Mid-Atlantic Dealer News - June 2023

The official magazine of the MIDATLANTIC INDEPENDENT AUTO DEALERS ASSOCIATION

PENNSYLVANIA • MARYLAND • DELAWARE

1501 North Front St., Harrisburg, PA 17102 (717) 238-9002 midatlanticautodealersunited.org

Noah Melamed - Chairman Ticket to Ride Auto, Lancaster, PA nmelamed@yourttr.com

Chris Smiley - Advisor Mountville Motor Sales, Columbia, PA rcsmiley@comcast.net

Bert Straub, President 1st Choice Auto LLC, Fairview, PA bertcstraub@gmail.com

Vacant, President - Elect

John DeFilippo - Treasurer DeFilippo Bros. Motorcars, Prospect Park, PA john.m.defilippo@gmail.com

Clint Weaver- Secretary America’s Auto Auction Harrisburg, Mechanicsburg, PA clint.weaver@americasautoauction.com

Tom Hodges, Vice-President Tom Hodges Auto Sales, Hollywood, MD tom@tomhodgesauto.com

Dan Limongelli, Vice-President Jo Dan Motors, Plains, PA jodanmotors@gmail.com

Michael Mansour, Vice-President Car Connection, Inc., New Castle, PA mike@carconnection1.com

Beth Melamed, Vice-President Ticket to Ride Auto, Lancaster, PA bmelamed@yourttr.com

Tom Brandis • tombrandis@netscape.net

Advantage Auto Sales & Credit, Quakertown, PA

Lisa Cohowicz • lisac@nepautoauction.com North East Pennsylvania A/A, Scranton, PA

Jeff Dreier • dreierauto@hotmail.com

Dreier Auto Sales, Shavertown, PA

April Hollobaugh • ajautosalestitusville@gmail.com A&J Auto Sales, Titusville, PA

Kevin Luring • k.luring@yahoo.com ADESA PA, York, PA

James Makia • james@exclusivemotorcarsmd.com Exclusive Motorcars, Randallstown, MD

Dan McNamee • dtlcars@aol.com

Daniel Thomas Auto Sales, Croydon, PA

Gregg Pachik • gregg.pachik@manheim.com

Manheim Philadelphia, Hatfield, PA

Kerri Rotunda • kerrir@corryade.com

Corry Auto Dealers Exchange, Corry, PA

George Smouse • gasmouse@zoominternet.net

Smouse Trucks & Vans, Mt. Pleasant, PA

Steve Worley • worleymotors@hotmail.com

Worley Motors, Enola, PA

WOULD

FEATURES

4 | CFPB Reports Major Data Breach

Politico reports the CFPB claimed one of its employees forwarded the personal information of more than a quarter-million consumers to a personal email account.

7 | Protect Your Customers’ Financial Stability with CPR Now!

Car Payment Reimbursement (CPR) provides unique automobile benefits to all valid drivers who have a financial obligation to pay, such as a lease or a loan. No credit or background checks or motor vehicle checks are required.

8 | Digital Marketing Strategies for Car Dealerships

Updating your digital marketing strategy is essential for attracting highquality leads to your dealership. With more and more people relying on their own online research to make decisions, having a comprehensive digital marketing plan is key to staying ahead of the competition.

10 | How to Keep Your Used Vehicle Profit Margins High Strap in because the rest of 2023 could be a bumpy ride for auto dealers. Several factors are converging to create a perfect storm of conditions that threaten used vehicle profit margins.

18 | Why Customers Pay Late, How to get On-Time Payments

“You want to remove as much friction as possibl. A gentle reminder and frictionless customer experience are the two things that eliminate procrastination.”

20 | Retail Market Good If Not Great, Cox Analyst Says

“I wouldn’t get carried away calling it a strong retail market in March by historical standards,” he says, because double-digit increases in fleet sales were a significant driver in the new-car segment. Supply was also a factor.

22 | Data Shows Importance of Online Merchandising

Cox Automotive provided data that shows today’s car shoppers are formulating most of their decisions before stepping foot in a dealership, making online merchandising more important than ever before.

Email heather@piada.org

Copyright 2023

BERT STRAUB, PRESIDENT MIDATLANTIC IADA MANAGER, 1ST CHOICE AUTO, LLC FAIRVIEW, PA

Listen up!

The automotive industry and independent car dealers are experiencing a surge in demand due to the pandemic. Personal vehicles are becoming increasingly popular, and independent dealerships offer competitive pricing and flexible financing options. However, with the rise of online car buying and the entry of big tech companies in the auto industry, independent dealerships must stay innovative and adaptable to remain competitive. Keep up the great work, and stay ahead of the curve! For these reasons, I urge you to attend the MAIADA conference in Atlantic City this year. The Executive Board has also made arrangements for any Board member to attend the NIADA Conference in Vegas this year, allowing us to have all the best vendors and breakout sessions for you. As always, we are here to protect you, the dealer, and bring value to your membership. Do not hesitate to reach out to us for all your needs.

MIDATLANTIC IADA CONVENTION RETURNS

EXECUTIVE DIRECTORS MESSAGE

CFPB reports major data breach

JOHN ODORISIO EXECUTIVE DIRECTOR MIDATLANTIC IADA

I am pleased to report that after many months of research and due diligence, we have selected a company that will be able to provide our membership with health care options tailored for small and medium size businesses. Please check our website (mariada.org ) for details.

June is the month when the FTC Compliance for properly handling customer online information begins. DON’T be unprepared. Visit our website for more information and to take the online class ensuring your dealership is in compliance.

Our annual convention will resume this year at Caesar’s Atlantic City, September 24 - 26. The itinerary and speakers will bring value to any dealer attending and we’ll also have some fun! Stay tuned for more details.

The Consumer Financial Protection Bureau is working through the fallout of a major data breach.

Politico reports the CFPB claimed one of its employees forwarded the personal information of more than a quarter-million consumers to a personal email account.

The employee was fired when the data breach came to light. It was reported the employee sent spreadsheets with names and transaction-specific account numbers related to those 256,000 consumer accounts at a single institution.

