are accountable and for which their lenders may also be liable. The CFPB bulletin suggests that auto lenders simply provide dealers a flat fee for contract assignment/sales or that they stop sharing rate markup revenue with dealers. A flat fee solution would probably take the form of a lender paying a flat dollar amount to the dealer for any retail sales contract it purchases, regardless of whether the rate had been marked up and regardless of the amount that it had been marked up. The flat fee would be more like a finder’s fee for the dealer rather than a participation in, or sharing of, any additional markup revenue. It’s interesting to note that the recent DOJ settlement with an auto dealer did not prohibit rate markups or suggest using flat fees. Instead, it required the dealer to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA.” The DOJ seems to still allow rate markups if they are subject to guidelines and controls. The CFPB bulletin also suggests that lenders engage in closer supervision or review of dealer ECOA compliance. In an August webinar cosponsored by the CFPB, the Federal Reserve Board and the U.S. Department of Justice, Patrice Ficklin, fair lending director for the CFPB, indicated that lenders may be liable for discrimination that takes place at a dealership whether or not they have knowledge of a particular offence and they are expected to analyze auto loans dealer by dealer as well as on an aggregated basis across the lender’s entire portfolio. The recent CFPB bulletin, DOJ lawsuit settlement and cosponsored webinar with multiple regulators are clear indications that ECOA compliance is a priority shared by a number of agencies with enforcement

authority over lenders and dealers. Again, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. So what should dealerships do in response to the ECOA focus? Prioritize and focus attention on your dealership’s ECOA compliance before your lender or regulator knocks on the door. Begin by taking at least the following steps: u Review your written ECOA policies and procedures to make sure they are consistent with ECOA requirements and that they are targeted to root out and prevent discrimination. Create written policies and procedures if you don’t already have them and regularly review and update them as needed. u Conduct regular ECOA training for your entire staff, officers and board. u Review your rate markup policies. Make sure that you have caps and/or other standards and controls in place to help reduce or eliminate the risk that rate markups are intentionally or unintentionally being applied to discriminate against certain groups based on race, color, national origin, age, gender, etc. u Review your employee compensation policies to make sure that they do not unintentionally fuel possible discriminatory behavior. u Review your credit records or otherwise conduct tests for any unexplained pricing disparities for different groups of credit applicants. You should also make sure that your ECOA compliance activities are recorded so that you have evidence of your efforts. As my colleague Ed Kramer, vice president of regulatory affairs for Wolters Kluwer Financial Services puts it, “You’ve got to demonstrate you are taking steps to stay compliant. If you don’t, it’s going to be really difficult to persuade regulators, or lenders, you are interested in being compliant.

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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OK 1113  

Oklahoma Nov 2013

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