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O D E K FAKE FA DOCUMENTS Thorny Issue for Dealers

Also in this issue: – Michael W. Dunagan on What to Do When Peaceable Repossession Is Not Possible – A Guide to Texas Sales Tax Audit – Why Charge All Customers the Same Rate – CFPB, The Roadmap Forward — Part Two


TIADA Board of Directors PRESIDENT Robert Beck/Stop N’ Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 PRESIDENT ELECT Mark Jones/Mike Carlson Motor Company 264 Exchange Burleson, TX 76028 CHAIRMAN OF THE BOARD Juan Sabillón/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 SECRETARY Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 TREASURER Eddie Hale/Neighborhood Autos 1717 US 287 Decatur, TX 76234  ICE PRESIDENT, WEST TEXAS V (REGION 1) Brad Kalivoda/Fiesta Motors 2599 74th Street Lubbock, TX 79423  ICE PRESIDENT, FORT WORTH V (REGION 2) Chad Lancaster/Chacon Autos 11800 E. Northwest Hwy Dallas, TX 75218  ICE PRESIDENT, DALLAS V (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas, TX 75237  ICE PRESIDENT, HOUSTON V (REGION 4) Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365  ICE PRESIDENT, CENTRAL TEXAS V (REGION 5) Greg Phea/Austin Rising Fast 8024 IH 35 North Austin, TX 78753  ICE PRESIDENT, SOUTH TEXAS V (REGION 6) Armando Villarreal/McAllen Auto Sales 4215 S. 23rd Street McAllen, TX 78503  ICE PRESIDENT AT LARGE V Robert Blankenship/Texas Auto Center 6809 N IH-35 Austin, TX 78744  ICE PRESIDENT AT LARGE V Russell Moore/Top Notch Used Cars 900 East Davis Conroe, TX 77301 TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am – 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org

Vo l u m e X X I / I s s u e 4 / A p r i l 2 0 21

TexasDealer contents

5 Officers’ Message

by Mark Jones, TIADA President Elect

7 New Members 9 Legal Corner: What To Do When Peaceable Repossession is Not Possible by Michael W. Dunagan

10 Upcoming Events 10 Local Chapters 12 CFPB, The Roadmap Forward (Part Two) by Texas Dealer Staff

16 TIADA Scholarship Application 17 Legislative Bulletin 18 On The Cover: Fake Documents Thorny Issue for Dealers by Nick Zulovich

22 TIADA Auction Directory 24 2021 TIADA Conference & Expo 31 TIADA Member Application 33 Legislator Spotlight 35 A Guide to Texas Sales Tax Audits by Jon Wellington

40 Dealers, Please Just Give Shoppers What They Want: The Ability to Buy a Car Online by Renold Liu

43 Regulation Matters: Why Do Most Buy-Here Pay-Here Dealers Charge All Customers the Same Rate? by Earl Cooke

46 Behind the Wheel by Jeff Martin

Did You Know? During this legislative session, the TIADA legislative team will comb through over 8,000 pieces of legislation in order to protect YOUR business. Turn to page 17 to find out which key bills we are currently following. Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.

Editor: Teresa Orkun

Magazine Ad Sales: Patty Huber, 512-310-9795


WE ARE OPEN! WELCOMING DEALERS & DRIVING VEHICLES THROUGH THE LANES!


officers’ message Four Small Changes That Led to Big Savings!

H

ello fellow Texans! It’s amazing how much all of our businesses have changed in the last year due to Covid-19. While it may seem like longer, it was only one year ago that so many of us were scurrying and searching for answers on how our businesses would survive this pandemic. Although it is not over yet, let’s not quickly forget the money saving lessons we learned in the early stages of the pandemic. During those early weeks and months of uncertainty

by Mark

Jones

MCMC Corporate (Burleson) TIADA PRESIDENT ELECT

last year, many of us were faced with making hard business decisions. Unsure of what was going to happen, many of our businesses immediately started analyzing our expenses and quickly determined which costs were absolutely needed to operate a profitable business and which were just “extras” or nice-to-haves. My hope is that all of us will remember that “confused feeling” we experienced and that we will all continue to benefit from the expense changes that we were forced to make

Although it is not over yet, let’s not quickly forget the money saving lessons we learned in the early stages of the pandemic. April 2021

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while in crisis mode. Benjamin Franklin is most often credited with the old saying that “a dollar saved is a dollar earned,” and from our experience in 2020, I would have to agree with him in a big way! Instinctively, most car dealers like to play offense (sell more cars!) when it comes to profitability, but last year proved to be very eye opening to many dealers across Texas about how important

playing defense (controlling our expenses) is to the bottom line of our dealerships. Please allow me to share some of the recent “defensive changes” we made in our business that have made a big impact on our bottom line. These ideas may or may not fit your model, but hopefully they will get you brainstorming on changes you can make to improve your business profit.

...hopefully [these ideas] will get you brainstorming on changes you can make to improve your business profit. Hours of Operation

I credit our General Sales Manager for questioning the hours that we were open. One day he asked, “Why do our sales locations open at 9 a.m. when less than 1 percent of our annual sales occur between 9 and 10 in the morning?” Of course, my answer was: “For 47 years we have always opened at 9 a.m.; that’s what we do.” With much skepticism, I agreed that we would “test” opening at 10 a.m. instead of 9 a.m. for a couple of months. RESULT: Zero decline in sales, and a significant annual savings in hourly payroll.

Better Employee Cross-Training

When the pandemic occurred, we were faced with making tough personnel decisions. What we have discovered is that many of the positions that we had in our organizational chart could be combined and fulfilled by one employee rather than two. RESULT: 20 less employees in March 2021 vs. March 2020 = Big Savings.

Better Use of Technology

Like many dealers in 2020, we were forced to take a hard look at the technology we were 6

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using during the pandemic. Fortunately, we found a better front end eco-system that now allows us to increase our BDC productivity and deliver a 100% approval to our customers before they arrive at our dealership. This saves time and money for both us and our customers. RESULT: Less staff required at the locations and faster delivery times for our customers.

Using Different Channels for Recon and Supplies

Please Welcome Our Newest TIADA Members DEALER MEMBERS

A&E Motors Arturo Arakelian . . . . . . . . . . . . . . . . . . . . . . 5505 San Pedro Ave., San Antonio, TX 78212 Credit Builders Auto Landry Gibbs . . . . . . . . . . . . . . . . 4411 N State Line Ave., Texarkana, TX 75503 GG Ultimate Cars Georgina Cortes . . . . . . . . . . . . . . 16722 Carrack Turn Dr., Friendswood, TX 77546 Monte C Byrd dba Monte’s Motors Monte Byrd . . . . . . . . . . . . . . PO Box 948, Bellville, TX 77418 Nathan Ross Motors Brandon Tyler . . . . . . . . . . . . . . . . . . . . 6303 Indiana Ave., Lubbock, TX 79413 Southwest Classic Motors Tony Farmer . . . . . . . . . . . . . 7008 Lake Louise Dr., Arlington, TX 76016 Tomlin’s Auto Sales James Tomlin . . . . . . . . . . . . . . . . . . . . . . 13430 Hwy 110 South, Tyler, TX 75707 Tonia Stevens LLC Tonia Stevens . . . . . . . . . . . . . . . . . . . . . . . . . . . 8811 Stults Rd., Dallas, TX 75243 ASSOCIATE MEMBERS

Alliance Auto Auction of Austin Brad Wilson . . . . . . . . . . . . . . . . . . 1550 CR 107, Hutto, TX 78634 Cross-Sell Danielle Scovanner . . . . . . . . . . . . . 2265 Harrodsburg Rd., Suite 401, Lexington, KY 40504 Phoenix Business Consulting, LLC Jessica Cumbee . . . . . . 8636 Ashcroft Ave., Dallas, TX 75243

Reconditioning expense continues to be one of the biggest expenses an independent dealer faces each month. Not only have we continued to see an increase in car costs over the last 12 months, but the recon needed on the vehicles we are purchasing continues to grow as well. By using online sources such as Amazon, eBay, and even ordering online from traditional part providers, we have saved thousands of dollars in the last 12 months. Yes, it does take a couple of extra days to recon the unit while we wait on parts to arrive, but the savings are significant in many cases. RESULT: Average Parts Savings Is 30% Less On Online Orders vs. Traditional Outlets. Obviously, these are just a few examples of “defensive changes” that you may consider that can have a big impact on your business’s profit. My challenge to you is to consider what areas and/or departments at your dealership can be more productive or operate at a lower cost. I promise that there are savings available and that your bottom line will thank you! April 2021

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TM

Call:

EPI-TIADAhalf APR2021.pdf

Bill Murphy (512-799-2886) 1

3/16/21

Bob Burke (800-366-0036)

Matt Ruckel (214-529-7624)

Ryan Driggers (214-289-3627)

8:33 AM

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M

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CM

MY

CY

CMY

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legal corner

What To Do When Peaceable Repossession is Not Possible Dealer Question: I know

that as a car creditor with a lien on a vehicle, I can peaceably repossess the vehicle when the contract is in default. Occasionally, a debtor will hide the vehicle or lock it up in a garage where I can’t repossess it. I’ve contacted our local police department for help, but they tell me they can’t get involved without a court order. What are my next steps when a peaceable repossession is not possible? Answer: The Uniform Commercial Code (the Texas version is known as the Texas Business and Commerce Code) provides that the holder of a security interest in collateral can upon default peaceably repossess the collateral without any type of legal process. The key word here is “peaceably.”

