compliance guide presentation (full guide)

COLORADO DEALER COMPLIANCE GUIDE

Presenter

CADA/McGloin, Davenport, Severson and Snow, P.C.

Michael J. Dommermuth, Esq.McGloin, Davenport, Severson & Snow, P.C.1600 Stout Street, Suite 1600Denver, Colorado, 80202Direct Dial: (720) 536-3550Phone: (303) 863-9800Facsimile: (303) 571-1600Miked@mdsslaw.com

Your Guide to Colorado Laws and Regulations

•Provide Dealers with a Single Reference Guide

•Summarize Key Colorado State Laws that Impact Dealers

•Organized for Ease of Use

•Understandable and Useful Summaries (2-3 Pages per Topic)

•Relevant State Forms and Publications and Links to Additional Resources

•Cross-references to Statutes and Regulations

•Joint Effort of CADA and MDSS

SOURCES OF REGULATION

• Statute• Regulations• Case Law

OVERVIEW OF STATE REGULATIONS• Licenses• Two Government Agencies• Motor Vehicle Dealer Board (administer laws, create

rules, discipline)• Auto Industry Division (enforcement, licensing,

regulation)

• Manufacturer/Distributors• Executive Director of Department of Revenue • Powersports Industry• Other State Agencies

• Do Not Abandon a Vehicle - Crime

• Vehicle Presumed Abandoned– Left Unattended or Unmoved 7 or More Days or

– License Plate/Vin Removed

– Vehicle Damage exceeds Value (Salvage)

– Owner Contacted by Law Enforcement to Remove and Fails to Do so Within in 3 days

ABANDONED VEHICLES

• Repair Shop Abandonment– Vehicle Left at Repair by Owner and

– Repair Shop Offered to Repair and Offered an Estimate and

– Owner Refused to Allow Repair, Refused to Remove the Vehicle Or Refused to Pay for Authorized Repairs and

– Vehicle Not Subject to Sale Agreement

• Must Meet all 4

ABANDONED VEHICLES (cont.)

ABANDONED VEHICLES (cont.)• To Satisfy 3rd Requirement

– Send Certified Letter to Owner, Include Copy of Repair Order

– If No Response Within 10 Working Days of Postmark date, Vehicle is Considered Abandoned

ABANDONED VEHICLES (cont.)• Current Regulation Includes a $2,000 Limit• If Value Less Than $200 – Scrap• Procedures DR 2542

– Establish Value – 15-30 days

– Certify Vin

– Request Title Search

– Notify Owner and Lienholders

– Bond 2x

– Wait 30 Days – File Statement with DMV

• Records Must Be Kept 3 Years!

• Very Broad Definition• Colorado Requirements

– State Dealer’s name– Sales Tax– Accurate! (MVDB Rules)– Price

• Include all costs to customer• Requirements if a specific vehicle is advertised• Savings must be documented• Trade-in amount with MSRP

ADVERTISING

• Colorado Requirements (cont.)– Condition of Advertised Vehicle

• Not operable• Photo of similar vehicle• State if used• State if salvage

– Miscellaneous• Going out of business• Do not try to hide terms• Do not falsely imply terms• Do not use terms “dealer cost”, “invoice”, or “wholesale”• Restriction on prize or gift ads

• Out of State Advertising – Jurisdictional issues– Posting on internet

ADVERTISING

• Private Dispute Resolution

• Stay out of Court

• Requires a Contractual Agreement

• Private Judge

ARBITRATION

ARBITRATION (cont.)

PROS• Less Expensive• Faster and More Efficient• Use in Conjunction with Class

Waiver• Less Adversarial – Minimize

Hostility• No Punitive Damages• Can be Done Without

Attorneys

CADA/McGloin, Davenport, Severson & Snow, P.C.

• No Appeal Rights – If Lose, That’s It!

• Arbitrators Split baby• Same Arbitration Forums

Expensive - $500 Per Hour Arbiters

• Dealer Should Pay Most of Cost of Arbitration

ARBITRATION (cont.)

