Re gulator y Update and the Road Ahead. Shaun Petersen, NIADA

Transcription

1 Re gulator y Update and the Road Ahead Shaun Petersen, NIADA 2016 O C T O B E R

2 Manufacturer Recalls - Legislation in DC - Blumenthal Amendment; Rentals - Legislative Attention in CA, NYC, NJ - NIADA Position of Best Practices on Recalls - Not all Recalls are equal: Safety vs. Non-Safety - Disclosure vs. Repair - Safercar.gov VIN Specific Inquiry and Batching - Tort Liability for selling vehicles with known open Recalls - Stop Drive & Stop Sell Notifications - CPO/X-point inspection advertising

3 SCRA Enforcement - Department of Justice Two enforcement actions - What is a military member? - Fulltime active duty - Reservists on active duty - National Guard on federal order for more than 30 days - 6% interest rate cap - Default judgment protection - Repossession with court order

4 CFPB - What s next? Pending Bills to Reform Structure HR 5485, CHOICE Act Reforming CFPB Indirect Lending Guidance (HR 1737 and S 2663) Larger Market Participant Rule: 10,000 originations a year BHPH - Reservation of Right for Potential Rulemaking LHPH? Arbitration Rulemaking Small dollar lending

5 CFPB Herbies Auto Sales Allegations: Violated Truth in Lending/Regulation Z Hidden Finance Charges Misleading advertisements Abusive practices Not having concrete sales price presented to consumer until end Question: What is a finance charge? What makes it hidden?

6 Facts: CFPB Herbies Auto Sales Almost exclusively BHPH operation Handful of cash deals Advertised low interest rate of 9.99% Did not negotiate finance price Did negotiate cash price Required GPS device and warranty on financed deals built in in price Price not disclosed until paperwork presented

7 CFPB Herbies Auto Sales Requirements on Herbies: Clearly post price on car Get signed disclosure financing document at time of offering specific car must include: Make, model, year, VIN Terms (length, timing, number, dollar amount of installments) Total number of payments to payoff Purchase price & finance charge List of add-ons APR and amounts for add-ons $700,000 redress

8 CFPB Herbies Auto Sales Lessons learned: Mixing cash and credit sales Include all mandatory costs in finance deal as finance charges Negotiation policies How do you handle warranties Having clearly defined price Pricing solely to payment NO ONE IS TOO SMALL!

9 CFPB & FTC Credit Reporting What is the Furnisher Rule? 1. Have written policies aimed to ensure accuracy of information sent to CRA 2. Investigate and respond to consumer disputes

10 CFPB & FTC Credit Reporting CarHop Advertised that could help rebuild credit Allegedly provided inaccurate credit information Offered right to return within 72 hours Voluntary repo Reported customers as repossessed owing money Payment histories inaccurately reported Reported closed/deleted accounts

11 CFPB & FTC Credit Reporting CarHop - cont d Alleged violations Did not provide consumers address to contest inaccurate information if reason believe inaccurate Did not report good credit info Did not have reasonable policies/procedures appropriate for nature, size, complexity Furnisher Rule $6.5 million fine

12 CFPB & FTC Credit Reporting FTC Tri-Color RFC did not have policies and procedures for investigating consumer disputes Company directed consumers to dispute with CRA $83,000 fine

13 - Auto Fare NC DOJ Fair Lending - Allegations: Reverse Redlining intentionally targeting African Americans for the extension of credit on unfair and predatory terms without meaningfully assessing creditworthiness - State law violations - Failure to comply with repo laws - GPS without disclosing

14 DOJ Fair Lending - Why was the suit brought? - Statements made showing interested in African American consumers - Inferior intellect - Fewer credit options - More likely to accept dealership terms - Derogatory statements - Dominant African American area

15 - What is required? DOJ Fair Lending - Documents policies and procedures for credit apps and financial documents needed - Limit total of payments per months 25% of total documented net income - Deferred down limited to 4 months/$800 total - Provide CarFax at consumer expense - Notice on car mileage, year, make, model, sales price, down payment

16 DOJ Fair Lending - What is required? cont d - Test drive consumer get inspection can have for 3 hours - Provide written notice encouraging test drive - Interest rate caps Maximum minus 5% - Charge same rate to all consumers except rate is reduced additional 3% if - - Down payment 150% of posted - Net income more than $2499 monthly - Previously financed with dealer - FICO more than 550

17 DOJ Fair Lending - What is required? cont d - Pricing limitations 15% greater than NADA retail value - No Doc Fees - Repossession limitations - 2 consecutive installments - Within 45 days and not redeemed, 30% refund of down payment less reasonable fees no refund if more than 2,000 miles driven