CFPB spokesperson Sam Gilford said in the Politico article, the bureau has referred the matter to the inspector general and is “taking appropriate action to address this incident.”

“The CFPB takes data privacy very seriously, and this unauthorized transfer of personal and confidential data is completely unacceptable,” Gilford said.

notifying them about the “major incident” that they sent on March 21.

The CFPB incident comes as the deadline for the implementation of the Federal Trade Commission’s Safeguards Rule nears.

The FTC Safeguards Rule deadline is June 9. It was extended from December in November.

According to the FTC, the Safeguards Rule requires non-banking financial institutions, such as mortgage brokers, motor vehicle dealers, and payday lenders, to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe.

Finally, thank you very much for your support and please feel free to provide me with feedback at john@piada.org

“All CFPB employees are trained in their obligations under bureau regulations and Federal law to safeguard confidential or personal information.”

Agency staff told lawmakers they had learned of the breach Feb. 14 in an email

The updated rules approved in October 2021 require financial institutions to designate an individual to oversee their security program, develop a written risk assessment, limit and monitor who can assess customer information, encrypt information, train security personnel, develop a response plan, assess security practices of service providers and implement multi-factor authentication for any individual accessing customer information.

Penalties can range up to $46,517 per violation. n

Two Issues that Independent Dealers Should be Proactively Following

By Erik A. Ross, Senior Associate, Milliron & Goodman

The Pennsylvania Independent Automobile Dealers Association (PIADA) is currently working on several proposals before the Pennsylvania General Assembly. To keep you apprised of our legislative activity, below is a summary of just two issues that we are proactively working on.

1

Modifying Management of Abandoned Vehicles at Auction

House Bill 103 (Schmitt-R) amends Title 75 (Vehicles), authorizing a wholesale vehicle auction, or salvor, to begin the process to remove vehicles that have been abandoned at the wholesale auction without the wholesale auction’s consent.

It would also authorize the wholesale auction to charge and collect storage fees, as well as the releasing or recovering costs of the abandoned vehicle.

• Status: House Judiciary, 3/7/2023

• PIADA Letter of Support Sent 3/13/2023.

Specifically, the proposed legislation requires the wholesale vehicle auction to file a report, outlined in existing law at § 7311.1 (a), with the local police department declaring that an unauthorized vehicle has been left unattended on private property for a period exceeding three business days. If the wholesale vehicle auction elects to file such a report, it may remove, sell, or legally obtain the ownership and title of a vehicle that is declared an abandoned vehicle by PennDOT. The following shall apply:

• A wholesale vehicle auction that intends to sell or legally obtain ownership of an abandoned vehicle

shall indicate that intention on the report filed.

• If the abandoned vehicle is unclaimed, the wholesale vehicle auction may submit an application for a certificate of title to PennDOT.

• If PennDOT determines that a new certificate of title should be issued, an abandoned branded title shall be issued to the wholesale vehicle auction.

• After the abandoned vehicle branded title is issued, the vehicle shall be offered for sale at auction by the wholesale vehicle auction. Notice shall be provided to prospective buyers that the title has been branded as a formerly abandoned vehicle.

The wholesale vehicle auction shall be reimbursed for all applicable costs related to the storage and processing of the vehicle from the proceeds of the sale of the vehicle. The remaining proceeds of the sale shall be paid to PennDOT and transmitted to the State Treasurer for deposit in the Motor License Fund.

In addition, if the wholesale vehicle auction does not intend to sell or legally obtain ownership of an abandoned vehicle, existing law at § 7311.1 (c) (Salvors) provides that an abandoned vehicle can be towed to a salvor’s property and the salvor may elect to file a report with the local police department.

We hope to get this legislation moving soon and will keep you apprised of any committee activity.

2 Requirements for Sale of Scrap Materials/Stopping Catalytic Converter Robberies

House Bill 791 (Isaacson-D) amends the Scrap Material Theft Prevention Act to require a scrap metal buyer of used catalytic converters to maintain records of purchases. This includes proof of ownership, documentation of potential identifying marks, VIN of the vehicle from which the part is removed, the sellers home address and driver license number, license plate of the vehicle which brought in the part, and photo of the seller of the part.

In addition, it requires scrap metal buyers to retain the item for 10 days before recycling or scrapping it so law enforcement could retrieve the item if it is deemed stolen.

• Status: House Consumer Protection, Technology and Utilities, 4/3/2023

• PIADA Letter of Support Sent 4/14/2023.

The theft of catalytic converters has reached epidemic proportions in both Pennsylvania and across the country, with incidents of catalytic converter theft doubling in Pennsylvania in recent years. For example, a January 2023 TribuneReview article, Surveillance work leads police to Western Pa. catalytic converter theft suspects, noted: “The catalytic converter thieves hit in early December at Jim Shorkey auto dealerships in North Huntingdon and North Union, Fayette County, police said. There was a total of 35 catalytic converters taken from Mitsubishi Outlanders at both locations — two were left behind on the ground — causing $124,000 in damage.”

“Around the same time, Moon police were investigating the thefts of $20,000 worth of catalytic converters from tow trucks.”

Thefts have continued to increase along with the value of precious metals within the catalytic converters. Catalytic converters have valuable metals inside them and only take a matter of minutes to steal, especially for experienced thieves. These parts can then be sold at scrap yards for around $50 to $200, although most end up being shipped overseas.

The theft of catalytic converters has severe financial repercussions on small automobile dealers. Once a catalytic converter is stolen from an automobile dealer, they are then responsible for covering the large insurance deductible (average $2,500) associated with their policy. Replacing a stolen catalytic converter can cost anywhere from $1,000 to $2,500, accounting for both the part itself and the labor to install it. Many small automobile dealers across the state simply cannot afford multiple catalytic converters being stolen off their lot.

Several states, including Texas, Arkansas, and South Carolina, enacted new legislation last year to deter theft.

We understand that the House Consumer Protection, Technology, and Utilities Committee is interested in considering this legislation at an upcoming meeting.