KEY TERMS•Who – How Many Arbitrators•Where•What Types of Disputes•How•Appeal Rights•Consistency with RISC and Purchase Agreement•Do you Sell if Customer Refuses

• Three Types– Chapter 7– Chapter 13– Chapter 11

• Federal Law Generally• State Law for Lien Perfection• Lien Perfection Is Essential

– Protect your claim– Prevent lender buy-back

BANKRUPTCY / LIEN PERFECTION

• Bankruptcy Basics– Begins with debtor filing a “petition”– Automatic stay prohibits any collection activities

• Including repossession

• Important Dates– Creditor’s meeting– Proof of claim deadline

• Contact Legal Counsel

BANKRUPTCY / LIEN PERFECTION (Cont.)

• Automatic Stay

What Do You Do When You Get A Bankruptcy Notice

• 30 Days!Procedure

Must File with DMV:• Signed RISC

– Name and Address of Debtor(s)– Name and Address of Lienholder– Make, VIN and Year– Date and Amount of Loan

• Certificate of Title Application• State Filing Fee

• Time: Date Stamped Receipt of Filing

BANKRUPTCY / LIEN PERFECTION (Cont.)

• Lawsuit by Group of People in Same Situation– Plaintiff’s goal is settlement

• The Class– Request to certify– Four elements– Expensive early process

• Class Action Waivers in Contracts• Add-on fees

– Frequent target of class actions– Include in price of car– Disclose to customer– Justifiable– Include in repair estimate

CLASS ACTION LAWSUITS

• Sale of Vehicle on Behalf of Owner

• Need a Written Agreement

• Owner May Be Required to Deliver Title Even if Not Paid

• ISSUES TO CONSIDER

CONSIGNMENT

• Generally– Regulates transactions with consumers – Limits finance charges / sets maximums

– Applies to products used for personal or household

purposes • Annual Notice Filing • Allowable “Additional Charges”

– Not included in finance charge

– Fees, taxes, insurance charges, etc.

CONSUMER CREDIT CODE

• Written Contract Required– Even if deal re-done– Disclose information about financing (APR, financing

charge, etc.)– Insurance disclosure

• Buyer’s Right to Cancel “Home Solicitation Sale” • Notice of Default and Right to Cure Required • No “Unconscionable” Conduct

– Taking advantage

CONSUMER CREDIT CODE (Cont.)

• CCPA – Deceptive Trade Practices– False representation regarding vehicles (new v. used,

advertising)– Failure to deliver written contract– Failure to disclose– Failure to have licenses

• Specific to Motor Vehicles– Guarantee financing– Selling trade-in/return down payment

• Triple Damages and Attorney Fees• Security Breach Notification

CONSUMER PROTECTION ACT

•TRUNCATION!!!

CREDIT CARDS

• Dealers Must Make Written Disclosure

– Salvage

– Lemon

– Known Material Damage

• Salvage

– Cost of Repair Exceeds Value

– Failure to Disclose Salvage Requires Full and Immediate Refund

• Material

– “Those Details Concerning a Vehicle for Sale that are Essential or Necessary for a Reasonable Prospective Buyer to Know”

– Question of Fact = Jury Trial– Best Practice – Disclose– Might Have a Claim against Seller Upstream

DAMAGE DISCLOSURE

• Permissible, But Not in Statute or Regulation • Must Charge Uniformly

– Cash and credit customers

• Risk of Class Actions • Must Disclose as Additional Dealer Costs and

Profits– Disclose in all purchase contracts– Post signs

• Must Be in Advertised Prices– “Advertisement” is defined broadly

• Manufacturer Programs

DELIVERY & HANDLING FEES

• Disclosures– All transactions

• Failure to Make Disclosures = Deceptive Trade Practice• Terms

– Legal documents– Only written terms are enforceable– Notice that fraud is punishable by law– CASH SALE – notice that a lump sum is due– CONTINGENT FINANCING - customer will agree to maximum APR

• Best Practice – use interest rate close to RISC

– Daily and mileage rate if no financing– MVDB contact

• Sign New Documents on Refinancing• Disclose Lemon Status Conspicuously

DISCLOSURES

• Program Area– Enhanced/Gasoline Testing (metro counties)– Diesel (metro counties)

• Emission Exempt Stickers (Four Year)– Resale – Record-keeping requirements

• Exempt Sticker Replacements• Emission Testing Vouchers or Test Must be Provided• Cost Passed to Customers• Retain Proof of Emissions Test • Vehicles that FAIL Emissions