C

ourt cases have held that the refusal of a debtor to relinquish possession of collateral takes the situation out of the realm of peaceable. If a repossession can’t be accomplished peaceably (that is, with the permission of the debtor, or without the knowledge of the debtor and without breaching the peace), then it will be necessary to obtain an order (or “writ”) from an appropriate court. Law enforcement officers have generally been trained that they can’t order a debtor to turn over collateral to the creditor without a court order. A creditor, being a private citizen, can peaceably repossess collateral without a court order. A law enforcement officer, by virtue of his or her position, is, in the eyes

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of the law, a government official. The U.S. Constitution forbids governments or government officials (except in a few emergency situations) from taking property from a citizen without due process of law. Due process of law is accomplished in this situation by applying for relief from a court. On those occasions when self-help repossession is not available to the vehicle lien holder, such as when the collateral is hidden or locked up and the debtor refuses to return it or when repossession cannot be accomplished without breaking and entering or other breach of the peace, the creditor may have no alternative but to turn to the court system to enforce his or her rights to the collateral. The most appropriate remedy for a secured creditor seeking court-ordered return of collateral is referred to in Texas as sequestration (in some states the process is referred to as replevin). Sequestration is a process by which a court, upon suit being filed and upon being presented with evidence of certain required conditions, can order the collateral to be seized by a constable or sheriff and held pending final judicial determination of the ownership rights to the collateral. Recourse to sequestration involves the use of the officers

by Michael

Dunagan

W.

TIADA GENERAL COUNSEL

...when repossession cannot be accomplished without breaking and entering or other breach of the peace, the creditor may have no alternative but to turn to the court system to enforce his or her rights to the collateral. empowered by the state (as opposed to self-help repossession), so constitutional due process considerations arise, and strict compliance with legal procedures is required. To obtain a writ of sequestration, the secured creditor must show that he or she is legally entitled to possession of the property and that the party in possession will “conceal, dispose of, ill-treat, waste, or destroy the property or remove it from the county during the suit.” A bond must also be posted, in an amount set by the court, before a writ can be issued. 9


Upcoming Events 2021

April 19

Board of Directors Meeting, Austin, TX

July 25 Board of Directors Meeting Kalahari Resorts & Conventions Round Rock, TX

July 25-27

TIADA Conference and Expo Kalahari Resorts & Conventions Round Rock, TX

Local Chapters CORPUS CHRISTI

G.R. Moore The Car Shack (dates announced at www.txiada.org)

EL PASO

Cesar Stark S & S Motors Meeting – 3rd Friday (Monthly)

FORT WORTH

Meeting – 4th Thursday of Jan–May and Sep–Oct

HOUSTON

April Hanson Coast to Coast Motors Meeting – 2nd Tuesday (Monthly)

SAN ANTONIO

Jose Engler Irving Motors Corp (dates announced at www.txiada.org) 10

Given the cost and time restraints of the sequestration process, self-help repossession is still the most desirable way to retake collateral. But when peaceable repossession is unavailable, or forced resistance or violence is threatened, sequestration is the safest and best remedy for a car creditor.

Once a judge is satisfied that the creditor is entitled to an order of possession, he or she will sign an order for the clerk of the court to issue the writ of sequestration. The order will also specify the amount of bond that is to be posted by the creditor. Court rules require bonds to be at least the amount of the value of the property plus costs. Some courts will allow local individuals with non-exempt real property to post signature bonds. Others may require a corporate surety bond or a cash bond. Some surety companies that specialize in litigationtype bonds provide sequestration bonds to lien holders. After the bond is received and approved by the court clerk, the writ is issued and sent to the sheriff or constable instructing the officer to take possession of the property. Sequestration is only a temporary taking process, so the secured creditor must go forward with obtaining a final judgment awarding ultimate possession. However, once property is taken by an officer with a writ, many defaulting debtors don’t respond to the suit. If the debtor doesn’t respond, the creditor is entitled to take a default judgment. Once the officer takes possession of the property, the creditor can ask the court to grant it possession after ten days, absent the filing of a counter-bond by the debtor. While it is rare for a debtor to file a counterbond, the court could award possession to the debtor pending a final determination of the legal rights of the parties. Because of the technical procedural due process requirements of sequestration, it will usually be

necessary to hire an attorney to prepare the appropriate pleadings and affidavits. Justice-of-the-Peace courts have the authority to issue emergency orders, including writs of sequestration, but most J.P.s will not undertake to handle a sequestration. Some will allow individuals without attorneys to file suits seeking sequestration writs in their courts. Some even provide forms for creditors to fill out. Justice courts have jurisdiction in cases where the value of the collateral does not exceed $20,000.00. It has been our experience that most J.P.s, choose not to get involved in issuing writs. To determine whether your local J.P. will process a sequestration action and whether the lien holder can file without an attorney, call the justice court and ask the judge or civil clerk. Because of the legal T e x a s

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technicalities involved in the process, we recommend having an attorney involved. If the value of the vehicle exceeds $20,000, it will be necessary to file the action in a county or district court. Generally, representation of an attorney will be required at that level. We occasionally run into situations where debtors simply refuse to honor the officer’s demand for possession under the writ. It is then necessary to file an action in the court seeking to have the debtor held in contempt of court. This process requires additional procedural steps and thus adds to the expense of the process. While our discussion up to now has involved lien holders obtaining possession from debtors after default, the sequestration process can be used whenever a third party is wrongfully in possession of collateral and refuses to return it.

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Examples would include someone who has “bought” the vehicle from the debtor without clearing the lien; a third party holding a vehicle to secure some type of obligation owed by the debtor that is not superior to the vehicle lien; and a person claiming a wrongful mechanic’s or storage lien (see my article Fraudulent Mechanic’s Lien Claims Still Concern Car Creditors in the February 2016 issue of Texas Dealer for more about steps to take when confronted with a questionable lien claim). Finally, a practical consideration about sequestration: When neither the debtor nor the vehicle can be found, this remedy is of little value. The writ must be served upon the debtor (or a person in illegal possession of the property). The sheriff or constable attempting to serve the writ will typically not provide skip-tracing services, and will rely on the creditor to supply a valid address.

Conclusion

Given the cost and time restraints of the sequestration process, selfhelp repossession is still the most desirable way to retake collateral. But when peaceable repossession is unavailable, or forced resistance or violence is threatened, sequestration is the safest and best remedy for a car creditor.  Editor’s Note: This article is taken from Texas Automobile Repossession: A Lien Holder’s Legal Guide, with the permission of the author. The book is available from TIADA. Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 40 years. He has written a number of books and hundreds of articles for trade journals and law reviews. His clientele includes dealers, banks, finance companies, auto auctions and credit unions.

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feature

CFPB, The Roadmap Forward by Texas Dealer Staff

This article is the second of an exclusive three-part series interview with Jean Noonan, member of the CFPB Taskforce on Federal Consumer Law. Part one can be found in the March issue of Texas Dealer.

Part Two: Consumer

& Dealer Relationship

We resume our conversation where we left off on Part One with a question citing the Taskforce report with recommendations for improved financial protection program. Texas Dealer: The report states: “DOOR-TO-DOOR SALES In any contract for the sale of goods entered into outside the creditor’s place of business and payable in more than four installments, the debtor should be able to cancel the transaction at any time prior to midnight of the third business day following the sale.” As you are aware, door-to-door sales statutes were originally designed to combat shady door-to-door salesmen and car dealers were excluded from the federal door-todoor rescission law. Today consumers are reaching out over the internet to car dealers from numerous states with various state statutes modeled after the federal law 12

and some of those laws are less clear as to applicability. Would you care to share your view on the application of door-to-door statutes to internet sales? Jean Noonan: This rule is a good example of a legal provision that creates compliance uncertainty in an area it was never intended to regulate. The FTC rule and similar state laws were created long before internet sales existed. If I order from Amazon, no one thinks I should have a three-day cooling-off period, and it is hard to imagine how disruptive such a rule would be. Similarly, if I am buying a car completely online, the door-to-door sales laws should not apply simply because I do not walk into a dealership. Ordering a car online and having it delivered is an increasingly popular way to buy a car. We should not have rules that frustrate a consumer’s ability to buy a car in a way they may prefer and find T e x a s

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convenient, especially because our consumer protection laws have not kept up with the times. Texas Dealer: The report says, “credit that they [consumers] can afford but cannot obtain is harmful to consumers.” I think a great example of this is how many of our members have stepped in to fill a void left by traditional lenders by offering a Buy Here Pay Here option for vehicle financing. However, some claim consumers are harmed by the high rates required to overcome the risk involved with financing these consumers. Should our dealers be worried about how this balance will be struck under the new administration? Jean Noonan: Yes. I think they should be worried; I am concerned that the new administration will not appreciate the importance of making credit available for vehicle purchases to consumers who do not qualify for prime credit. As a consumer advocate, I know there is a definite role for BHPH auto finance. I understand some of the concerns that regulators have with the BHPH industry. Rates are high and sometimes the price of the car is high because the cost of doing business is high. Defaults are higher than we would all like, but even if there is a 25 percent default rate, that means 75 percent pay for the car and have transportation for their family. Consumers know the cost of the auto and the financing, and they are in the best position to decide if the cost

of ownership is worth it. Do they live in a place where they can get to work by walking or is there a bus? Can their children get to school? Those are very personal decisions, and many people lack a good alternative to car ownership. Many people live in areas that lack good public transportation. I hate to see anyone lose a good job because no one will finance a car for them. If they are shopping at a BHPH dealer, it is because they know they do not qualify for traditional financing. I would like to see every BHPH dealership report to the credit agencies so customers can get the benefit of their good payment history and can graduate to more affordable credit. Texas Dealer: Will you elaborate on BHPH dealers reporting to the credit agency? Jean Noonan: Reporting payment history has pros and cons for both consumers and BHPH dealers. On balance, I believe that credit reporting is a good practice. Consumers have an opportunity to build a good repayment record, and dealers will have better information for assessing credit risk. The main caution I offer BHPH dealers who report information is that their reporting must be accurate. There is not a private right of action, so customers cannot sue them for errors in furnishing information to credit agencies under the Fair Credit Reporting Act. But regulators can enforce the FCRA’s accuracy provisions, so having a good compliance management system is very important.