While House and Senate leaders have said they are in no hurry to pass a state budget. The Constitutional deadline to pass a balanced budget is June 30, 2023, and they are more concerned with enacting a “good” budget for the people of Pennsylvania, than merely getting one done on time.

However, with the June 30th deadline looming before summer recess, that usually provides a pinch point to get other legislation done so we will be working hard to try and get some of PIADA’s priorities through one chamber or another by that deadline.

We will keep you apprised of future developments through updates and this space. n

Why Your Dealership Needs CPR for Cars™

By Thomas F. Lovetere, CEO & President, Drivers Connection, Inc. Founder of the CPR Program | dealerships.cprforcars.com

CPR for Cars™ is a membership-based program that offers a unique Car Payment Reimbursement (CPR) service to protect the consumer of whom have a financial obligation to pay such as a loan or a leased vehicle from unexpected events that might render their vehicle unusable. Our program reimburses members for their monthly payments when they can’t use their vehicles due to a covered event. CPR for Cars™ provides a wide range of benefits that can offer peace of mind to our members and help dealerships build customer loyalty and increase sales.

One of the most unique features of the CPR for Cars™ Program is the Loss of Use Reimbursement benefit. This benefit provides members up to $7,500 in reimbursement for their monthly payments during the membership contract period, with up to three requests for reimbursement covering three consecutive months. CPR for Cars™ Members receive 50% of their car payments based on 7 to 15 days of loss of use, 100% of their car payments based on 16 to 30 days of loss of use, 200% of their car payments based on 31 to 60 days of loss of use, and 300% of their car payments based on 61 days or more of loss of use. This benefit provides CPR for Cars™ Members with financial protection during unexpected events that might cause them to be without their vehicle for an extended period. Car payments are due and payable regardless of the disposition of one’s car.

The CPR for Cars™ Program also includes a First Year Membership Bonus Repair Coverage benefit, which provides members with up to a $500 reimbursement for outof-pocket repair expenses when their covered vehicle is involved in a collision, and the repairs are performed by the dealership, and for immediate expenses derived from the covered event. Additionally, the First Year Membership Bonus Loss Coverage benefit offers members a one-time vehicle replacement reimbursement up to a $1,000 towards a vehicle of equal or greater value, purchased from the dealership, if their covered vehicle is declared a total loss.

The CPR for Cars™ Program covers a variety of events, including accidents (regardless of fault), vandalism, stolen vehicles, totaled vehicles, recalls, and mechanical breakdowns. The CPR for Cars™ Program covers most passenger cars, SUVs, and light trucks (class 1-3), including electric vehicles, from $5,000 to $125,000 in value. The CPR for Cars™ program is an excellent option for those who want to protect themselves from the unexpected financial impact of events that might render their vehicle unusable. With the program’s comprehensive coverage and generous reimbursement benefits, our members can have peace of mind and avoid falling behind on payments or risking vehicle repossession. Members have the option to add additional vehicles, and all members receive dedicated assistance from a CPR for Cars™ Account Rep and the added peace of mind that their repair is being monitored by a TPA.

Dealerships that offer the CPR for Cars™ program benefit from a profitable revenue stream that can increase sales and build customer loyalty by providing added value to both their new and previous customers. There are no costs to become a reseller, and no inventory space is required. The CPR for Cars™ Program is an excellent opportunity for consumers and dealerships alike. Visit us at dealerships.cprforcars.com to become a reseller today! n

Digital Marketing Strategies for Car Dealerships

By Sean Toussi, Glo3D.com

Gone are the days when selling cars was a straightforward affair. Nowadays, customers are taking a more proactive role in the car-buying process. They are no longer content to sit back and let the sales team do all the talking. Instead, they are actively seeking out information and making their own decisions. This means that traditional advertising methods are no longer as effective as they once were in generating a steady flow of customers.

Updating your digital marketing strategy is essential for attracting high-quality leads to your dealership. With more and more people relying on their own online research to make decisions, having a comprehensive digital marketing plan is key to staying ahead of the competition.

Importance of online marketing in auto dealerships

The automotive industry is one of six industries where online research is consistently carried out prior to offline purchases, with potential car buyers taking to the internet to guide their decisions. This trend towards web-based interactions has had a significant impact on all industries, particularly on the automotive industry, where reviews are often consulted.

By leveraging online automotive marketing, you can ensure that shoppers in your area are aware of your dealership and the cars you have for sale. This will help you stand out from the competition and be chosen by those looking for new or used vehicles. Research shows that only 8% of used car buyers make decisions based solely on what they hear from salespeople at the dealership, while the other 92% are heavily influenced by the information they find online.

In light of the fact that the majority of car buyers are beginning their search online, automotive marketers must shift their strategies to the web. This is not just an extra chore, but rather a chance to display

your products and reach out to leads that may have otherwise been missed. Digital marketing offers a variety of special opportunities to do this as follows:

Video Marketing

The automotive industry is heavily reliant on video content. People need to visualize themselves in a new vehicle and want to view the car before they purchase it, so providing them with videos of the vehicle can give them an idea of what it looks and feels like. Whether you post the videos on your website, social media, or YouTube, they can be a powerful tool in convincing customers to buy a car without ever having to leave their homes. The evidence that video can be a powerful tool for motivating customers to act is clear. Google’s research found that 40% of people who watched a video about cars or trucks eventually visited a dealership. This means that your video can do a lot of the hard work for you, and your sales team just needs to give the final nudge to get people to complete the purchase.

The most successful online videos for car dealerships usually demonstrate the main characteristics of the vehicle. These videos may include test drives, demonstrations of accessories, and even 360-degree virtual tours that give viewers a complete experience of being in the car.

Online reviews

Regarding the lack of trust in customerdealership relationships, it is important to take advantage of online reputation management to attract more customers. This includes responding to online reviews, both positive and negative, as well as actively working to increase the number of positive reviews. Auto marketers should pay attention to the feedback on dealership review sites, such as CARFAX, in addition to the more general review sites like Google and Facebook. These platforms are frequented by serious car buyers, who are more likely to select your dealership if your customers have good things to say. While online reviews may not have the same impact as personal recommendations, they can reach a much larger audience and can influence a new lead to visit your website or dealership.