18 DOJ Fair Lending - What do I do? - Must have fair lending policy - Watch what you say! - Watch easy front door access

19 Wage and Hour Issues Classification of Employees - Independent Contractors or Employees Overtime exemptions professional, salaried employees Service advisor exemption Supreme Court

20 Dealership Exemptions Minimum Wage/Overtime Executive Administrative Professional Overtime Only Salesman Partsman Mechanic Commission-Paid Motor Carrier

21 Executive Exemption 1. The employee is in charge of a department or sub-department; and 2. The employee supervises the work of two or more full-time employees; and 3. The employee is paid a salary of at least $455 per workweek (for now).

22 Administrative Exemption 1. The employee s primary duty is non-manual office work directly related to management policies or general business operations; and 2. The employee exercises discretion and independent judgment on matters of significance; and 3. The employee is paid a salary of at least $455 per workweek (for now).

23 Professional Exemption 1. The employee s work requires advanced knowledge, invention, imagination or talent; and 2. The employee exercises discretion and independent judgment on matters of significance; and 3. The employee is paid a salary of at least $455 per workweek (for now).

24 White Collar Exemptions Employers will be able to satisfy up to 10% of the salary threshold from nondiscretionary bonuses and incentive payments Includes commissions Can count only those paid quarterly or more frequently

25 White Collar Exemptions Effective December 1, 2016, minimum salary threshold will be $913 per week (paid on a salary basis ) Requirement still applies each pay period (not annualized) Thresholds will be updated every three years, with 150 days' notice

26 Salesman exemption 1. The employee is employed at a retail automotive dealership; and 2. The employee s primary duty is to sell cars or trucks to customers.

27 Partsman exemption 1. The employee is employed at a retail automotive dealership; and 2. The employee s primary duty is stocking, issuing, requisitioning, or selling parts.

28 Mechanic exemption 1. The employee is employed at a retail automotive dealership; and 2. The employee s primary duty is performing mechanical or body repair work on a car or truck.

29 Commission-paid exemption 1. The employee is employed at a retail automotive dealership; and 2. The employee receives the majority of compensation in the form of commissions; and 3. The employee receives at least time and one-half the federal minimum wage ($10.89) for all hours worked.

30 Motor carrier exemption 1. The employee is employed by a motor carrier; and 2. The employee works on or drives a vehicle that weighs 10,000 lbs. or more; and 3. The employee performs safety-affecting duties for the vehicle s operation in interstate commerce.

31 Service Advisor Exemption In Navarro v. Encino Motors, a federal appeals court held that service advisors are NOT exempt salespersons as a result of their job duties Relied on DOL Rule that drastically changed the The issue is currently before the U.S. Supreme Court Dealerships may utilize the commission-paid exemption where available to maintain service advisors exempt status

32 State Issues - State related issues - assistance - Oregon BHPH Legislation - GPS issues - NJ, IL, CA, OK

33 State Issues - SC Doc Fee litigation Consumer charged a closing fee that wasn t directly related to the expenses incurred in closing may sue for damages under SC Dealers Act Dealer couldn t explain how closing fee calculated Court stated dealer must account for costs that comprise its closing fee and fee can t be comprised of general operating expenses Court said dealer may comply with Closing Fee Statute by setting a fee that represents avg. of costs actually incurred by dealer in all closings from prior year

34 State Issues What did the Court s opinion tell us?: The time for analysis of items included in closing fee and cost for each is the point at which the closing fee is set. Dealers are limited to actual costs of retrieving and preparing documents for closing. Costs should not include expenses for salaries of finance and sales managers, building, utilities, "outside services," no general operating expenses not directly tied to sale. It should be OK to set a closing fee in an amount that is an average of the costs the dealer actually incurred in all closings of the prior year. Closing fee is not limited to expenses incurred for document preparation, retrieval, and storage. However, any costs sought to be recovered by a dealer under a closing fee charge must be directly related to the services rendered and expenses incurred in closing the purchase of a vehicle. What about costs of forms, computer programming of closing documents, the hardware to deliver the closing documents, and other such expenses? Freeman v. J.L.H. Investments, LP, 2015 S.C. LEXIS 367 (S.C. November 4, 2015).

35 Contact Me Shaun Petersen Senior Vice President, Legal & Government Affairs 2521 Brown Blvd. Arlington, TX (office)

36 Don t forget to rate my class on the DSUS app. Visit usersummit.dealersocket.com for class notes. THANK YOU