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Texas Dealer: Some of our members only offer one interest rate for all customers out of concern that regulators will accuse them of discrimination. Essentially, regulation is harming consumers by making these lower rate loans unavailable to them. Do you think this is a valid concern? Jean Noonan: I think offering multiple rates can be done with very little legal risk if done correctly. I have some subprime clients who have one rate, and it is usually the state cap. If they wanted to offer a risk-based rate with several levels, there are ways to do it quite safely. For example, dealers can set very objective criteria for pricing at each risk level, so consumers at highest risk pay highest rate. A problem can arise if the consumer’s interest rate is not set objectively. If customers who appear to be of equal risk are paying different rates, this can create an inference of illegal discrimination. Unless the dealer can explain that pricing difference convincingly, the dealer is at risk. But there are legitimate business reasons customers of equal risk may pay different rates. A dealer must be able to explain these differences in each case. Perhaps the customer who received a lower rate walked in with a credit rate quote from another dealer or creditor. Maybe the dealer was especially motivated to sell particular cars and decided to offer a lower rate to get those cars off the lot. Those would be legitimate nondiscriminatory reasons.

Trade associations like TIADA have a very important role in making sure regulators understand the informational needs of consumers. Unless the dealer makes a note of that, however, it will be hard to defend those decisions. Our Taskforce recommended that Regulation B be amended to provide a safe harbor if a dealer uses the NADA/NAMAD/AIADA fair credit compliance program. I have advised many of my dealers to use that program, because, even without a safe harbor, a dealer is able to defend its pricing decision, if challenged. The NADA Fair Credit compliance program sets up a strong and defensible way to explain discretionary differences.

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Many independent dealers do not want to offer just one rate because it prices them out of the market for the best qualified customers. A lot of us believe a used car is one of the best bargains out there, so I think that every independent dealer should strongly consider risk-based pricing. Texas Dealer: One of the recommendations made was “the CFPB reorganize its internal structure and operations to instantiate a ‘markets-based’ organizational structure, as opposed to a ‘tools-based’ operational structure.” In such an approach, would BHPH dealers be regulated by the same group as other used car dealers? Jean Noonan: Probably so. A benefit of a marketsbased internal structure is that it gives the Bureau staff the opportunity to understand the auto finance market, including the ways in which BHPH dealers differ from other independent dealers. I always told my lawyers who worked for me at the FTC you cannot be a good regulator unless you understand the business. I believe the CFPB staff members want to be good at understanding the business and specializing in a market promotes that knowledge much more than specializing in the use of a tool like enforcement or rulemaking. Certainly, in private practice you cannot be a good attorney without understanding the business. From the perspective of good policy, we want to eliminate laws that interfere with a valuable business practice without a significant benefit to consumers. That is a law that is actually hurting consumers, so there is no upside with this law in this context. That’s what I think we really need to look at. More laws do not necessarily mean better consumer protection. We need smarter laws. A smart law is one that focuses on preventing consumer harm, while still supporting financial inclusion and innovation.

available or at a better price. We should focus our education on helping consumers shop intelligently and not have disclosures meant to discourage. I do believe that we should have disclosures and education that meet consumers where they are and tell consumers what they really want to know. I do think the Truth in Lending Act does a pretty good job of that. Whether a consumer is shopping for a used BMW at a high end independent or buying whatever she can afford at a BHPH dealer, there are some basic things she needs to know, such as the cost of credit, both in dollars and interest rate, what the monthly payment is, and the number and frequency of the payments. The one thing a disclosure won’t tell me is whether I could have gotten a better deal elsewhere. Disclosures can facilitate shopping, but consumers must decide for themselves whether to invest that time. Texas Dealer: The report states “Currently, the use of alternative data to make credit decisions is allowed, but liability concerns over its use, methods of collection, and compliance with credit reporting laws have slowed its widespread adoption by industry.” If a dealer wanted to implement the use of alternative data, what would be some of your recommendations? Editor’s Note: Next month read part three of this series to find the answer to this question and more.

Texas Dealer: A portion of the report focuses on the need for financial education. Do you worry that the attorneys, government workers, and people providing input about that education will not understand the needs of our customers? Jean Noonan: That is an excellent question and, yes, I do worry about this. Trade associations like TIADA have a very important role in making sure regulators understand the informational needs of consumers. Often education and disclosure rules are designed by people who are not using those services and are shaped by what they want consumers to know rather than by what those consumers themselves want to know. For example, if I am a government lawyer writing a disclosure pertaining to a product or service I don’t like, I might emphasize everything I can to discourage a consumer from choosing it, even if that product might be a reasonable choice for a particular consumer. Consumers need objective facts so they can make an informed choice. A BHPH purchase can be a very rational decision for consumers. Reducing the risk or cost of default by using a starter interrupter or GPS can also benefit consumers by making credit more April 2021

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ATTENTION STUDENTS!!!

$1,000

Marvin Norwood Scholarship DEADLINE

May 10, 2021 {Applications and/or any required documents received after May 10, 2021 will NOT be accepted.} Criteria and Guidelines 1. Each applicant must be entering or currently enrolled in an accredited college or a trade school. Proof of enrollment must be included with this application.

Date: Name:

DOB:

Address: City:

State: (You will receive email confirmation of receipt.)

Telephone Number: High School Last Attended: Address:

3. Each applicant must complete the application form.

Date of Graduation:

4. A copy of high school transcripts is required for applicants who are college freshmen. If applicant is currently enrolled, provide college transcripts with official university imprint.

Other High Schools Attended (Names and Addresses):

6. Compose an essay of no more than two typed, double-spaced 8 ½” x 11” pages. The essay should discuss the applicant’s relationship with their TIADA scholarship sponsor, current education goals and future aspirations as it relates to the applicant’s subject/training area. 7. Provide at least two (but no more than three) letters of recommendation, no older than one year, from college/high school faculty, employers or other appropriate sources (not related).

Zip:

Email:

2. Each applicant must provide a letter from their TIADA member sponsor that includes the sponsor’s address and phone number.

5. Provide a detailed description of participation in any academic, honorary, civic or extracurricular activities in college. In addition, a detailed description of high school activities is required from college freshmen along with a college acceptance letter.

16

SCHOLARSHIP APPLICATION

City:

State:

Zip:

Dates of Attendance:

College(s) you are attending or plan to attend for admission:

Parents Name(s): TIADA Member Name (Sponsor): TIADA Member Company Name: TIADA Member Address: City:

State:

Zip:

Sponsor Signature Should you have any questions, please contact TIADA at 512.244.6060. Please return the completed application with all required documents to: TIADA Attention: Scholarship Applications 9951 Anderson Mill Rd. Suite 101, Austin, TX 78750

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legislative bulletin

by TIADA

Staff

Bills We are Watching

T

he 87th Legislative Session has been a unique one like so many other things during COVID. Typically, this time of year TIADA is running around the halls of the Capitol and physically meeting with the members of the legislature and their staff, but these are the days of COVID and physical meetings are often not possible. Yet, TIADA is still busy at work following bills, meeting virtually with members of the legislature, and making sure dealers’ voices are heard at the Capitol. Fortunately, years of building relationships has made it possible for TIADA to have dealers’ concerns heard during this unique time. Below you will find a few key bills we are watching:

SB 876 (Hancock) This bill

would allow a motor vehicle dealer to apply for the registration of and title for vehicles sold by the dealer with any county tax assessor-collector who is willing to accept the application. TIADA supports this bill. STATUS: TIADA is working closely with other stakeholders to help move this bill through the legislative process. HB 2879 (Landgraf) This bill would change the notice requirement to lienholders before the sale or disposition of a motor vehicle by allowing the later of the 30th day after the date on which the charges accrue or the 30th day before the date of a proposed sale or disposition of the motor vehicle. Current law requires notice April 2021

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prior to the 30th day on which the charges accrue. This bill would significantly slow down the current process for lienholders to be notified about the threat of a mechanic’s lien. TIADA opposes this bill. STATUS: TIADA is working hard at ensuring members of the legislature are aware that this would unfairly burden lienholders of vehicles by allowing long delays before the lienholder is aware that a lien is being claimed. Currently, this bill has only been introduced and has not seen any movement. SB 935 (West) This bill would allow a metal recycler or used automotive parts recycler to purchase a vehicle for crushing or parting without obtaining title to the vehicle or notifying the lienholder if the vehicle is at least 12 years old. TIADA opposes this bill. STATUS: TIADA is working hard to ensure members of the legislature are aware that 12-year-old vehicles are very common and not clunkers and that this bill would hurt the ability of lienholders to ensure their collateral is safe from bad actors. Your best source of up-to-the-minute information on legislative issues that will affect your industry is the Legislative Action Center, found under Advocacy at the TIADA website, www. txiada.org. As always, we welcome the input of our members regarding legislative matters. TIADA’s legislative team will work diligently to keep you abreast of the issues and call on you to act when needed.

at Past Legislative Victories During the 83rd Legislative Session in 2013, TIADA

supported and worked with Rep. Elkins to pass HB 2690, also known as the AntiCurbstoning Bill, which allows any peace officer in the state to take action against a person who is engaged in business as a dealer without a license, a major victory for the industry.

During the 85th Legislative Session in 2017, TIADA opposed and worked to stop SB 878 (Hancock) that would have allowed insurance agents more flexibility when offering “named driver” and “excluded driver” insurance policies.