Online Presence

Creating a website tailored to the needs of consumers is key to gaining their interest. It should be fast-loading and user-friendly for all users, regardless of whether they are accessing it from a smartphone, tablet, or computer.

To have your website at the top of search inquiries, you need to consider search engine optimization (SEO). Incorporating keywords into your website and blog content can help you rank higher for relevant terms and provide car shoppers with the information they need. Think about the features they might be looking for, which vary depending on your target audience. More importantly, when creating an SEO plan that is centered around the user, local SEO should be taken into consideration. Because people who are looking to buy a car often prefer to shop for dealerships in their area. Having a comprehensive Google My Business listing can be very beneficial in this regard.

Strap in because the rest of 2023 could be a bumpy ride for auto dealers. Several factors are converging to create a perfect storm of conditions that threaten used vehicle profit margins, including rising interest rates, waning consumer confidence, a potential recession, falling retail prices and a tight supply of three- to four-year-old vehicles due to fewer leased vehicles hitting the markets.

However, there is some good news. Unemployment remains low and new vehicle prices remain high, which means that plenty of car shoppers will qualify for financing and will opt for used vehicles. Demand should remain stable throughout the year.

Regardless of market conditions, 75 percent of auto dealers are placing a greater emphasis on their used-vehicle

How to Keep Your Used Vehicle Profit Margins High

By Josh DeYoung, Vice President of Sales, Velocity Automotive

business this year, according to an Automotive News survey conducted in January 2023. Top strategies are accepting less gross profit per used vehicle sold and reducing retail prices and profit targets.

While a decline in used-vehicle gross profit might be expected, it’s not inevitable for all dealers. Focusing on the following strategies can help to keep your profit margins higher than the market average.

SMART ACQUISITION STRATEGY

Being smart about how much you pay for inventory is essential. Pay too much, and the potential for profit sinks; offer too little, and you send the trade somewhere else. Most dealers rely on inventory management software as a guide for how much to pay for used vehicles. However, this

software alone does not tell the whole story. Market prices are aggregate and do not include every detail about what makes one piece of inventory more valuable than another. With so much technology today, sometimes it isn’t easy to properly value one car from the next.

Working out the true value of a vehicle requires the use of the original factory window sticker data. Which features and packages are included on a particular vehicle? Does it have upgraded technology? Managers have long used this data to assess vehicle value, but historically this data has been challenging to obtain or access, especially at an auction.

Fortunately, it is now possible to access window sticker data from your inventory management software app on your smartphone. This eliminates the need to log in to another system, download PDFs from the internet or call staff from remote locations. So, managers can easily access window stickers to calculate offers rapidly and confidently so that you can obtain more vehicles at the right price, setting you up to make a healthy margin.

IMPROVE RECONDITIONING

According to J.D. Power, the average number of days it takes for used vehicles to sell at franchise dealerships is 42 days. Some factors affecting this time lag, such as transit times, are largely out of the dealer’s control.

The recon process has a huge impact on how long a vehicle is at the dealership, and this process is firmly within the dealer’s control. Many dealers don’t track recon as closely, or their methods are outdated and inaccurate. I recently worked with a dealership that took up to 21 days to get their vehicles fully retail ready. This causes great cost and loss. Ideally, once a vehicle is received at the dealership, the recon process should take no longer than five to seven days.

Digitizing the process and integrating recon information with your CRM is an effective fix for this problem because you can’t fix what you can’t measure, and you can’t measure what you can’t see. Visibility from within the existing systems that your staff uses makes it easier for managers to hold service staff accountable for deadlines.

Additionally, the CRM is where salespeople, BDC agents and sales managers live for a good part of their day. Providing insight into the recon process from within the CRM allows your sales team to see which vehicles have been received and where they are in the recon process. Keeping salespeople in the recon loop further helps accelerate the sales process because they can estimate when a vehicle will be ready for retail and set appointments with interested customers.

MERCHANDISE WITH TRANSPARENCY

Consumers want to complete more of the car-buying process at home, which means they want more information upfront to help make a decision. According to the Capital One 2023 Car Buying Outlook survey, only 21 percent of consumers believe the car buying process is very or fully transparent, versus 68 percent of dealership principals and employees. Dealers need to close this gap. And you do this through transparency and making the information consumers require easily available to make a buying decision.

The more data you provide, the more car shoppers will trust you, and the more sales you will make. If they have to surf the internet to find information about your car, they will soon land on your competitor’s website. You must captivate and engage today’s shoppers – or – risk losing the deal. You don’t have to reveal how much you paid for a vehicle, but being transparent about dealer add-ons, interest rates and other fees helps alleviate typical customer obstacles to buying.

Additionally, try automating touchpoints with consumers. For example, what is the automated lead response when you receive a lead? Instead of telling a car shopper they have to wait and talk to a salesperson, set up an automated response to include a complete digital portfolio of their vehicle of interest; this includes window sticker data, service recon records, CarFax, Google reviews of your dealership, links to value proposition videos, and other information that a car shopper can’t get from the vehicle display page (VDP). Open rates on these automated emails are as high as 70 percent.

Another automation that increases customer engagement is price change alerts. When a customer record is associated with a vehicle of interest, and there are price changes on that vehicle, an email is automatically sent to the customer, alerting them of a price change. Salespeople have too much going on to remember to do these little things, and automation is a great way to keep customers engaged.

While most dealers are prepared to accept less gross profit per used vehicle sold, it doesn’t mean that your dealership has to. Fight to keep every dollar of gross, using technology to streamline your acquisition, recon and merchandising strategies. n

Josh DeYoung currently serves as vice president of sales at Velocity Automotive. Josh deeply understands industry trends, dealer operations, customer preferences and competitor activity. He is results-driven with a proven track record in leading high-performing sales teams.

