2017 GNYADA Membership Directory

State laws also may require other disclosures and mandate that certain contract terms be conspicuously disclosed as well. Both RISCs and lease agreements must state the monthly payments and term of the payment obligations. TILA and Regulation Z also include negative equity on a trade-in into the cash price disclosure on a RISC. Negative equity should either be used to reduce the customer’s down payment (but not below $0) or itemized under “Amounts Paid to Others”and not as part of the sales price of the vehicle. TILA also requires listing items that a consumer is not required to purchase in order to obtain credit, but elects to do so. These items are typically disclosed in the Itemization of the Amount Financed on the RISC. Simply including the un-itemized cost of aftermarket items such as vehicle etching, service contracts, rustproofing, and other items into the cash price of the vehicle constitutes “payment packing”, an activity of great interest to the FTC and state Attorneys General. Even if an aftermarket product is permitted under applicable state and federal law, failing to disclose these items in the Itemization of the Amount Financed could subject the dealer to regulatory scrutiny and/or lawsuit. For example, a dealer was sued in a class action alleging a TILA violation for including vehicle etching in the cash price of new motor vehicles without disclosing that it was doing so – or that the vehicle etching was optional. Pick-Up Payments: TILA also addresses the subject of deferred down payments (also called“pick-up payments”), a practice in which the consumer agrees to make a portion of the contractual down payment at a time later than contract signing and vehicle delivery. A deferred portion of a down payment may be treated as part of the down payment if it is payable not later than the due date of the second otherwise regularly scheduled payment and is not subject to any finance charge. However, most lender agreements require the dealer to represent and warrant that it has received the down payment in full prior to assigning any contract to the lender. Thus, while TILA permits deferred down payments, there is a strong risk that a lender will require a dealer to repurchase a RISC for breaching the rep and warranty that the down payment has been received in full. TILA also provides several ways to disclose pick-up payments. If the pick-up payment is treated as part of the down payment, it must be subtracted from the amount financed. Alternatively, it may, but need not, be reflected in the payment schedule. But if the pick-up payment goes in the payment schedule, it must be included in the Total of Payments disclosure required by TILA. State laws also have provisions relating to deferred down payments. Some states require a separate disclosure of the deferred portion of the down payment on the RISC. Non-disclosure of the deferred portion on the face of the RISC may violate state law. TILA disclosures must reflect the legal obligation of the parties. If information necessary for the accurate disclosure is unknown, the disclosure may base the information on the best information reasonably known to the creditor and label the disclosures as estimates. In the case of a refinancing, new TILA disclosures must be provided for the refinanced transaction. TILA also includes recordkeeping requirements. Creditors must retain evidence of compliance for two years after the disclosures are required to be made. FTC Credit Practices Rule The FTC Credit Practices Rule prohibits certain unfair contract provisions, such as making consumers assign their wages to get credit or a creditor taking a lien on household goods to secure payment. It prohibits “pyramiding” of late fees, when a payment is considered late only because the payment did not include a late fee from the previous payment. The Credit Practices Rule also requires giving cosigners an FTC-mandated notice describing their potential liability if the consumer fails to pay. The notice must be given and signed by the cosigner before

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2017

MEMBERSHIP DIRECTORY 167