17


on the cover by Nick Zulovich

Senior Editor, Cherokee Media Group

FAKE DOCUMENTS FAKE DOCUMENTS Thorny Issue for Dealers

P

oint Predictive, a San Diegobased technology company that specializes in developing tools to prevent fraud, estimated that auto-finance fraud totaled more than $7.3 billion industry wide in 2020. That’s the highest amount the firm has ever seen in its data that goes back 10 years. And for independent dealerships here in the Lone Star State, fraud is a Texas-sized problem for both green-pea operators and dealers who have been turning metal for decades. “It’s rampant right now,” said Greg Reine, who is owner of Auto Liquidators in Dallas. “We’re living in a world we’ve never lived in before now that we’re doing online

18

“I think we’re at the tip of the iceberg where fraud is going to be happening more and more.” ~Michael Zak, Dixon Motors — Houston

applications, online approvals, online purchasing.” Auto Liquidators CEO Jenissa Rice estimated that one of five of its submitted applications contained some fraudulent details. Rice mentioned that there are groups on Facebook where individuals can purchase information packets specially made for auto financing that include fake paystubs, proof of employment and residence history. “I know we miss some and that’s discouraging,” Rice said. At another dealership in Dallas that has been in business since 1959, Chad Lancaster with Chacon Autos acknowledged that probably 20% of the applications that land with his operation likely contain fraudulent elements. T e x a s

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“It’s certainly not going away and, if anything, it’s gotten more challenging,” Lancaster said. “Through our own research, I think there are 300-plus websites that a customer could go to and generate a fake paystub. We’ve seen it to where you can spend $15 and get a pretty well-made paystub. And for a little extra cost you can get a phone number to get employer verification, too.” In Houston, Michael Zak with Dixon Motors shared how many more vehicles he could retail if he and his staff simply approved every application that arrived and looked solid at first glance. “I could grow my business by 20% if I accepted every fraudulent document that’s out there and just looked the other way,” Zak said. “But as a buy-here, pay-here dealer, we are the bank, so it’s more personal to us. We want to make sure we’re working with the right person. “I think because of technology, it’s going to become a bigger issue as we move more to what I’ll call the Carvana model, where it’s all done outside of the dealership and you don’t personally see someone face-to-face while trading information. It may be harder to scrutinize that in the future on certain documents,” he continued.

Pandemic intensifying the problem

Among the many lasting impacts from the pandemic is what Zak referenced. First because of regulatory mandates and now stemming from changing consumer preferences, potential buyers are conducting more activities online and less inside the dealership showroom. It has forced underwriters to be even more meticulous when examining April 2021

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documents and the details they contain. Oftentimes, these fraudulent documents contain figures that don’t compute when looking at hours worked and pay rate. They also have inconsistent tax withholdings — if any at all. Some documents even have had deductions

“It’s certainly not going away and, if anything, it’s gotten more challenging. Through our own research, I think there are 300-plus websites that a customer could go to and generate a fake paystub.” ~Chad Lancaster, Chacon Autos — Dallas

for state income tax even though Texas doesn’t have such taxes in place. Furthermore, documents sometimes have the number zero where the letter O should be or vice versa, especially on the fake documents compiled quickly or by the lesssophisticated fraudsters offering these materials. Lancaster elaborated about the industry transition to online accelerated by the pandemic. “Sometimes it’s more tempting to submit fraudulent documents when you’re doing it all online,” Lancaster said. “You’re not sitting across from someone as they’re handing them to you. Sometimes the temptation is greater when you’re just uploading them from your computer or smartphone. It’s something that as this industry continues to evolve, we as dealers have to be mindful of it.”

Sometimes operators try to deceive, too

Much of the fraud operators encounter nowadays comes from potential customers on the consumer side of the automotive equation. But bulk portfolio buyers and capital providers are seeing fraud, too. Robert Chappell, who is president of CAR Financial Services, recalled one of the most complicated fraud cases the company ever encountered. When looking at the paper from one particular dealer, Chappell recollected that his team noticed the income portion of each contract included Social Security disability benefits. Even when the contract included a married couple, one spouse might have had full-time outside employment while the other spouse collected those benefits. “It’s very hard to get that verified,” Chappell said. “But we kept 19


seeing it over and over. It ran very deep in the amount of contracts we had.” After the company’s general counsel made a connection with the Social Security officials who specialize in fraud, an in-depth investigation began. CAR Financial Services eventually sued the dealership and won a judgment. Chappell emphasized this particular case is likely an outlier, but he also explained why it could happen even when dealers are so cognizant about fraud nowadays. “We do pretty extensive background checks. Most dealers are good, honest people and want to do business and do it right,” Chappell said. “But when they get backed into a corner, they’re overextended and borrowed too much, they’ve got too many floorplans, they’ll do things fraudulently to get additional funds. That happens sometimes when they’ve got an outside investor. “If we see a lot of duplicate titles, that’s a red flag for us. They also might be trying to sell to someone else so we try to dig a little deeper,” he added.

Ways to minimize fraud

While Chappell mentioned an example of what finance companies are doing to spot fraud, dealers are 20

“We verify the information provided and crosscheck with other sources. If you are relying solely on a customer provided document, you are going to have a much higher probability of being the victim of fraud..” ~Stephen Barrett, Barrett Motors and BMI Finance

using a variety of ways to limit their fraud exposure. For Erika Blankenship, owner of Texas Auto Center in Austin and San Marcos, it all begins with training. Blankenship said her managers, underwriters and other staff members consistently review their strategies and discuss what fraud tactics have been noticed so each team member stays up to date. Blankenship also heads to the same place where fraudsters go to find fake materials — the internet. “I’ve looked a lot things up on Google,” she said. “I think we do a pretty good job of weeding through that stuff before we ever approve a deal.” Stephen Barrett, owner of Barrett Motors and BMI Finance, described a similar strategy. With four locations in Rowlett, Garland, Sachse and Greenville, Barrett has seen fake driver’s licenses, check stubs, lease agreements and even insurance documents. He emphasized that the fundamentals of solid underwriting are even more applicable today. “Verification is the key to avoiding being the victim of fraud,” Barrett said. “We verify the information provided and crosscheck with other sources. If you are relying solely on a customer provided document, you are going to have a much higher probability of being the victim of fraud.” For Zak in Houston, he took advantage of training and recommendations offered by a city police department official who specializes in spotting fake licenses. “One of the things he taught us early on was to be leery of paper IDs, for instance, if someone walks in, presents a paper ID saying, ‘I lost my license and I just went to the DMV office and here’s my paper copy.’ It used to be those were what we would accept,” Zak said. “But then he told us the T e x a s

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fraud rate on those documents and I started to investigate and seeing different fonts and dates. So, I said no longer are we going to accept IDs unless it’s the legitimate, hard plastic one that we can see and touch.” Lancaster pointed out that sometimes potential customers try to use a fraudulent document because they think they’ll never qualify for financing otherwise. He said that’s when it’s time for independent dealers to use one of their strengths — building relationships. “It’s not all bad intent. It’s not all customers that want to steal a car,” Lancaster said. “Sometimes it’s customers that may be selfemployed and don’t have a good way of showing income, so they feel like they have to do this in order to get approved. Some of it is just sitting down with the customer and saying, ‘this isn’t right, but tell us what you’re doing.’ Sometimes, it’s just as simple as, ‘I’m self-employed and I don’t have paystubs and I didn’t think I was going to get approved.’ Does that work in every scenario? No, but there are some where we can walk through that and prevent them from making a mistake and sometimes still put them in a car if they have good intentions.” No matter what segment of dealership operations might need attention, the clear agreement by operators is to remain vigilant about fraud. “I think we’re at the tip of the iceberg where fraud is going to be happening more and more,” Zak said. Editor’s Note: TIADA will offer a hands-on fraud training session as part of The Learning Laboratory on Tuesday, July 27 during the upcoming TIADA Conference & Expo. Turn to page 25 for more information or visit TiadaAnnualConference.com. April 2021

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BHPH DEALERS TAKE THE

Agora Lender Challenge

If you have a line of credit and can get your lender to match our industry leading rates and benefits, we will write you a check for $1,000.* But when they don’t, because they can’t, give us a call.

877.592.4672

*Eligibility to receive the $1,000 award is subject to providing fully executed loan documents (and other service agreements) evidencing satisfaction of all Agora Challenge items and is subject to Agora review. © 2021, Agora Data, Inc. All rights reserved.

21


TIADA Auction Directory

Save thousands on buy or sell fees at these participating auctions! *VALID FOR SELL FEE ONLY AT INSURANCE AA LOCATIONS ** ONLINE AUCTION AVAILABLE

Abilene ALLIANCE AUTO AUCTION ABILENE

www.allianceautoauction.com 6657 US Highway 80 West, Abilene, TX 79605 325.698.4391, Fax 325.691.0263 GM: Brandon Denison Friday, 10:00 a.m.

$AVE : $200

C.M. COMPANY AUCTIONS, INC. www.cmauctions.com

2258 S. Treadaway, Abilene, TX 79602 325.677.3555, Fax 325.677.2209 GM: Gregory Chittum Thursday, 10:00 a.m. $AVE : $200

IAA ABILENE*

www.iaai.com 7700 US 277, Hawley, TX 79601 325.675.0699, Fax 325.675.5073 GM: Terrie Smith Thursday, 9:30 a.m.

$AVE : up to $200 Sell Fee

Amarillo IAA AMARILLO*

www.iaai.com 11150 S. FM 1541, Amarillo, TX 79118 806.622.1322, Fax 806.622.2678 GM: Shawn Norris Monday, 9:30 a.m.

$AVE : up to $200 Sell Fee

Austin ADESA AUSTIN

www.adesa.com 2108 Ferguson Ln, Austin, TX 78754 512.873.4000, Fax 512.873.4022 GM: Rich Levene Tuesday, 9:00 a.m.

$AVE : $200

ALLIANCE AUTO AUCTION AUSTIN

www.iaai.com 2191 Highway 21 West, Dale, TX 78616 512.385.3126, Fax 512.385.1141 GM: Geoffrey Rabb Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

METRO AUTO AUCTION AUSTIN www.metroautoauction.com 8605 Cullen Ln., Austin, TX 78748 512.282.7900, Fax 512.282.8165 GM: Brent Rhodes 3rd Saturday, monthly

$AVE : $200

Corpus Christi CORPUS CHRISTI AUTO AUCTION

www.corpuschristiautoauction.com 2149 IH-69 Access Road, Corpus Christi, TX 78380 361.767.4100, Fax 361.767.9840 GM: Hunter Dunn Friday, 10:00 a.m.

$AVE : $200

IAA CORPUS CHRISTI*

www.iaai.com 4701 Agnes Street, Corpus Christi, TX 78405 361.881.9555, Fax 361.887.8880 GM: Patricia Kohlstrand Wednesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

Dallas-Ft. Worth Metroplex ADESA DALLAS

www.adesa.com 3501 Lancaster-Hutchins Rd., Hutchins, TX 75141 972.225.6000, Fax 972.284.4799 GM: Allan Wilwayco Thursday, 9:30 a.m.

