independent dealer magazine november 2012 issue

November 2012 — Independent Dealer — 1 www.fiada.com

Information and Insight for Florida Used Car Dealers

SINCE 1940

A Publication of theFlorida IndependentAutomobile DealersAssociation

November 2012

PRST STDU.S. POSTAGE

PAIDFULTON, MO

PERMIT NO. 38

www.FIADA.com

Heading into a new era, FIADA puts its focus on three key areas: increasing membership, building leaders and growing the PAC. Read President Chris Leedom’s vision for the future on PagE 4.

2 — Independent Dealer — November 2012 www.fiada.comPAID ADVERTISING

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DealerIndependent

MAILING ADDRESS 1840 Fiddler Court Tallahassee, FL 32308 TELEPHONE (850) 385-2712 (800) 237-0448 FAX (850) 385-3251 WEBSITE www.FIADA.com

EXECUTIVE COMMITTEE Christopher Leedom President

Dino Mercurio Senior Vice President

Brandi Noegel Chairman of the Board

David Cox, CMD Secretary

Paul Matton Treasurer

Frank Fuzy Regional Vice President

George Hickey Regional Vice President

Steve Marbais, CMD Regional Vice President

Jim Winterick, Sr. Regional Vice President

Jim Winterick, Jr. Regional Vice President

FIADA STAFF Lisette Mariner Executive Director

Terry Myers Educational Instructor

Sarah Langley Administrative Director

Leah Nash Membership Coordinator

Nicole Lee Development Administrator Amelia Tillman Administrative Assistant

Christy Taylor Editorial/Advertising

POSTMaSTER:Send address changes to

FIADA • 1840 Fiddler CourtTallahassee, FL 32308

(850) 385-2712 • Toll Free: (800) 237-0448Fax (850) 385-3251 • www.FIADA.com

The Independent Dealer is a publication of:Florida Independent Automobile

Dealers Association,1840 Fiddler Court, Tallahassee, FL 32308

The magazine is published every month inTallahassee and distributed to Florida new, used,

wholesale and lease/retail car dealers.Advertising rates are available upon request.

The statements and opinions expressedherein are those of the individual authors and do

not necessarily represent the views of Independent Dealer or the Association. Likewise, the

appearance of advertisers, or their identification as members of FIADA, does not constitute an

endorsement of the products or services featured.

ContentsNovember 2012

For members of the Florida Independent Automobile Dealers Association

C O LU M N S & F E AT U R E S

4 President’s Message Christopher Leedom

6 Executive Director’s Message Lisette Mariner

8 What’s In It For You? Leah Nash

10 Membership News New, Renewing and Rejoining Members

11 Logged On Get the most out of your membership by learning how to use the powerful features of www.FIADA.com. Up first: Setting up your member profile.

12 Leadership Profile The FIADA Executive Committee members are dealers just like you who want to give back to the Association. Learn their story and how they want to help you.

15 Title and Registration Training Take advantage of this new course being offered by the FIADA

16 Yes, It Is Time to Renew Your “License to Make Money” Terry Myers

18 It’s Your Move Deciding what to do when your lease customer files for Bankruptcy is an important decision. Understand your options and what will work for you.

20 The FTC Used Car Rule and Window Sticker Made Easy Industry Expert Keith Whann explains what you should be doing with The Buyer’s Guide and how to stay compliant with this Federal Rule.

24 Legal Round-Up Attorneys Thomas B. Hudson and Nicole Frush Munro update dealers on important federal news and ongoing litigation of importance to dealers.

26 Legislative Update FIADA Lobbyist Sandra Mortham

29 To Pay or Not to Pay? How do you handle the paycheck when inclement weather forces you to close your business for a few days?

30 Industry News

4 — Independent Dealer — November 2012 www.fiada.com

F R O M T H E P R E S I D E N T

Pounding the DrumBY CHRISTOPHER LEEDOM, FIADA PRESIDENT

Last month I had the privilege of being sworn in as the President for FIADA for 2012-2013. It is indeed an honor to represent you and help lead FIADA for

the upcoming year. Thank you for your support.

If you were not able to attend the annual convention you really missed an informative and enjoyable time. The education sessions were well attended (and counted toward CE credits), the exhibit hall had over 60 vendors with some of the best products for your business, and the entertainment was first class. We hope to see everyone next year in Orlando and let’s set a record for attendance!