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The CARLAWYER©

By Eric Johnson, Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®

Here’s our monthly article on selected legal developments we think might interest the auto sales, finance, and leasing world. This month, the developments involve the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Federal Trade Commission, the Federal Reserve Board, Federal Deposit Insurance Corporation, and the National Credit Union Administration. As usual, our article features the “Case(s) of the Month” and our “Compliance Tip.” Note that this column does not offer legal advice. Always check with your lawyer to learn how what we report might apply to you or if you have questions.

FEDERAL DEVELOPMENTS

On March 30, the Office of the Comptroller of the Currency announced the establishment of its Office of Financial Technology to, among other things, enhance the OCC’s knowledge of technological changes in the banking industry, including fintech platforms, bankfintech partnerships, and digital assets.

On March 31, the Consumer Financial Protection Bureau issued its Consumer Response Annual Report highlighting the consumer complaints it received in 2022. The report analyzes complaint data across multiple consumer financial products and services, multi-year complaint trends, and how companies responded to consumer complaints.

On April 3, the Consumer Financial Protection Bureau issued a policy

statement detailing the Consumer Financial Protection Act’s prohibition on abusive acts or practices in consumer financial markets and summarizing past enforcement of the prohibition. The policy statement notes that, under the CFPA, there are two abusiveness prohibitions. An abusive act or practice: (1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (2) takes unreasonable advantage of: (a) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service, (b) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service, or (c) the reasonable reliance by the consumer on a covered person to act in the interest of the consumer. In its press release, the Bureau notes that “the policy statement will assist consumer financial protection enforcers in identifying wrongdoing, and will help firms avoid committing abusive acts or practices.” The Bureau also notes that “[p]olicy statements provide background information about the laws the CFPB administers and articulate how the CFPB will exercise its authorities, but they do not impose new legal requirements.” The public will have until July 3, 2023, to submit comments on the policy statement.

On April 25, officials from the Federal Trade Commission, Consumer Financial Protection Bureau, Department of Justice, and Equal Employment Opportunity Commission issued a joint statement addressing the agencies’ enforcement efforts related to the increased use of automated systems and artificial intelligence (“AI”). The joint statement explains that, as the use of automated systems and AI becomes increasingly common in a range of applications, including in financial services, these tools have the potential to perpetuate bias, discrimination, and other harmful outcomes. The agencies emphasize that

they will use their enforcement authorities to protect civil rights, fair competition, consumers, and equal opportunity. The agencies have previously expressed concern about the use of automated systems and AI. For example, the CFPB published a circular commenting on the use of technology to make credit decisions, noting that the fact that the technology used to make a credit decision is too complex, opaque, or new is not a defense to violation of federal law. Similarly, the FTC issued a report evaluating the use and impact of AI. Both the DOJ and the EEOC have also worked on and continue to work on issues related to automated systems and AI. In the joint statement, the agencies highlight that automated systems and AI “have the potential to produce outcomes that result in unlawful discrimination.” The agencies note that discrimination can arise from the following sources:

(1) Data or datasets. This source of potential discrimination comes from data or datasets that can be skewed by unrepresentative datasets, datasets that incorporate historical bias, and datasets that contain other errors;

(2) Model opacity and access. When automated systems become “black boxes” and do not work in a transparent and clear way, it becomes harder for users, businesses, and developers to know whether the systems are fair; and

(3) Design and use. This source of potential discrimination comes from a developer’s failure to understand the context in which automated systems and AI will be implemented. Developers may be designing a system on the basis of flawed assumptions about its users, relevant context, or the underlying practices or procedures it may replace.

On April 26, the Consumer Financial Protection Bureau, Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and state bank and state credit union regulators issued a joint statement to remind

supervised institutions that the use of U.S. dollar LIBOR panels will end on June 30, 2023. The agencies also reiterated their expectations that financial institutions with USD LIBOR exposure should complete their transition of remaining LIBOR contracts as soon as practicable. The agencies stated that failure to adequately prepare for LIBOR’s discontinuance could undermine financial stability and institutions’ safety and soundness and create litigation, operational, and consumer protection risks. Two days after the issuance of the joint statement, the Consumer Financial Protection Bureau issued an interim final rule, effective May 15, 2023, which amends Regulation Z to reflect the enactment of the Adjustable Interest Rate (LIBOR) Act and its implementing regulation promulgated by the Federal Reserve Board. The interim final rule is intended to facilitate the transition of consumer loans that currently use the LIBOR index to other replacement indices. Comments on the interim final rule are due within 30 days after the date of publication in the Federal Register.

On April 26, the Consumer Financial Protection Bureau’s Office of Research issued a blog post and working paper on the incidence of civil judgments and implications for consumers, including wage garnishment and asset seizures.

CASE(S) OF THE MONTH

Applying Down Payment to Negative Equity on Trade-in Rather than to Price of Vehicle Aligned with RISC’s Language and Did Not Violate TILA:

An individual bought a used BMW from a BMW dealership. In connection with the purchase transaction, the buyer traded in her Jeep on which she owed $4,775 more than the Jeep’s value. The dealership applied the buyer’s $2,000 down payment to the negative equity on the trade-in and rolled the remaining $2,775 in negative equity into the new financing. The buyer sued the dealership and the assignee of her retail installment sale contract for violating, among other laws, the Truth in Lending Act, the Fair Debt Collection Practices Act, and the Ohio Consumer Sales Practices Act. The dealership moved to dismiss the complaint, and the U.S. District Court

for the Northern District of Ohio granted the motion. The buyer argued that the dealership violated TILA by improperly crediting her down payment to the negative equity on her trade-in rather than to the purchase price of the BMW. The court found that the RISC clearly provided that her down payment was applied to reduce the negative equity on the Jeep. Moreover, the court found that even if there was a TILA violation, the one-year statute of limitations ran on the buyer’s claim five months before she brought this action. Therefore, the TILA claim failed. The buyer also argued that the dealership violated the FDCPA. The court found that because the FDCPA governs the conduct of debt collectors and there were no allegations that the dealership participated in the collection of the buyer’s debt, the FDCPA claim also failed. Finally, the buyer alleged that she was entitled to rescind the transaction under the OCSPA. Because the court dismissed the federal claims, it declined to exercise jurisdiction over the state law claim. See Barnes v. Santander Consumer USA, Inc., 2023 U.S. Dist. LEXIS 47903 (N.D. Ohio March 21, 2023).