$AVE : $200

ALLIANCE AUTO AUCTION DALLAS

www.allianceautoauction.com 1550 CR 107, Hutto, TX 78634 737.300.6300 GM: Brad Wilson Wednesday, 9:45 a.m.

www.allianceautoauction.com 9426 Lakefield Blvd., Dallas, TX 75220 214.646.3136, Fax 469.828.8225 GM: Chris Dean Wednesday, 1:30 p.m.

AMERICA’S AA AUSTIN / SAN ANTONIO

AMERICA’S AA DALLAS

$AVE : $200

www.americasautoauction.com 16611 S. IH-35, Buda, TX 78610 512.268.6600, Fax 512.295.6666 GM: John Swofford Tuesday, 1:30 p.m. / Thursday, 2:00 p.m.

$AVE : $200 22

IAA AUSTIN*

$AVE : $200

www.americasautoauction.com 219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 GM: Ruben Figueroa Tuesday, 1:00 p.m. / Thursday, 1:00 p.m.

$AVE : $200

IAA DALLAS*

www.iaai.com 204 Mars Rd., Wilmer, TX 75172 972.525.6401, Fax 972.525.6403 GM: Joshua Boyd Wednesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

IAA DFW*

www.iaai.com 4226 East Main St., Grand Prairie, TX 75050 972.522.5000, Fax 972.522.5090 GM: Robert Brown Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

IAA FORT WORTH NORTH*

www.iaai.com 3748 McPherson Dr., Justin, TX 76247 940.648.5541, Fax 940.648.5543 GM: Jack Panczyk Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

MANHEIM DALLAS**

www.manheim.com 5333 W. Kiest Blvd., Dallas, TX 75236 214.330.1800, Fax 214.339.6347 GM: Rich Curtis Wednesday, 9:00 a.m.

$AVE : $100

MANHEIM DALLAS FORT WORTH**

www.manheim.com 12101 Trinity Blvd., Fort Worth, TX 76040 817.399.4000, Fax 817.399.4251 GM: Nicole Graham-Ponce Thursday, 9:30 a.m.

$AVE : $100

METRO AUTO AUCTION DALLAS

www.metroaa.com 1836 Midway Road, Lewisville, TX 75056 972.492.0900, Fax 972.492.0944 GM: Scott Stalder Tuesday, 9:00 a.m.

$AVE : $200

El Paso EL PASO INDEPENDENT AUTO AUCTION www.epiaa.com 7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 GM: Luke Pidgeon Wednesday, 10:00 a.m.

$AVE : $200

IAA EL PASO*

www.iaai.com 14651 Gateway Blvd. W, El Paso, TX 79927 915.852.2489, Fax 915.852.2235 GM: Jorge Resendez Friday, 10:30 a.m.

$AVE : up to $200 Sell Fee T e x a s

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MANHEIM EL PASO

www.manheim.com 485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 GM: JD Guerrero Thursday, 10:00 a.m.

$AVE : $100

IAA HOUSTON NORTH* www.iaai.com 16602 East Hardy Rd., Houston-North, TX 77032 281.443.1300, Fax 281.443.4433 GM: Aracelia Molina Thursday, 9:00 a.m.

$AVE : up to $200 Sell Fee

Harlingen/McAllen

MANHEIM HOUSTON

IAA MCALLEN*

www.iaai.com 900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 GM: Ydalia Sandoval Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

BIG VALLEY AUTO AUCTION**

www.bigvalleyaa.com 4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 GM: Lisa Franz Thursday, 9:30 a.m.

www.manheim.com 14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 GM: Brian Walker Tuesday, 9:00 a.m. / Thursday 6:30 p.m.

$AVE : $100

MANHEIM TEXAS HOBBY www.manheim.com 8215 Kopman Road, Houston, TX 77061 713.649.8233, Fax 713.640.6330 GM: Darren Slack Thursday, 9:00 a.m.

$AVE : $200

$AVE : $100

Houston

Longview ALLIANCE AUTO AUCTION LONGVIEW

ADESA HOUSTON

www.adesa.com 4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 GM: Angela Williams Wednesday, 9:00 a.m.

$AVE : $200

AMERICA’S AA HOUSTON

www.americasautoauction.com 1826 Almeda Genoa Rd, Houston, TX 77047 281.819.3600, Fax 281.819.3601 GM: John Swofford Thursday, 2:00 p.m.

$AVE : $200

AMERICA’S AA NORTH HOUSTON www.americasautoauction.com 1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 GM: Buddy Cheney Tuesday, 1:00 p.m.

$AVE : $200

AUTONATION AUTO AUCTION - HOUSTON www.autonationautoauction.com 608 W. Mitchell Road, Houston, TX 77037 822.905.2622, Fax 281.506.3866 GM: Juan Gallo Friday, 9:30 a.m.

$AVE : $200

HOUSTON AUTO AUCTION

www.houstonautoauction.com 2000 Cavalcade, Houston, TX 77009 713.644.5566, Fax 713.644.0889 President/GM: Tim Bowers Wednesday, 11:00 a.m.

$AVE : $200

www.allianceautoauction.com 6000 East Loop 281, Longview, TX 75602 903.212.2955, Fax 903.212.2556 GM: Chris Barille Friday, 10:00 a.m.

$AVE : $200

IAA LONGVIEW* www.iaai.com 5577 Highway 80 East, Longview, TX 75605 903.553.9248, Fax 903.553.0210 GM: David Cooper Thursday, 9:00 a.m.

$AVE : up to $200 Sell Fee

Lubbock IAA LUBBOCK* www.iaai.com 5311 N. CR 2000, Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 GM: Lori Davee Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

TEXAS LONE STAR AUTO AUCTION** www.lsaalubbock.com 2706 E. Slaton Road., Lubbock, TX 79404 806.745.6606 GM: Dale Martin Wednesday, 9:30 a.m

$AVE : $75/Quarterly

Lufkin

Midland Odessa IAA PERMIAN BASIN*

www.iaai.com 701 W. 81st Street, Odessa, TX 79764 432.550.7277, Fax 432.366.8725 GM: Christopher Rogers Thursday, 11:00 a.m.

$AVE : up to $200 Sell Fee

ONLINE ACV AUCTIONS**

www.acvauctions.com 800.553.4070

$AVE : $250

E-DEALERDIRECT**

www.e-dealerdirect.com chris@edealerdirect.com

$AVE : Up to $500/month

San Antonio ADESA SAN ANTONIO

www.adesa.com 200 S. Callaghan Rd., San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 GM: Clifton Sprenger Thursday, 10:00 a.m.

$AVE : $200

IAA SAN ANTONIO*

www.iaai.com 11275 S. Zarzamora, San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 GM: Brian Sell Monday, 9:00 a.m.

$AVE : up to $200 Sell Fee

MANHEIM SAN ANTONIO**

www.manheim.com 2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 GM: Mike Browning Wednesday, 9:00 a.m.

$AVE : $100

SAN ANTONIO AUTO AUCTION**

www.sanantonioautoauction.com 13510 Toepperwein Rd. San Antonio, TX 78233 210.298.5477 GM: Brandon Walston Tuesday, 10:00 a.m. / Thursday, 1:30 p.m.

$AVE : $200

Tyler GREATER TYLER AUTO AUCTION www.greatertyleraa.com 11654 Hwy 64W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 GM: Wayne Cook Tuesday, 5:00 p.m.

$AVE : $200

Waco

IAA HOUSTON*

LUFKIN DEALERS AUTO AUCTION

ALLIANCE AUTO AUCTION WACO

$AVE : up to $200 Sell Fee

$AVE : $200

$AVE : $200

www.iaai.com 2535 West. Mt. Houston, Houston, TX 77038 281.847.4700, Fax 281.847.4799 GM: Alvin Banks Wednesday, 9:00 a.m.

April 2021

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www.lufkindealers.com 2109 N. John Reddit Dr., Lufkin, TX 75904 936.632.4299, Fax 936.632.4218 GM: Wayne Cook Thursday, 6:00 p.m.

www.allianceautoauction.com 15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 GM: Carmen Robinson (Sales Manager) Friday, 10:00 a.m.

23


The best dealers in Texas, the best education anywhere.

FEATURED SESSIONS BHPH

SPECIAL FINANCE & RETAIL

MANAGEMENT

CHUCK BONNANO

CORY MOSLEY

ADAM DENNIS

VICE PRESIDENT OF DEALER DEVELOPMENT NIADA

COMPANY PRINCIPAL MOSLEY STRATEGY GROUP, LLC

PRINCIPAL SURGEMETRIX

BEST PRACTICES KILL SALES GROWTH – HOW NOT TO BE A VICTIM

TAP PING INTO THE HISPANIC MARKET

THE BHPH EXIT RAMP


NEW THIS YEAR July 25-27, 2021

The Learning Laboratory

On Tuesday we are turning up the creative juices and offering a variety of learning environments to meet our ever-growing dealer community. You said you wanted more dealer interaction, here it is!

Live Podcasts Watch, listen, and participate in these live podcasts hosted by professional podcasters from the auto dealer community. This is sure to go viral!

Hands-On Demonstrations

COMPLIANCE

TECHNOLOGY

Can I take a look at that? This lab is beyond talking. Small groups will participate in hands-on education learning to identify fraud, by reviewing actual documents, understanding auction signs by participating in a live auction, and joining a “shark tank” like dealer walkaround competing for cash.

Cars and Coffee Come have a cup a joe in this relaxed atmosphere where industry experts and icons will take your questions and talk shop. No fancy PowerPoints, this is back of the napkin kind of stuff.

CORRIE THOMP S ON DIRECTOR OF ENFORCEMENT TEXAS DEPARTMENT OF MOTOR VEHICLES

TXDMV CALLED: WHAT DO I DO NEXT?