During my acceptance speech I pledged to focus on three key areas over the next year. You will hear me pounding the drum on these goals quite a bit over the next 11 months. First and foremost is our membership. Everyone agrees as an association member is your strength and lifeblood. We have about 700 members as of this writing. My goal is to increase that by 20 percent of the next year. How do we do that?

First, I would like to challenge each of you to sponsor a member dealer. Everyone knows a good dealer friend from the auction or perhaps even in your market. Yes they may be a competitor but by all of us marching together and having a stronger voice through FIADA we all benefit. It helps insure your business will benefit if we have more dealers to support our legislative and association efforts. This is critical. So I challenge you, find at least one dealer and offer to sponsor their membership for the first year. I have committed to sponsoring three new dealer members. So far I have identified one. Call the FIADA office and Lisette and

her team will take the name of the dealer you wish to sponsor and will send a letter notifying them that they are now members of FIADA and you sponsored their membership. We want to welcome as many dealers as possible to FIADA. If we all added one member we would double our membership – think about it.

Secondly, we need to support our PAC. We heard at convention that money is the mother’s milk of politics and it is true. We raised nearly $4,000 for our PAC at the convention. The PAC is how we insure our voice is heard in Tallahassee on important issues like curbstoning, repo hold, and a myriad of other issues. Other states have been blindsided by legislation that is not friendly to our industry and when you lack the resources to properly respond it is not a good place to be. So consider donating to our PAC and supporting our legislative efforts.

Finally, we need some volunteers. FIADA, as you know, is a volunteer organization. We need good dealers to step up and help lead the association by participating in our board of directors and committees. Please feel free to email me at [email protected] or contact Lisette Mariner and step forward. Our next board meeting is in January and we would love to see five new dealers get involved. It is a most rewarding experience.

As we approach the holiday season I hope each of you enjoy a Happy Thanksgiving with your families and loved ones. Have a great month!

Christopher Leedom,FIADA President


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E X E C U T I V E D I R E C T O R ’ S M E S S A G E

Heavy Truck Dealer Plates Get New RulesBY LISETTE MARINER, EXECUTIVE DIRECTOR

FIADA recently received an announcement from the Bureau of Issuance Oversight, Division

of Motorist Services regarding House Bill 1223 to share with you. The announcement states:

Effective January 1, 2013, pursuant to HB 1223, a dealer of heavy trucks as defined in s. 320.01(10), upon payment of the license tax imposed by s. 320.08(12), may secure one or more dealer license plates that are valid for use on vehicles owned by the dealer to whom such plates are issued while the heavy trucks are in inventory and for sale and are being used only in the state for demonstration purposes. The license plates may be used for demonstration purposes for a period not to exceed 24 hours. The license plates must be validated on a form prescribed by the department and must be retained in the vehicle being operated.

The Department has created a form HSMV 82084 for this purpose and will post it on-line for use effective January 1, 2013 at the Department’s website at http://flhsmv.gov/html/forms-NUMBER_DMV.html. An e-mail will be sent by the Department as soon as form HSMV 82084 is posted.

Here is what the new forms will look like:

www.fiada.com6 — Independent Dealer — November 2012

State of FloridaDepartment of Highway Safety and Motor Vehicles

Dealer Plates for Heavy Trucks for Demonstration Purposes

Dealership Information:

Name of Dealership: ________________________________________________________________

Address: _________________________________________________________________________

City:__________________________ State: __________________ Zip Code: _________________

Dealer License Number: _____________________________________________________________

Driver Information:

Name of Driver:____________________________________________________________________

Address:__________________________________________________________________________

City:__________________________ State:__________________ Zip Code: _________________

Telephone number: _________________________________________________________________

Driver License Number: _____________________________________________________________

Dealer License Plate Number:_________________________________________________________

Vehicle Identification Number:________________________________________________________

Date of Demonstration:______________________________________________________________

Date Demonstration Started:__________________________________________________________

Date Demonstration Ended:___________________________________________________________

Total Number of Hours:______________________________________________________________(Not to exceed 24 consecutive hours)

Signature of Driver:_________________________________________________________________

Name of Dealer Representative: _______________________________________________________

Signature of Dealer Representative: ____________________________________________________

To Be Retained at the Dealership for Audit by the Department

“Under penalty of perjury, I do swear or affirm that all the information contained in this application is true and correct.”

