2018 GNYADA Membership Directory

A pattern of numerous unwinds of spot deals may give plaintiffs’lawyers or regulators grounds to claim the dealer is engaging in “yo-yo financing,” which can be a deceptive trade practice under Section 5 of the FTC Act or state law. It is a good practice to monitor what percentages of your spot deals are unwound. If you see the percentage rising, investigate and train your sales and F&I officers on what types of deals you believe your lenders will buy. A dealer should be prepared to show that the dealership made a good faith effort to get the original deal financed with multiple finance sources. Many of the principles applicable to spot deliveries in a sale transaction would apply to a lease transaction, though some terms and conditions of the spot delivery might change based on state law. Any forms used to document the terms of the lease spot delivery would need to reflect those changes. The Federal Odometer Law This law requires sellers of motor vehicles to disclose to buyers in writing the odometer reading of the vehicle being sold, and prohibits tampering with odometer devices. The buyer must review and sign the disclosure. For used car sales, the odometer reading at the time of transfer must be disclosed on the title. Specific additional disclosures are required by this law and other applicable regulations, plus there are recordkeeping requirements. State laws also govern registration and titling requirements. Internet Sales This is an evolving area of the law as dealers increase sales to out-of-state buyers using a variety of web-based tools. When a dispute arises, the buyer will attempt to sue the dealer in the buyer’s home state and claim that the dealer should have been licensed in their home state and/or that the law of their home state (including those laws addressing contract disclosures, and related consumer credit requirements and limitations) applies to the transaction. Consult a knowledgeable attorney on how to minimize your risks when selling to out-of-state customers through an Internet sale process. State Law Restrictions on Fees State laws also limit or restrict fees that may be charged by a dealer, especially when the vehicle purchase will be financed in a credit sale. Some fees are only applicable to credit sales (e.g., application fees, credit investigation fees, lien recording fees, etc.). State retail installment sales acts and consumer credit codes often limit or prohibit the kinds of fees that may be charged in a credit sale. Some of these fees may also be treated as a finance charge under federal law, state law, or both. Some fees are charged in both cash and credit sales. Document preparation (“doc fees”) is a good example of a fee that dealers typically charge in both cash and credit sales. As a general rule, a dealer should not charge doc fees in a credit sale unless the dealer also charges the same doc fee in a cash sale. This is because charging a doc fee only for credit sales means that the doc fee will be treated as a finance charge under federal law, and that complicates things for the dealer and any assignee of the finance contract. In many states, a doc fee that is a finance charge would be subject to rebate upon prepayment of the finance contract. In addition, the systems responsible for creating the federal Truth in Lending disclosures on a RISC will not be able to calculate the impact of the doc fee on the finance charge and APR disclosures. So, a dealer that charges a doc fee only on credit sales is likely to understate the finance charge and APR in violation of federal law, and possibly state law as well.

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