LYAMEN SAVY CEO AND FOUNDER 321 IGNITION

MOBILE FIRST VS. MOBILE RESPONSIVE WEBSITES AFFECT YOUR LEADS

Panel Discussions Unplugged Rockstar dealers and experts from Texas and around the country will serve on a variety of panels. These are the biggest names in the industry, and they are all willing to share what they know.


Thank You

TO

P L A T I N U M

L I M I T E D S P O N S O R S H I P & E X H I B I T I N G O P P O R T U N I T I E S AVA I L A B L E

OUR


CURRENT G O L D

Sponsors

W Walker Auction Group

S I L V E R

S P E C I A L T Y ACV AuCtions – Happy Hour AdVAntAge AutomotiVe AnAlytiCs – Happy Hour V12 – Lanyards PrimAlend CAPitAl – Meeting Digital Signage s irius Xm rAdio – Luggage Tag for Backpack B R O N Z E Auction Credit Enterprises BlytzPay

AUL Corporation

First Texas Auto Credit PFS Auto Finance

AutoAction

AutoMaster

Ignite Consulting Partners

AutoZoom

Big Valley Auto Auction

MyCarCare.com/Car Care Promotions Inc.

Tax Refund Services – wTax Max

Wayne Reaves Software

C O N TA C T PAT T Y H U B E R AT PAT T Y. H U B E R @ T X I A D A . O R G / 5 1 2 . 3 1 0 . 9 7 9 5


2021 TIADA Conference & Expo July 25 –27, 2021 Kalahari Resorts & Conventions – Round Rock, TX Customize your conference experience by selecting from the options below. Please complete the registration form and return it with payment in full to the address listed or for online registration, go to www.TiadaAnnualConference.com.

EARLY BIRD RATE

CONFERENCE OPTIONS

through June 18th

Register by June 18th,

Full Conference Pass—Dealers Only (includes Welcome Reception, Monday & Tuesday Education /Sessions, Expo Hall, Lunch on Monday & Tuesday, and Awards Reception & Dinner)

1st Registrant 2nd Registrant* 3rd + additional Registrant*

Save $100 per attendee.

$595 $495 $495 $395 $395 $295

One Day Dealer Pass

$300 $400 non-members

(Monday 7/26 or Tuesday 7/27) (includes Monday or Tuesday Education, Expo Hall and lunch on your selected day)

Non-Member (Dealers only)

$895 $795

TADA and out-of-state IADA members are eligible for TIADA member rate

*Registrants must be from same dealership to receive discounted rate

Discounted guestrooms are available for $199/night with a waived resort fee for TIADA Conference attendees. Please contact the hotel directly to book your room. Must be reserved on or before June 18th to receive discounted rate. Room reservations that are cancelled 72 hours, or more, prior to arrival will receive full refund less $30.00 processing fee. Less than 72 hours prior to scheduled arrival forfeits entire deposit. No-shows will also be charged one-night’s room & tax.

Kalahari Resorts / 3001 Kalahari Drive/ Round Rock, TX 78665 Call 512.651.1000 or book online TiadaAnnualConference.com/KalahariResorts 28

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April 2021


Dealership: ______________________________________________________ Phone: ____________________ Address: ________________________________________________City/ST/Zip: ______________________  Primarily BHPH Dealer

 Primarily Retail Dealer

REGISTRANT DETAILS

 Equally BHPH/Retail Dealer

REGISTRANT DETAILS

1st Registrant

2nd Registrant

1st TIME ATTENDEE? Yes No

1st TIME ATTENDEE? Yes No

Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________

Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________

Email:__________________________________________________

Email:__________________________________________________

 FULL CONFERENCE ($495 Early Bird through 6/18)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY

$____ $____

 FULL CONFERENCE ($395 Early Bird through 6/18)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY

$____ $____

 Expo Hall Guest Wristband (10 & older) ($99 x ____)  Addt’l. Awards Dinner Ticket (10 & older) ($50 x ____)

$____ $____

 Expo Hall Guest Wristband (10 & older) ($99 x ____)  Addt’l. Awards Dinner Ticket (10 & older) ($50 x ____)

$____ $____

2nd Registrant Subtotal $_____

1st Registrant Subtotal $_____ 3rd Registrant

4th Registrant

1st TIME ATTENDEE? Yes No

1st TIME ATTENDEE? Yes No

Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________

Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________

Email:__________________________________________________

Email:__________________________________________________

 FULL CONFERENCE ($295 Early Bird through 6/18)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY

$____ $____

 FULL CONFERENCE ($295 Early Bird through 6/18)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY

$____ $____

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legislator spotlight Representative DeWayne Burns was first

knew this was the right thing to do — for me to serve in this community and share my faith by example.

elected to the Texas House of Representatives in 2014 and is currently serving his fourth term. DeWayne was appointed Chairman of Agriculture and Livestock and serves on the Culture, Recreation & Tourism Committee, as well as House Administration. Raised in southwest Johnson County, he grew up on a small farm near the Bosque County line and the Brazos River. He attended public school in Cleburne and graduated from Tarleton State University. Representative Burns began his career at the Texas Grain and Feed Association before being hired as a legislative analyst and later moving to the Texas Department of Agriculture where he was ultimately promoted to the position of Coordinator for Special Issues in the department’s Intergovernmental Affairs Division. Representative Burns is currently a property and business investment manager. His community service includes Vice President of the Cleburne ISD Board of Trustees, President of the Johnson County Farm Bureau, member of the Johnson County Economic Development Commission, and Fire Commissioner for Johnson County’s Emergency Services District #1. He and his wife Jennifer have two sons and a daughter.

favorite aspect of Texas’s House District 58? Rep. Burns: I love the diversity of the communities because we have suburban development, economic diversity, and development from agricultrual to industrial to retail. Having all aspects of suburban and rural communities.

Texas Dealer: What inspired you to run for public office? Rep. Burns: I started volunteering in the community

Texas Dealer: What was you first vehicle? Rep. Burns: 1964 Chevy step side pickup.

and meeting more people. When you start getting more involved in your community, you become more aware of the issues that face your community as a business owner or a parent. I was raised to work hard, I believe we are all on a mission to serve where we are called, and my faith plays a big role in my life. When the opportunity came to serve my community in this capacity, my family and I considered it and prayed about it and ultimately, we April 2021

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Texas Dealer: What skill(s) do

you utilize most frequently at the Capitol? Rep. Burns: Relationshipbuilding, practicing honesty and kindness to everyone everyday and being genuine about it.

Texas Dealer: What is your

Texas Dealer: What problem or policy issue do you

think deserves more attention? Rep. Burns: Spending more time focusing on the proper rule of government. Sometimes we don’t need to make it better, but rather get it out of the way. Bridging supporting economic and business industry growth throughout the state of Texas, focusing on the issues that provide economic development and opportunity for Texas and those issues can vary from education to regulation to infrastructure. All things that will help Texans prosper.

Texas Dealer: What is the biggest challenge facing small business owners today? Rep. Burns: Selective fees, excessive taxes, and too much government regulation. #TXLegislatorSpotlight 33


feature

A Guide to Texas Sales Tax Audits by Jon Wellington Principal, LGT

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ear taxpayer, the Texas Comptroller has an assignment to conduct a routine audit of your sales tax account.” So begins the letter every business owner dreads getting. While a Texas sales tax audit may be routine to the Texas Comptroller’s Office, it is anything but routine for a business that does not have the time or resources to deal with it. This article hopes to inform you about the audit process and give you some tips on ways to minimize any disruption to your business — and any damage to your bank account — from a sales tax audit.

Background

In its simplest terms, a Texas sales tax audit is the Comptroller’s way of verifying the accuracy of taxpayers’ sales and use tax returns. For fiscal year 2020, Texas collected sales tax revenue of $34.10 billion, about 60% of the State’s general revenue. With that kind of money at stake, it is no surprise that the Audit Division’s 22 field offices spend most of their time auditing taxpayers for sales and use taxes. With respect to sales of tangible personal property, the burden will always be on the taxpayer to prove why a transaction was not taxable; for services, the burden is on the auditor to prove why a service was taxable. Both the seller and the buyer in any transaction are “jointly and severally liable,” meaning that the Comptroller can audit either party to collect the tax. Therefore, you are liable for any taxes on your sales as well as your purchases. This article will interchangeably refer to “sales tax” and “sales and use tax.” Use tax is basically the flip side of sales tax, and is imposed on the storage, use, or consumption of a taxable item or service in Texas. If sales tax is paid, no use tax is due. Put differently, use tax is what a purchaser owes if it purchased a taxable item or service and it was not charged sales tax for whatever reason. Taxpayers should accrue use tax on a monthly basis on its books and report and remit the tax on its next sales and use tax return. Due to COVID-19, audits are currently being handled remotely and taxpayers are being given generous amounts of time to respond to document requests, but these unusual practices will likely be coming to an end soon. April 2021

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The Audit Process

After initial contact and some preliminary communications with the auditor, a taxpayer will eventually receive a confirmation letter setting an agreed-upon start date for the audit, containing a document request. Generally, you should expect to see a request covering the audit period for most or all of the following documents (electronic or physical): general ledger, journal entries, sales and purchase journals, asset listing/depreciation schedule, financial statements, federal tax returns, sales tax return workpapers, and bank statements. After receiving the documentation, the auditor will conduct some preliminary review and get comfortable with your internal controls and business model. Most of the remainder of the audit will involve you responding to requests for invoices, resale certificates, contracts and any other documentation supporting your tax positions. If one of your sales invoices should include sales tax but does not, you will need to provide the auditor a valid resale/exemption certificate from your customer or it will be treated as taxable. Similarly, if a purchase invoice does not show you paid sales tax, you will need to explain why that product or service was not taxable or prove that you accrued and remitted use tax on a prior tax return. Eventually, the auditor will be ready to issue an assessment. Before the assessment is issued, taxpayers have the opportunity to plead their case to the auditor’s supervisor and an independent auditor. Assuming those avenues fail, the auditor will issue the actual assessment. At that time, taxpayers can protest some or all of the assessment through an administrative appeals process. During the administrative appeals process, taxpayers have no obligation to pay the underlying assessment, although interest will continue to accrue. Once you have reached the end of the appeals process, you would typically need to pay the assessment, with the option to sue in district court for a refund.