– Timing– Repair or unwind

EMISSIONS

EQUIPMENT

• Dealers have a Statutory Obligation to Sell Vehicles with Certain Equipment

• Proper Condition and Adjustment

• Safety Inspection

• Tow Away, Not to Be Driven

EQUIPMENT (Cont.)Equipment Certification

• TV Screens• 2 Head lamps• 2 Tail lamps• License Plate Lamp• Rear Reflectors• Break Lights• Turn Signals

• Functioning Beam Indicator

• Working Breaks• Horn• Review Mirror• Wipers

• Goal – To Protect Competition in Financing– No single source financing agreement– No side-deals that reduce competition– Dealers must be free to offer financing from

multiple sources

• For a Violation– Possible crime– Double damages– Void contract

FINANCE – ANTI-MONPOLOY LAW

• Transfer of Franchise Ownership or Change of Management– No unreasonable denial– 20 days to confirm receipt of notice/ask for information– 60 days to decide– Cannot condition on site control, renovation

• Protection from Exclusivity Requirement• Manufacturer Must Make All Models Available to All

Dealers• Equal Treatment on Incentives, Bonuses and

Rebates

FRANCHISE LAW

• Protection from Required Facility Upgrades• Protection for Relocation Requests• Manufacturers Are Prohibited from Owning

Franchises• Reimbursement for Right of First Refusal• Protection from Unreasonable Export Charge Backs• Termination of a Franchise – “Just Cause” Required

FRANCHISE LAW (Cont.)

• Disclose Value of Prize in Advertisement (CCPA)• “No Purchase or Payment Necessary” Language• “Free” Item in Connection with Purchase – Cannot

Raise the Price of the Required Purchase (Federal Law)

• Sweepstakes Cannot Require a Purchase (Federal Law)

GIVEAWAYS, RAFFLES AND PRIZE PROMOTIONS

• Debt Cancellation or Insurance?– Typically a debt-cancellation contract (lender waives

amount due after loss)– Insurance (insurer pays off amount due after loss)

• Maximum Charges– GAP fee may not exceed $300 or 2% of the amount

financed, whichever is higher.

GUARANTEED AUTOMOBILE PROTECTION (GAP)

• Requirements– Leases are excluded– Allows GAP to be sold for an “additional fee”– Disclosure

• GAP not required, may cancel, fee– Contract provision– Separate cancellation agreement

• Provide Customer with Policy and Terms• Refunds – if Loan is Prepaid or on Repossession

GUARANTEED AUTOMOBILE PROTECTION (GAP) (Cont.)

• Dealer’s Obligation • Secure and Verifiable ID (SVID) Required for Title

– Dealers must provide ID verification– Only certain forms of ID acceptable

• Temporary Permits– Obtain proof vehicle sold to person on permit– Vehicles going out of state excepted

• Third-Party Lender Agreements Require Verification• Not the Same as “Evidence of Lawful Presence”

ID THEFT / SECURITY BREACH NOTICE

• “Insurance” – One Party Takes Risk For Payment • Must be Licensed to Sell Insurance With Vehicle • Individual License

– Pre-license education and continuing education

• Agency License– Nominate responsible person– Responsible person must be licensed

INSURANCE (SELLING)

• Dealers not Legally Required to Confirm Customer has Insurance

• Consumer Credit Transaction– Disclose that dealer is not providing insurance

– Have customer indicate whether they have insurance • Best practice - Verify Insurance

– Failure may be breach of lender agreements– Prevent third-party claims against dealer if customer

causes accident

INSURANCE VERIFICATION

• Violations of Law by Dealers or Salespersons– Auto Industry Division – primary enforcement agency – Motor Vehicle Dealer Board – decision maker

• Procedure– Complaint (consumer, another dealer, salesperson, audit)– AID conducts an initial investigation and findings

• AID can settle the matter• MVDB can review any case (pattern of violations, willful violations,

danger to public)

– Final decision• Penalties and fines (punitive, increase for successive violations)

– Appeal

INVESTIGATIONS / DISCIPLINARY ACTIONS

• License Denial, Suspension or Revocation– Material misstatement in application– Fraud– Failure to maintain bond– Misleading advertising– Selling unsafe vehicle

• Violations that Apply to Dealer Licensees Only– Failure to perform agreements– Misrepresenting material facts to customer– No principal place of business– No notice of rejection of purchase

• Violations that Apply to Salesperson Licensees Only– Selling without a license– Improperly using or withholding a customer’s money

INVESTIGATIONS / DISCIPLINARY ACTIONS (Cont.)