COMPLIANCE TIP

How do you handle negative equity on your deals? Although our Case of the Month was favorable to the dealer, it highlights the importance of properly handling negative equity in the transaction. In this case, the court found that dealer’s Retail Installment Sales Contract clearly provided that down payment was applied to reduce the negative equity. However, the Truth in Lending Act and Regulation Z provide two acceptable methods for disclosing negative equity on the RISC – known as the “netting” or “nonnetting” methods. You’ll want to make sure you’re doing it right like this dealer. Time to call or text your knowledgeable compliance lawyer! n

Eric (ejohnson@hudco.com) is a Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®, a monthly legal newsletter for auto dealers and a contributing author to the F&I Legal Desk Book. For information, visit counselorlibrary.com. ©CounselorLibrary.com 2023, all rights reserved. Single publication rights only to the Association. HC# 4858-2456-5854.

AUCTION DIRECTORY

PENNSYLVANIA

ADESA MERCER

758 Franklin Road, Mercer, PA 16137 724.662.4500 / Fax: 724.662.8716

Friday 9:00 AM

Office M-W: 9-4:00; TH: 9-5:00; F: 8-5:00 adesa.com

ADESA PA

I-83 Ex. 28 (Old Ex. 12), 30 Industrial Rd. York, PA 17406

717.266.6611 / Fax: 717.266.7650

Wednesdays 9:00 AM; INOPS 8:30 AM

Specialty Sale every 4th Wed 8:30 AM adesa.com

ADESA PITTSBURGH

378 Hunker Waltz Mill Rd. New Stanton, PA 15672

724.925.4700 / Fax: 724.925.4701

Tuesday 9:00 AM pittautoauction.com

AMERICA'S AA - HARRISBURG

1100 S. York St., Mechanicsburg, PA 17055 717.697.2222 / Fax: 717.697.2234

Thursday 8:45 AM harrisburgautoauction.com

AMERICA’S AA - LANCASTER

1040 Commercial Ave., P.O. Box 406 East Petersburg, PA 17520 717.569.5220 / Fax: 717.569.3109

Wednesday 9:00 AM; INOPS 8:30 AM americasautoauction.com

AMERICA’S AA - PITTSBURGH

55 E. Buffalo Church Rd. Washington, PA 15301 724.225.1777 / Fax: 724.225.7223

Thursday 12:30 PM americasautoauction.com

America’s AA – Erie

P.O. Box 317, 12141 Route 6 West Corry, PA 16407 814.664.7721 / Fax: 814.664.7724

Thursday 10:00 AM

3 Lanes Dealer Consign, Fleet/Lease americaserie.com

BLAISE ALEXANDER AUCTION

350 Fairfield Rd., Montoursville, PA 570.435.8391

Mondays: 10:45am blaisealexanderauction.com

BLOOMSBURG AUTO AUCTION

25 Ridge Road, Bloomsburg, PA 17815 570.784.2306

Wednesday 10:00 AM bloomaa.com

CAPITAL AUTO AUCTION

5135 Bleigh Ave., Philadelphia, PA 19136 215.332.2515

Monday thru Friday 9:00 AM - 4:30 PM capitalautoauction.com

CENTRAL PENNSYLVANIA AA

Exit 178 of I-80, Lock Haven, PA 17745 800.248.8026 / Fax: 570.726.7841

Thursday 9:45 AM

Office: MTF 8-5:30 W-Th 8-6:00 cpaautoauction.com

GARDEN SPOT AUTO AUCTION

Robert Rd. & Apple St., Ephrata, PA 17522 717.738.7900 / Fax: 717.738.7930

Tuesday 10:00 AM gardenspotautoauction.com

GREATER ERIE AUTO AUCTION

7700 Avonia Road, (Exit 16 of I-90 & PA Route 98) Fairview, PA 16415-0916 814.474.3900 / 877.474.GEAA

Fax: 814.474.4969

Tuesday 1:45 PM greater-erie.com

LEHIGH VALLEY AUTO AUCTION

3880 Lehigh St., Whitehall, PA 18052

610.435.5554 / Fax: 610.435.5557

Wednesday 5:00 PM lehighvalleyautoauction.com

MANHEIM KEYSTONE

488 Firehouse Road, Grantville PA 17028 717.469.7900 / Fax: 717.469.2842

Every Monday 11:00 AM manheim.com

MANHEIM PENNSYLVANIA

1190 Lancaster Rd., Manheim, PA 17545 717.665.3571 / Fax: 717.665.9265

Exotic Highline Sales every other

Thursday - 9:00 AM

Every Friday Sale 8:30 AM manheim.com

MANHEIM PHILADELPHIA

2280 Bethlehem Pike, Hatfield, PA 19440 215.822.1935 / Fax: 215.822.8140

Tuesday 9:30 AM

TRA Sale - Tuesday 12:30 PM Office: M-Th 8:30-5:00; F 8:30-1:00 manheim.com

MANHEIM PITTSBURGH AA

21095 Route 19, Cranberry Twp., PA 16066 724.452.5555 / Fax: 724.452.1310

Wednesday 9:00 AM manheim.com

NORTH EAST PENNSYLVANIA AA

860 N. Keyser Ave., Scranton, PA 18504

570.207.CARS / Fax: 570.207.1860

Tuesday 10:00 AM

nepautoauction.com

PERRYOPOLIS AUTO AUCTION

Route 51 S. Perryopolis, PA 15473 800.735.5288/ Fax: 724.736.0466

Friday 9:45 AM

perryautoauction.com

MARYLAND

BSC AMERICA/BEL AIR AUTO AUCTION

4805 Philadelphia Rd., Belcamp, MD 21017 410.879.7950 / Fax: 410.893.1515

Thursday 8:30 AM at Clayton Station

Thursday 8:00 AM at Bel Air in Belcamp bscamerica.com

MANHEIM BALTIMORE-WASHINGTON 7120 Dorsey Run Rd., Elkridge, MD 21075 410.796.8899 / Fax: 410.799.0512