Best Practices for Texas Sales Tax Audits While every taxpayer’s business is unique and every auditor has their own approach, nothing is ever more important to a good sales tax audit defense

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than having good documentation. Because the onus of proof is on the taxpayer, you need to be able to support any defenses you intend to raise. The following checklist offers some best practices to prepare you for any questions an auditor may present.

BEFORE THE AUDIT

Review your purchase invoices  for use tax purposes. Ideally, an accounts payable person should be reviewing all purchase

invoices to make sure that sales tax is paid or that use tax is accrued and remitted if appropriate. Even a periodic review of your most significant vendors’ invoices can go a long way to preventing a large surprise liability. Dealerships will most often deal with this issue with respect to invoices from out-ofstate vendors. Pay special attention to invoices  from service providers with no sales tax. While Texas only taxes

.

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certain services, the Comptroller defines some of these services broadly and in ways that may surprise you. Significantly, many marketing-related activities - like digital photography, customer communications and online advertising - enter into the gray area of potentially taxable services. Document the above steps with  monthly workpapers. If you have been accruing and remitting use tax on purchase invoices, you should be prepared to prove that fact to your auditor. Ideally, for each month’s sales tax report, you should have a workpaper tying the amounts on the return to the underlying invoices. Make sure you have valid re sale and exemption certificates. Gathering documentation and reports can be time-consuming tasks, especially when you are relying on a third party, so it is never too early to start. A valid resale certificate must include the purchaser’s Texas sales tax permit number active at the time of the transaction. You do not want to find out in the middle of an audit that the purchaser of a fleet of your used vehicles failed to sign a resale certificate and is now out of business or otherwise being uncooperative. Consider getting an expert opin ion before the audit. Consider a review of your internal sales tax procedures. Such an analysis could help prevent future errors and quantify any potential exposure you may already have. Improve your titling practices  (Buy Here Pay Here dealerships that use deferred sales tax). Texas provides that sales tax is only due on seller-financed sales when the monthly payments are received from the customer, so sales tax is no longer due if a vehicle is repossessed. However, sales tax is “accelerated” when a vehicle is not titled in a timely T e x a s

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fashion. Accordingly, dealerships could end up owing sales tax on the full purchase price of a repossessed vehicle. Such a liability is avoidable with better titling practices.

DURING THE AUDIT

Communicate with the auditor,  even if it is only to say that you cannot meet a particular deadline. Believe it or not, auditors appreciate that you have a business to run, and are willing to work with taxpayers, especially with the hurdles created by COVID-19. Auditors will almost always grant extensions of time, as long as they are in good faith. Keep things professional. If an  auditor challenges your filing decisions, do not take it as a personal insult or accusation of wrongdoing. If somebody will take the auditor’s findings personally, consider hiring a

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representative to handle the audit. This could serve to eliminate this friction from the process, to have an expert set of eyes reviewing the documentation being provided to the auditor, and to host the auditor offsite to minimize disruptions. Ask the auditor to support his  assertions. Auditors do not know every nuance of every exemption and tax law, and like all of us, auditors (and their supervisors) make mistakes. Do not be shy in asking for legal support for any of the auditor’s assertions. Even if you cannot persuade the auditor of the error of his ways, the appeals process offers many opportunities to correct any mistakes made during an audit. Retain copies of all records  provided during the audit. This includes correspondence that you have with the auditor or any other parties on this matter.

If you expect you may have to protest the findings, retain your records throughout the process.

AFTER THE AUDIT

Consider an appeal. Just because  the auditor was not sympathetic to your arguments, that does not mean that your argument is lost. Auditors are always going to lean towards taxing transactions, so having a more objective audience hear your arguments may be all that you need to succeed. Use the audit as a learning ex perience. If an audit leads to a surprising result, a similar issue likely exists for the time subsequent to the audit period (and possibly in other states as well). Use the audit’s findings as a way to minimize future exposures and quantify existing risks. The Comptroller knows a good thing when he sees one, so you can

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resource guide The TIADA Website: www.txiada.org

Members can log in with their username/password and access our Dealer Member Directory, Legislative Action Center, Compliance Consultation Service and much more. Register for all upcoming TIADA events online through the Calendar of Events, access our online membership application, find contact information for all our Local Chapters, and access many additional resources through our Knowledge Base.

License Renewal Certificate

TexasDealerEducation.com

Texas Department of Motor Vehicles 888.368.4689 www.txdmv.gov

Office of Consumer Credit Commissioner 800.538.1579 occc.texas.gov

Texas Comptroller

800.252.1382 www.window.state.tx.us

NIADA

800.682.3837 www.niada.com

REPOSSESSIONS American Recovery Association

972.755.4755 www.repo.org or contact TIADA state office

FORMS

Burrell Printing

800.252.9154 www.burrellprinting.com

count on getting a similar letter again in a few years. Do not forget about the poten tial liability/reimbursement of your vendors/customers. You legally can still go back and collect any sales tax that your customers should have paid. While there may be valid business reasons not to try to collect the tax, it would be a mistake not to consider that option. Similarly, if your customer (or vendor) already paid the tax (on its own sales tax return or due to its own sales tax audit), you should not owe the tax. With a team of dedicated professionals, LGT’s Dealer Services team provides a wide range of services for independent dealers. For more information, contact Jon Wellington at 214.461.1430 or via email at jwellington@lgt-cpa.com.

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Avoid expensive fines and penalties

Dealer Academy The Texas License Renewal Education Course provides the ins and outs of being a dealer in

Texas in a self-guided online course, available 24/7. This is the same course required by the TxDMV to renew a GDN license, so it covers all the important subjects including: • Staying compliant with TxDMV regarding premises requirements • Acquiring Inventory • Temp Tags and Metal Dealer Plates • Buyer’s Guide • Deal Jacket Documents

• Transferring Titles • Record Keeping • Special Inventory Tax (VIT) • Federal Requirements • The OCCC • Enforcement and Investigation • Advertising Rules

Register your staff today! Just $99 This course is perfect for managers that need an overall refresher or for the new employee that needs to be brought up to speed on all aspects of this industry in a fast, convenient and reliable way. In addition to TxDMV’s approval, this course has been reviewed by the Tax-Assessor Collectors Association of Texas for accuracy so you’ll never have your title transfer paperwork rejected again. To register visit TexasDealerEducation .com and select the Texas License Renewal Education Course.

What People Are Saying: “Great ref resher course, helped me remember a lot of items that I need to be intoned with.” “The course provides all the necessary information, links, and rules where I can f ind useful tools for my business.” “If you want to learn more about a specif ic topic this course includes a direct link to the source you are trying to f ind out more information on.” “Overall, this program was great and I am happy that eLICENSING implemented this to ensure we know the basic stuff of running our dealers and running a clean ship without having to face violations or risk your license, this is awesome!” “This is a good training course for all new dealers. It can also be recommended for old dealers as a ref resher training course.”


feature

Dealers, Please Just Give Shoppers What They Want: The Ability to Buy a Car Online by Renold Liu

Head of Marketing, Leadbox

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f it’s one thing that a lockdownriddled 2020 has taught us it’s that more and more people have now been more accepting of buying things online. All one has to do is to look at the stock chart of Amazon, Shopify, or Lightspeed’s and you’ll see that these companies didn’t just recover, they’ve thrived and dominated. Amazon is +50%, Lightspeed is +128% and Shopify is a whopping +180% since the beginning of 2020.

It’s not a trend. It’s a shift.

COVID-19 lockdowns have forced the hand of all age groups to adopt online and now that they’ve done it, they’re not just noticing that it’s not hard it’s actually pretty convenient!

is now no longer considered an ‘early market’ solution but has successfully (and with fervor) jumped the adoption chasm to be firmly implanted into the mainstream market.

Online service IS better customer service. Some dealers feel that no online service can replace the in-person customer service that their salespeople can provide the customer.

In Oct of 2020, Google presented data from their 15th annual Think Auto event saying that: “40% of the Millennial population and 29% of the entire population would now consider buying their next vehicles online.” And I personally have seen online adoption in action. My 67-year-old mother now ordering groceries with her iPhone. My recently retired father-in-law just bought a subscription for toilet paper on Amazon. Yes, these I admit, are anecdotal personal evidence that supports my view, but they do align with Google’s sentiment that online shopping is being more and more adopted. Additionally, the fact that this group is considering online shopping means that this purchasing mechanism 40

Contrary to what some dealers may think, there is more and more evidence that shows that selling vehicles online IS producing better customer service vs. the inperson method. T e x a s

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In an interview with Chris Sutton, J.D. Power vice president of automotive retail, CNBC writes: “Customers often strongly dislike the long process of sitting in the dealerships’ finance and insurance office, filling out paperwork and negotiating the terms of the deal. They often don’t know what products they are being offered, such as extended warranties and service contracts. They also feel unprepared for negotiation.” The article goes on to say that “One obvious way of delivering this information is online. E-commerce has permeated countless industries, but auto sales have been slow to move online.”

The reward is worth the work.

Understandably, turning a traditional brick and mortar auto dealership into a modern ‘brick and click” auto dealership is a full commitment from the entire

“Customers often strongly dislike the long process of sitting in the dealerships’ finance and insurance office, filling out paperwork and negotiating the terms of the deal.” ~Chris Suttion, J.D. Power

business including sales, finance, and marketing (to name a few). Just like how dealers had to adjust and create internet departments when more people provided online leads rather than call in, dealers will need to adjust how their operations are structured when implementing digital retailing. That being said, the software itself is the easy part. The ease of implementing digital retailing into your dealerships now IS dramatically more simple than it once was and many software vendors can go live in under a month. Online car buying isn’t a fad, it’s here to stay. Some dealers might not think it’s here yet, but remember, even the best and brightest have been wrong before. You can contact Renold Liu at renold@ leadboxhq.com. For more information on Leadbox visit www.leadboxhq.com.

