GNYADA 2019 Membership Directory & Services Guide

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 State laws have not really caught up with the evolving online vehicle sales and financing platforms, but dealers are able to increase sales by selling to out-of-state buyers using a variety of web-based tools. When an out-of- state dispute arises, the buyer will often 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. This could potentially trigger scrutiny by state regulators too. Also check your dealer agreements with your lenders. Many dealer agreements contain representations by you that the deal has been conducted entirely within your dealership, and thus may subject your deal to repurchase. 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. Even where doc fees are charged on both cash and credit sales, state law may limit the doc fee to a specific dollar amount or to a reasonable amount in relation to the actual costs of preparing and filing documentation. A great deal of litigation has occurred relating to the propriety of doc fees charged by dealers in states where no specific amount is provided by law. Know your state law on permissible doc fees and consult your local attorney if no specific amount is permitted, or the doc fees are limited to being “reasonable.”

2019 membership directory & services guide / hot topics

PG 215