• Primarily Manufacturer Obligation

• Only New Vehicles Still Within Manufacturers Original Written Warranty

• No Commercial Vehicle Coverage

• Excludes Motor Homes, Motorcycles, Vehicles capable of Carrying 10+

LEMON LAWS

LEMON LAWS (Cont.)

• Must Conform to Warranty Within 1 Year of Delivery

• If Cannot be repaired after a reasonable number of attempts and defect substantially impairs use and market value…

• Manufacturer Must Replace or Refund Full Purchase Price

LEMON LAWS (Cont.)

• Written Notice to Manufacturer Required

• Written Disclosure to Subsequent Purchaser

• Repair Shops Have a Lien– But must keep vehicle

• Twelve-Day Repossession For Non-Payment– Sample letters in Guide

• Foreclosure– Must have possession– 30 days after bill was due– File lawsuit– 90-day limit

• Recommended Notices • Best Practices

– Get customer’s address– Have owner’s information– Accurate description of vehicle– Repossess vehicle peacefully or not at all

MECHANICS AND STORAGE LIEN

• Defined by Law– New: transferred from manufacturer to dealer for the first

time• Demo < 1,500 mi (must be demo use only)

– Used: Not new • Illegal to Represent Used Vehicle as New

– Includes advertisements

• Best practice – a Failed Spot Delivery Converts a “New” Vehicle to “Used”

• Check the Correct Box in RISC

NEW vs. USED

• Disclosure Required on Sale and Service– Disclose discrepancy

• Tampering/Fraud is a Serious Offense– Dealer and Salesperson cannot renew license

• Legitimate Repair– Set to zero– Written notice attached to vehicle

ODOMETER

• Permit to Sell Away from Dealership– Not for “display” only events

• Key Requirements– Request permit in writing before event– Post permit at sale– 6-day maximum– No consecutive permits

OFF PREMISE PERMITS

• Full-Use Dealer Plates– Many purposes– Owners or employees of the dealership– Inventory and sales requirements

• Dealer Demo Plates– Only for prospective buyer demonstration or legitimate

business purposes– 7 day maximum

• Depot Plates– Moving vehicle for repair

• In-Transit Plates– From purchase to storage or storage to point of sale

PLATES

• State and Federal Laws• Statute of Limitations for Potential Lawsuits• Record Retention Guidance from Heider, Tanner

and Dirks

RECORD RETENTION

• Generally Allowed– No specific law, regulation or guideline

• Gray Area for Licensing• Licensed “Buyers Agents” Cannot be Paid Referral

REFERRAL FEES

• Motor Vehicle Repair Act– Ensure customers informed and consent before repair

• Customer Authorization for Repairs / Work Order– Total cost of repair– Completion date– SIGNED– Exceptions

• Waiver Language

REPAIRS / SERVICE (MVRA)

• Oral Consent1. Date Given

2. Time

3. Manner of Consent (Telephone or Otherwise)

4. Name of Service Advisor

5. Total Amount of Estimate

6. Expected Completion Date

7. Name of Person Giving Consent

REPAIRS / SERVICE (MVRA) (Cont.)

• Disassembly

• Completion Dates

• Storage – Requires a Separate Written Contract – Storage Limitation

• Invoice1. Customers Name and Address

2.Year, Make, Model, Odometer, Start Date and License Number

3.Date Brought In

4.Itemization of All Parts

5.All Labor Charges – Including Name of Mechanic

6.Stages – Separate Mechanics

7.Itemized Statement of Charges

8.Identification of Sublet Repairs

9.Initials of Person Completing

• Before Repossession– Dealer must have valid security interest– Buyer must be in default

• If Using a 3rd Party Must Use Bonded Repossession Service

• Consumer Credit Sales - Default– Default: 10 day failure to make payment– Send notice of right to cure – 20 day right to cure– Co-signer

REPOSSESSION

REPOSSESSION (Cont.)

