Government Comings and Goings
Shaun PetersenSVP Legal and Govt. Affairs
NATIONAL INDEPENDENTAUTOMOBILE DEALERS ASSOCIATION
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
Military Allotment- Department of Defense Regulation Change- Ban on use of allotments for acquiring personal
property- House and Senate language require report on the
process behind amendement- CFPB "reminder" letters
CFPB - What’s next?⁻ Pending Bills to Reform Structure – HR 5485,
CHOICE Act⁻ Reforming CFPB Indirect Lending Guidance (HR
1737 and S 2663)⁻ House Financial Services Committee Report⁻ Larger Market Participant Rule:
⁻ Comments in support of 10,000 transactions a year or more up to suggested 50,000
⁻ BHPH - Reservation of Right for Potential Rulemaking
⁻ Arbitration Rulemaking ⁻ Debt Collection Rulemaking
CFPB – EZCORP - Facts:- Payday, installment, auto title lender- Ceased doing those loans in the US- Allegations:- Unlawful in-person collection visits at their homes
or workplaces- Risked disclosing consumers’ debt to third parties,
and caused or risked causing adverse employment consequences to consumers such as disciplinary actions or firing
- Ignored consumers requests to stop calling workplaces
CFPB – EZCORP - Deceived consumers with threats of legal action
when that was not true- Ran credit checks on despite advertising it would
not- Required consumers to pay through EFT – cannot
condition loan on preauthorizing repayment through EFT
- Made simultaneous attempts to EFT earlier than promised
- Lied to consumer that could not stop EFT payments, collection calls or prepay
- $7.5 mil restitution; $3 mil fine
CFPB – In Person Collection Guidance - Heightened risk of UDAP violation- “substantial injury to consumers which is not
reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition”
- Third parties may learn consumers have debts in collection
- Co-workers, employers, customers, roommates, neighbors
- Harm reputation- Negative employment consequences
CFPB – In Person Collection Guidance - May result in substantial injury even when there is
no risk the existence of the debt will be disclosed to third parties
- Employers prohibit non-work related visits- Likely or actual consequence of visit to harass
consumer- FDCPA violations – 3rd party collectors
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
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
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
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
Wage and Hour Issues⁻ Classification of Employees - Independent
Contractors or Employees⁻ Overtime exemptions – professional, salaried
employees⁻ Service advisor exemption – Supreme Court
Dealership Exemptions■ Minimum Wage/Overtime Overtime Only■ Executive Salesman■ Administrative Partsman■ Professional Mechanic
Commission-PaidMotor Carrier
Executive Exemption1. The employee is in charge of a department or
sub-department; and2. The employee supervises the work of two or more
full-time employees; and3. The employee is paid a salary of at least $455 per
workweek (for now).
Administrative Exemption1. 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).
Professional Exemption1. The employee’s work requires advanced
knowledge, invention, imagination or talent; and2. 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).
Salesman exemption1. The employee is employed at a “retail”
automotive dealership; and2. The employee’s primary duty is to sell cars or
trucks to customers.
Partsman exemption1. The employee is employed at a “retail”
automotive dealership; and2. The employee’s primary duty is stocking, issuing,
requisitioning, or selling parts.
Mechanic exemption1. The employee is employed at a “retail”
automotive dealership; and2. The employee’s primary duty is performing
mechanical or body repair work on a car or truck.
Commission-paid exemption1. The employee is employed at a “retail”
automotive dealership; and2. The employee receives the majority of
compensation in the form of “commissions;” and3. The employee receives at least time and one-half
the federal minimum wage ($10.89) for all hours worked.
Motor carrier exemption1. The employee is employed by a motor carrier;
and2. The employee works on or drives a vehicle that
weighs 10,000 lbs. or more; and3. The employee performs safety-affecting duties for
the vehicle’s operation in interstate commerce.
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
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
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
DOJ – Fair Lending- Auto Fare – NC- 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
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
DOJ – Fair Lending- What is required?- 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
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- - Downpayment – 150% of posted
- Net income more than $2499 monthly- Previously financed with dealer- FICO more than 550
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
DOJ – Fair Lending- What do I do?- Must have fair lending policy- Watch what you say!- Watch easy front door access
State Issues- State related issues - assistance
- Oregon BHPH Legislation- GPS issues - NJ, IL, CA, OK
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
State IssuesWhat 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).
Get Involved- National Leadership Conference – Sept. 26-28 –
Washington, DC- NIADA PAC Fund
Shaun PetersenSenior Vice President, Legal & Government AffairsS2521 Brown Blvd.Arlington, TX 76006817-640-3838 (office614-738-0960 (cell)[email protected]