Tuesday Sale, 9:30 AM

Tuesday Frontline Sale, 9:00 AM

TRA/Salvage, 1:00 PM manheim.com

NEW YORK STATE LINE AUTO AUCTION 830 Talmadge Hill Rd. S., Waverly, NY 14892 607.565.8151 / Fax: 607.565.3915

Ally Financial Open Sale –EVERY FRIDAY, 9:20 AM

GM Financial Open Bi-weekly. Simulcast in all lanes. statelineauto.com

WEST VIRGINIA

MOUNTAIN STATE AUTO AUCTION

Route 2, Box 835, Shinnston, WV 26431 304.592.5300 / Fax: 304.592.3510

Monday 10:30 AM; Office: 9:00-5:00 mtstateaa.com

PUBLIC AUCTIONS

CAPITAL AUTO AUCTION

5135 Bleigh Ave., Philadelphia, PA 19136 215.332.2515 / Fax: 215.332.2534

capitalautoauction.com

CAPITAL AUTO AUCTION

5001 Beech Rd, Temple Hills, MD 20748 301.316.4980 / Fax: 301.316.4982

capitalautoauction.com

Carriage Trade Public Auto Auction 1200 W Ridge Pike, Conshohocken, PA 19428 800.441.6717 / Fax: 610.834.8274

Monday Sale Day 3:00 PM

carriagetrade.com

WHY WAIT?

You can get DEALER TITLES processed ON THE SPOT or within 24 hours!

You can get SALVAGE TITLES processed ON THE SPOT or within 24 hours!

You can get your RETAIL PAPERWORK processed ON THE SPOT or within 24-48 hours!

At our offices! M-F: 9am-2pm 1501 North Front Street Harrisburg, PA 717-238-9002

YOUR MEMBERSHIP PAYS FOR ITSELF!

More specifically, the benefits of the MidAtlantic IADA membership include many helpful services, products, educational courses, national representation and much more!

REMINDER

2023

Dealer Discount Book

As a MidAtlantic IADA member, you will receive the 2023 Dealer Discount Book valued at over $20,000 worth of coupons with your membership.

Use your coupons at two or three participating auctions per year or sell service contracts for the participating warranty companies. You will more than get back your annual dues to MidAtlantic IADA.

Why customers pay late, how to get on-time payments

Late payments from customers impact many facets of a business, restricting cash flow, taking up resources and costing other opportunities.

In the auto industry, especially for buyhere, pay-here dealerships, finding options to get more consumers to pay on time is critical.

During a recent webinar held by the National Independent Automobile Dealers Association, Bruce Gaskill, Senior Director of Integration Partnerships at PayNearMe presented research on why customers pay late and some solutions to increasing ontime payments.

“A late payment, even a couple days late, can, for a smaller business, impact payroll and daily operating expenses,” Gaskill said.

“Anything you can do to keep your best customers on time has many pluses.”

PayNearMe polled 2,600 consumers, asking 30 questions about paying bills. The survey hit across different demographics to provide a representation of the U.S. population. Of the respondents, 51 percent said they were late on at least one recurring payment with a 12-month period. Thirty-one percent said they were late on up to three payments in that span and 18 percent were late on four to 10 bills.

“It’s not specific to non-prime lenders,” Gaskill said. Among individuals 60 and older, 92 percent had three or fewer late payments. In contrast, those 44 and younger were four times more likely to pay late.

According to the research, a lack of funds drives consumers to pay late, but it isn’t the primary reason for missing payments. For those 45 to 60, procrastination caused 33 percent to pay late. In those 30 to 44, approximately 30 percent reported overlooking physical mail and emails.

Of respondents under 30, 11 percent were late on every payment and 30 percent late every other month.

The younger generations were also not likely to use traditional banking methods,

30 percent using digital banks for primary accounts. Business Insider reported more than 50 percent of these age groups using digital wallets and more than 75 percent using digital payment apps.

Looking at 140,000 transactions totaling $42 million at 40 BHPH dealerships, 79 percent of payment transactions were completed with debit cards, 13 percent with cash, 7 percent with digital wallets and 4.3 percent with cash apps.

Gaskill suggests accepting as many forms of payment as possible.

“You should be accepting digital wallet currency. They do have money they can pay you, but that money is trapped in these types you are unable to accept,” Gaskill

The research shows younger people are more apt to set up autopay. Another suggested solution to getting an increase in on-time payments is using smart links in texts. The links take the customer to a portal where a card is saved and allows them to make a payment in less than a

“There’s a 90 percent reduction in inbound calls and more on-time payments,” Gaskill said.

“You want to remove as much friction as possible. A````` gentle reminder and frictionless customer experience are the two things that eliminate procrastination.” n

“The younger generation scores themselves lower on average when it comes to paying their bills on time,” Gaskill said.

Retail Market Good If Not Great, Cox Analyst Says

By Alysha Webb

After months of used-vehicle sales growth outpacing new-vehicle sales, that trend began to moderate in March, Cox Automotive analysts say.

“The retail vehicle market is showing clear changes in momentum in March,” Jonathan Smoke, Cox Automotive’s chief economist, says on a call discussing first-quarter economic and auto industry trends.

Total March new-vehicle sales were up 9% compared with March 2022, according to Cox. Smoke cautions against over-optimism, however. March used vehicle sales are estimated to have fallen 6% year-on-year.

After ending 2022 with the sharpest decline in a single year, wholesale used-vehicle prices have regained some support, rising 1.5% in March compared to February though still down 2.4% from March 2022.

Though 2023 may see some negative monthly movement in wholesale pricing, Cox Automotive doesn’t expect a full-year decline, says Chris Frey, senior manager of economic and industry insights.

Supply remains down, and wholesale prices “should remain elevated for at least the foreseeable future.”

USED BEV DEALERSHIP SALES UP SHARPLY

New battery-electric-vehicle sales have been on the rise. Cox forecasts sales of new BEVs in the U.S. will top 1 million units for the first time in 2023.