• Notice of Intent to Repossess to Law Enforcement Notice of Intent to Sell

• Notice to Law Enforcement within 1 Hour

• Do Not Breach Peace

• Salvage – Cost of Repair Exceeds Value– Excludes vehicles 6 years or older

• Salvage Status Must be Disclosed to Buyer– Buyer is entitled to a full refund if not– Knowledge not relevant

• Salvage Status Must be Noted on Title– Branded on door also

• Other States may not Note Salvage Status on Title

SALVAGE VEHICLES

• Must Be Insured • Service Contract Must State

– Insurer will pay if “provider” does not– Contact information for insurer

• Manufacturer Warranties Excluded• Penalties

– Attorney fees– Triple damages– MVDB enforcement

SERVICE CONTRACTS / VSC / EXTENDED WARRANTIES

• Legally Allowed, But:– CANNOT sell trade-in before approval

• Deceptive trade practice– NEVER “guarantee” financing IN ANY WAY

• “With your credit score, financing will be no problem at all."

• 10 Day Notification if Financing not Approved– Not business days– Best practice – in writing– Best practice – notify customer if the lender has not funded

for any reason

SPOT DELIVERY

• Required Disclosure– Bailment charges

• Take steps to minimize

– Must negotiate alternatives

• Re-Contracting: DO NOT PRE-DATE THE CONTRACT

• Retain Deposits to Cover Charges– Must be in disclosure– Only if no “guarantee” of financing

• Follow the Same Practices for Leases

SPOT DELIVERY (Cont.)

• DR 2434 – RISC– Seller can Cancel– No Guarantee of Financing– Bailment– 10 Day Notice Requirement – Written

Notice– DO NOT SELL TRADE

SPOT DELIVERY (Cont.)

• No Selling on Sundays– Applies to motor vehicles– Applies to every person– Applies to selling, negotiating and offering to sell

• Excludes Boats, Snowmobiles, and Agricultural Equipment

• Excludes Repair or Towing Services

SUNDAY SALES

• Dealers Collect Sales Tax– State and local taxes– Use tax

• Tax Rate Depends on Place of Registration– Residence for private customer– Where operated for business

• Collect Sales Tax Where Dealer and Customer Share Location

• Tax Discrepancies Do Not Change the Lien Perfection Date– No title issued until all taxes collected

TAXES – SALES AND USE

• Resources for Tax Rates – State and Private Parties– Hold Harmless Provisions – document how dealer obtained

tax rate– No help for delayed titles

• No Sales Tax if Vehicle Removed from Colorado Within 30 Days

TAXES – SALES AND USE (Cont.)

• Purchased from County• Monitored by State and Law Enforcement• Key Requirements

– Dealer completes• Errors void the plate

– 60-day duration– Dealer stubs to state, customer and dealer– Placed in rear of vehicle in readable location– May only be used for operable vehicles

• Report Lost or Stolen Permits – If lost by customer, customer must go to the county for re-

TEMPORARY PERMITS

• Upon Sale – Registered and New Title Issued• Dealer's Obligations Upon Sale

– Deliver certificate of title within 30 days• To customer on cash sale• To correct DMV on financed sale• To county of residence or primary use

– Failure could lead to loss of lien or liability to customer

• Contents of Application– Application for title and registration (DR 2395)

– Sales tax receipt, bill of sale, odometer disclosure, power of

attorney, emissions • Dealers Must Maintain Proof of Ownership

TITLE PROCESSING & REGISTRATION

• Objective is the Return of Unclaimed Property– Office of the State Treasurer, Unclaimed Property– Unclaimed property held in trust– Not motor vehicles

• Dealers Must– Attempt to identify, reach owners– Turn unclaimed property over to State– Report unclaimed property to State

• Any Money Due is Covered– Credit balances, refunds, referral fees, etc.

• The State May Audit • Retain Records for 5 Years

UNCLAIMED PROPERTY

• Prevents Loss From a Specific Cause– Etch, theft registration, tire protection programs

• Colorado Vehicle Protection Products Act • Contract Requirements

– Identity of all parties– Guaranteed by insurance policy– Customer may claim against insurer– Disclosure that product is not insurance

• Not Insurance – Exempt from Insurance Laws and Regulations

• Consumer Suits Possible if Products are not Disclosed

VEHICLE PROTECTION PRODUCTS

• Not Suitable for Use on a Vehicle– Included motorcycles

• Dealers Must– Register as a retailer that generates waste tires– Keep a copy of the registration– Only use a registered hauler to transport waste tires

• Waste Tire Recycling Fee Collection– On sales of new tires– Disclose fee on invoice

WASTE TIRES

Thank You!

Contact: Tammi McCoy, CADA

Mike Dommermuth, MDSS

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