DRIVING GROWTH KEEP YOUR CUSTOMERS. KEEP YOUR PROFITS.

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regulation matters

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Why Do Most Buy-Here PayHere Dealers Charge All Customers the Same Rate?

uring my interview with Jean Noonan, we discussed dealers offering tiered rates to consumers and how she believes it can be done with little legal risk, yet many dealers choose not to do so. Therefore, I imagine some of you are wondering why many dealers decide to charge all customers the same rate. The main reason dealers choose not to offer tiered rates is that it is easier and safer to offer only one rate to customers. For this same reason, offering only one interest rate has been and remains TIADA’s recommendation for most dealers because this eliminates (1) the chance of a disparate impact or disparate treatment allegation and (2) the necessity of additional policies and procedures related to offering risk-based rates. Additionally, TIADA believes highly qualified consumers are aware of other finance options or can be made aware of such programs by dealers thereby eliminating any loss of sales that would occur from not offering risk-based rates.

What is disparate impact or treatment?

A lender’s policies, even when applied equally to all its credit applicants, may have a negative effect on certain applicants. For example, a lender may have a policy of not making car loans to customers who make less than $60,000. This policy might exclude a high number of applicants who have lower income levels than the rest of the applicant pool. Since people of color and women on average make less money, this policy would have a greater impact on them than white males. That uneven effect of the policy is called disparate impact, and this can occur without any intention to discriminate. The U.S. Supreme Court has yet to address whether or not disparate impact in automobile lending is illegal, but under the Obama administration, the CFPB was very active in using a disparate impact theory to reach settlements with automobile lenders. Disparate treatment occurs when a lender bases its lending decision on one or more of the prohibited discriminatory factors covered by the fair lending laws, for example, if a lender offers car loans with a limit of $7,500 for applicants age 21 through 30 and $15,000 for applicants over age 30. This policy violates the Equal Credit Opportunity Act’s (ECOA’s) prohibition on discrimination based on age. While disparate impact is unclear as to legality, disparate treatment is clearly illegal. April 2021

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by Earl

Cooke

TIADA DIRECTOR OF COMPLIANCE AND BUSINESS DEVELOPMENT

“The main reason dealers choose not to offer tiered rates is that it is easier and safer to offer only one rate to customers.” Litigation Background

Franchise and retail dealers are allowed by lenders to mark up the interest rate of loans procured for consumers as a form of compensation for brokering the loan. Consumer groups began to view this practice of marking up interest rates as an unfair or deceptive act or practice (“UDAP”). When regulators and courts determined that the marking up of loans was not a UDAP, consumer groups moved to a new theory based on discrimination. This new theory resulted in the automotive industry and consumer groups entering into settlements in the mid-2000s. But the financial crisis in the late-2000s resulted in a new regulator called the CFPB that looked to regulate franchise dealers despite Congress giving franchise dealers an exemption from CFPB oversight. In December 2013, the CFPB reached the first settlement with the automobile financier Ally. The National Automobile Dealers Associated described the settlement as the CFPB “persuaded Ally Bank to agree to pay $18 million in penalties and $80 million in damages for alleged discriminatory impact in its lending. But that settlement comes with an asterisk because Ally admitted no wrongdoing, didn’t agree to eliminate dealer pricing discretion, and agreed to 43


635 Fritz Dr. Ste 210 Coppell, TX 75019 469-637-0150

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the deal shortly before it received federal approval to be a financial holding company. A cynical, political realist — might say Ally was simply paying for a license to lend.” Ally paid the settlement amount in January 2014, but the CFPB did not send out settlement checks until January 29, 2016. During this delay, Congress investigated the CFPB and its failure to send out settlement checks. On November 24, 2015, Congress issued a report showing that a CFPB “memoranda reveal[ed] that senior Bureau officials understood and advised Director Richard Cordray on the weakness of their legal theory, including: (1) that the practice the Bureau publicly maintained caused discrimination...may not even be recognized as actionable by the Supreme Court; (2) that it knew that the controversial statistical method the Bureau employed to measure racial disparities is less accurate than other available methods and prone to significant error... and (3) that the Bureau knew that factors other than discrimination were causing the racial disparities it observed, but refused to control for such factors in its statistical analysis.” Afterwards, the CFPB used Ally’s consent agreement as leverage to get other automobile finance companies to settle with them until the change of the administration. New car dealers who are exempt from CFPB oversight turned to Congress for relief from the CFPB, which prompted the Senate to use the Congressional Review Act (“CRA”) to offer relief to dealers. The CRA was “enacted in 1996 to strengthen congressional oversight of agency rulemaking, requires all federal agencies, including independent regulatory agencies, to submit a report on each new rule to both Houses of

Congress and to the Comptroller General before it can take effect.” The resulting disapproval, by the legislature, under the CRA means the CFPB may not reissue a rule in “substantially the same form” or issue a “new rule that is substantially the same” as the disapproved rule “unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.” This action by the Senate may limit the ability of the CFPB to go after the banks who new car dealers sell their paper to and may cause the CFPB to look for other places for enforcement actions, as such BHPH dealers need to be extra vigilant.

Tips for Retail Dealers

Retail dealers should use NADA/ NAMAD/AIADA Fair Credit Compliance Policy & Program (“Fair Credit Policy”) which is available at www.nada.org/faircredit or a comparable program to document any variation from the standard markup of automobile loans. The Fair Credit Policy has not been officially endorsed by any government agency, however the CFPB Taskforce did urge the CFPB and the Federal Reserve Board to establish that “good faith implementation of the Fair Credit Compliance Program or comparable program constitutes one method of preventing discrimination in pricing offered by retail sellers.”

Tips for Buy Here Pay Here Dealers Offering RiskBased Rates

A BHPH dealer who wishes to establish risk-based pricing should have written objective criteria used to determine who qualifies for each rate tier and must provide risk-based pricing notices. TIADA recommends any dealer wishing to establish such a program to consult with an attorney that specializes in consumer finance law. T e x a s

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Ignorance is no defense. Know the law. Repo and financing issues are among the most common violations found by the OCCC. If you own a previous edition of these books from 2008 or earlier, it is recommended that you upgrade to the current editions.

Dealer Financing of Used Car Sales This comprehensive book covers all aspects of the complicated world of seller-financing in Texas, including Maximum Finance Rates; Retail Installment Contracts; Contract Amendments; VIT; Repair Charges; Federal Disclosures and more.

TIADA Member Price: $125 (non-members $175)

Texas Automobile Repossession: A Lien Holder’s Legal Guide Everything you need to know about repossessions is addressed in this book, including Notification Requirements, Post-Repo Procedures, Private Sale vs. Strict Foreclosure, Bankruptcy, Post-Disposition Accounting, Tracking and Shut-off Devices, the 60% Rule and more. PLUS – includes all required forms.

TIADA Member Price: $125 (non-members $175)

TIADA

Now available for purchase online at www.txiada.org under “Legal Resources” or call 512.244.6060 to order by phone. When ordering online, login with your TIADA username and password to receive the discounted rate. All prices include shipping. Orders are shipped in 3-5 business days. texas independent automobile dealers association

Attorney Michael W. Dunagan is the author of the two must-have books for every Buy-Here, Pay-Here dealer in Texas. Mr. Dunagan has been General Counsel to TIADA for over 40 years. His law firm specializes in the representation of independent Texas car dealers.

April 2021

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TIADA texas independent automobile dealers association

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behind the wheel

Martin

It’s 2021, so I Podcast

I

will credit my good friend Andrew Perez for introducing me to Podcasting. Several years ago, he and I decided to run the Chicago Marathon and we trained together for a couple of months. He is more analytical than I am, so he likes to spend a lot of time studying something before he jumps into it. I am a bit more of a “let’s get started and figure this out along the way” kind of guy. As the analytical one of the two, he was constantly reading articles, trying diets, googling trends, and listening to podcasts about running. Admittedly, I had no idea what a podcast was and, in fairness, it was a fairly new phenomenon. He was always encouraging me to “download” a podcast and listen to this expert or that expert. I had already run one marathon, so I was pretty sure I WAS the expert! And this was before 5G or even 4G, so it was very difficult to livestream or listen to something on demand unless you were sitting in front of your desktop hardwired to the internet. Begrudgingly, I downloaded my first podcast and listened to some lady in an Australian accent explain that a person can actually overhydrate before running a marathon — who knew? About a year ago, I was invited to be a guest on the Auto Remarketing Podcast hosted by Nick Zulovich and Joe Overby. If you have never listened to a podcast, it is basically a radio talk show that you can listen to on your computer, iPad, or smartphone. Podcasts can either be pre-recorded or live. There are a number of platforms where you can find podcasts like, Spotify, Pandora or

by Jeff

TIADA EXECUTIVE DIRECTOR

you can search topics in your Apple App Store or your Google Playlist for Android users. The easiest thing to do is just google the topic you are interested in and the word podcast and see what pops up. During the Auto Remarketing Podcast, Zulovich and I basically chatted about the used car industry and, at that time, the pandemic. Last month, Zach Klempf invited me to be a guest on his podcast, The Used Car Dealer Podcast. We touched on a number of topics including my favorite, the importance of dealers being involved in their association. Trust me, you cannot think of a topic that someone hasn’t already done a podcast on. Outside of the ones I mentioned earlier I also listen to The Independent Dealer by Jeff Watson and Luke Godwin, Auto Success hosted by various people, and Dealer Talk with Herb Anderson, just to name a few. Most podcasts I listen to are around 30 minutes — that is about how long it takes me to get from my house to the office. If it’s a good one, I usually listen to it again the following day and if I don’t like the guest or topic, I turn it off or “change the channel”. It’s a great way to hear others’ thoughts and opinions within the industry. TIADA is even exploring launching its own podcast channel; who wouldn’t want to hear Mike Dunagan explain sequestration on their ride home today? And think of all the time you would have saved if you didn’t have to read his article found on page 9. As they say in radio, or podcast world... Stay tuned.

As they say in radio, or podcast world… Stay tuned. 46

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April 2021


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