Based on data from Cox’s vAuto subsidiary, the used retail days’ supply at the end of March was 40 days, down four days from the end of February and 15% lower than the end of March 2022.

Meanwhile, new days’ supply at end-March was 56, down one day compared to end-February but up 58% compared to end-March 2022. An increased number of lower-priced new-vehicle options helped boost sales, Smoke says. Facing a microchip shortage, manufacturers prioritized higher-margin luxury vehicles over more affordable models, driving many consumers to the used market. But the microchip shortage has largely abated, and the product mix has responded accordingly.

Now, “Consumers are seeing a better mix of vehicles; areas that were not produced in the past are now in the market,” he says.

Credit conditions also began to favor new-vehicle purchases over used in March, says Smoke. Auto loans became easier to obtain in March than in February, though still 5.5% more difficult to obtain than in March 2022.

“The pool of buyers that were forced into the used market is going back to new,” says Smoke. “The traditional used-car market buyers are left, and they are the most challenged in terms of credit conditions and affordability.”

As the volume of new BEV sales grows, so does the supply of used BEVs. Retail used BEV sales through dealerships rose 32% in the first quarter compared to the same quarter in 2022, according to Cox data.

That is an “important milestone,” Smoke says. “We expect greater sales of used EVs in the marketplace as the new-EV trade cycle increases.”

The number of wholesale BEVs processed at Manheim locations in the U.S. rose 40% in the first quarter compared to the same period in 2022 to nearly 9,800 units. In the first quarter, the wholesale value of used BEVs increased 3.7% year-on-year.

The number of Instant Cash Offers via Kelley Blue Book in the first quarter rose 144% to nearly 12,000. An Instant Cash Offer, made online through the KBB website, is a fixed offer for a used vehicle based on KBB Values which can be applied towards the next car purchase or used to sell the vehicle to a participating dealer. As the sheer volume of new BEVs sold increases, so does the volume of used BEV Instant Cash Offers, says Smoke. “It provides insight for what is a very hot segment in the vehicle market,” he says.

A growth rate of more than 4% in the overall market is unlikely in 2023, given supply constraints and the lack of used inventory, he says. “The biggest potential for growth in 2023 and moving forward is electric vehicles.” n

“I wouldn’t get carried away calling it a strong retail market in March by historical standards,” he says, because double-digit increases in fleet sales were a significant driver in the new-car segment. Supply was also a factor.

Data Shows Importance of Online Merchandising

Cox Automotive provided data that shows today’s car shoppers are formulating most of their decisions before stepping foot in a dealership, making online merchandising more important than ever before. With these dynamics limiting dealers’ ability to influence decisions in person, they’ll need to reexamine their merchandising strategies to capture more shoppers further upstream.

“The fact is that consumers aren’t visiting as many dealerships as they did even a few years ago, so merchandising is now how they experience vehicles,” explains Nathan Fox, assistant vice president, Operations for vAuto, a Cox Automotive Inventory

By UsedCarNews

Management Solutions brand. “Shoppers are no longer just weeding out their options. They are now selecting which vehicle they are interested in purchasing— all based on online merchandising— increasing the importance for dealers to capture their attention earlier than ever before.”

The growing importance of online merchandising is driven by the following industry data and trends:

• 80% of shoppers are open to the idea of buying completely online.

• 74% of shoppers compared cars only online when searching for a vehicle

• 41% of car buyers visited only one

dealership before purchasing a vehicle.

• Shoppers are looking at dealerships up to 100 miles beyond their local geographies.

Consumers’ online expectations have been elevated by the superior experiences of innovative companies like Amazon, digital auto retailers and national dealer groups who are leading the way in the automotive space. Winning online shoppers’ decisions today requires dealerships to embrace merchandising in new ways so that they not only win the deselection (or browsing) battle, but also the final selection. n

2023 ADVANCED ISSUING AGENT TRAINING COURSES

IN-PERSON COURSES ZOOM COURSES

The in-person training courses will be provided by Pennsylvania Association of Notaries, a PennDOT approved instructor. All classes begin at 9:00AM. No refunds and may not be transferred to another class date.

Members: $125; Non-members: $150

Thursday, September 21

Deadline to register: September 6 MANHEIM

PHILADELPHIA AA

2280 Bethlehem Pike

Hatfield, PA 19440

Thursday, October 5

Deadline to register: September 20

GARDEN SPOT AA

Robert Rd. & Apple St.

Ephrata, PA 17522

ONLINE COURSES

The online training courses will be provided by Pennsylvania Association of Notaries, a PennDOT approved instructor.

Members/Nonmembers: $169

The ZOOM training courses will be provided by Pennsylvania Association of Notaries, a PennDOT approved instructor. All classes begin at 9:30AM. Class size limited – registration closes ten business days prior to class date.

No refunds and may not be transferred to another class date.

Members: $99; Nonmembers: $129

Thursday, July 20

Deadline to register: July 5

MARYLAND FORMS DEALERS CAN ORDER

Shipping Cost:

1 – 4 packs = $10.00

5 – 10 packs = $15.00

Over 10 packs – Please call ahead for pricing.

on Card Exp. Date________

Card Number _____________________________________ Security Code________

We cannot process orders until payment is received.

Signature ____________________________________________ Date

For questions you may contact Cynthia Slemons at 717.238.9002 ext. 16 or Cynthia@piada.org .

PENNSYLVANIA FORMS DEALERS CAN ORDER

ADP FORMS

Please make checks payable to PIADA, 1501 North Front St., Harrisburg, PA 17102 (call in to receive shipping cost to include in payment) or you may fax orders to 717.238.3870 with credit card information. *All orders MUST be accompanied by a method of payment. *Must provide DIN if applicable.

MIDATLANTIC IADA = PIADA + MDIADA + DEIADA

Contact Shannon at 717.238.9002 x 18 Shannon@piada.org www.piada.org • www.mdiada.org • www.deiada.org

Contact Cyndi at 717-238-9002 x16 Cynthia@piada.org