Signature of Dealer Principal/Officer Typed Name and Title

HSMV 82084 (11/12)

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www.fiada.com8 — Independent Dealer — September 2012

BY LEAH NASH, MEMBERSHIP COORDINATOR

There is something always going on at the Florida Independent Automobile Dealers Association. This month, I would like to call a few of those items to

your attention:

FIADA Online. FIADA and its staff work hard to be there for all members and potential members by providing technical assistance on a daily basis. There are times, however, when the FIADA staff may be unavailable due to the time of day or other extenuating circumstance. In these instances, please refer to the FIADA website, located at www.fiada.com, for resources.

Is it time for you to renew your membership or would you like to refer another dealer to join? Joining FIADA or renewing your membership is literally just a few simple clicks. Just click on “Join Now” at the top of the page to renew your membership or help someone else to join. After joining, you will have your own login to access member resources such as Resource Library and be able to create your own FIADA profile.

Looking for Classes? The FIADA website also has an online calendar of events that includes all Dealer Training

School classes, including Pre-Licensing seminars, Title and Registration classes and all available Continuing Education classes. The site is easy to use and you can even sign up and pay for your classes online. Don’t forget, as a member, you get discounts for some of these classes!

The FIADA online calendar is also updated with FIADA events, such as quarterly Town Hall meetings and the Annual Convention. Be sure to bookmark the FIADA website so that you can keep track of these upcoming events.

Important Updates. Probably one of the most important reasons to check back frequently to the FIADA website is for important industry updates. The homepage has an updated video about and scrolling news on issues that affect you as independent dealers in Florida. Not only does FIADA update you on state issues, we keep you updated on national issues as well.

Be Social. FIADA loves to be social! Be sure to like the FIADA Facebook page at facebook.com/FLIndAutoDealersAssoc and follow FIADA on Twitter @FIADA.

What’s In For You? is a series of articles that focuses on what FIADA can provide to you as part of its valuable member benefits. Leah Nash is FIADA’s Membership Coordinator and will be traveling statewide to meet with potential members and current members to determine what member benefits are most appreciated. Look for Leah at your dealership or an auction near you. Be sure to say hello!


Visit FIADA.com and click on “Join FIADA” to become a member or renew your membership, or scan this code with your mobile device. If you do so after reading this article, type Leah Nash in the Sponsor Name section of the online application. You may also contact Leah Nash at [email protected] to join or if you need membership recruitment assistance. If you would like to receive FIADA Facebook updates, please like the FIADA page at facebook.com/FLIndAutoDealersAssoc.


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aUTOLINE SaLES & LEaSINgOrlando, FLMark Dusich

BaTISTa aUTO SaLES, INC.Tampa, FLJuan BatistaSponsor: FIADA Office

CaR BIz 2, INC.Orlando, FLDarren BowmanSponsor: Don Scott

M E M B E R S H I P N E W S

New Members O C T O B E R 2 0 1 2

aLLIaNCE BUS gROUPOrlando, FLMike Pouncy Sponsor: John Cousins

BIg FISh aUTOMOTIvE, LLCFernandina Beach, FLMike Zaffaroni

CaRFaX Centreville, VAKathy Collins Sponsor: Leah Nash

CERIO aUTO SaLESCicero, NYVinnie Cerio

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FIDELIS PPMLakewood, NYRyan Williams

haMILTON CaR COLLECTIONIndianRocks Beach, FLRober Hamilton

LaTIN MOTORSMiami, FLDavid Laber

LOT STOCkERSBoca Raton, FLChris Shaw

MaD MOTOR CaRSStuart, FLSonia Alvez

MaYPORT MOTORSPORTS, INC. Atlantic Beach, FLJoe McDaniels

PRECISION aUTOMOTIvE SERvICE CENTER, INC. Ocala, FLGary Fleming

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SOUThEaST aUCTION FINaNCE, LLC Palm Harbor, FLGary Connors

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Rejoining Members O C T O B E R 2 0 1 2

Renewing Members OC TOBER 2012

40+ Year MembersJohn Rogers Used Cars Orlando, FLManheim’s Lakeland Auto Auction, Inc. Lakeland, FLNoegel’s Auto Sales Starke, FL

30+ Year MembersABC Autos, Inc. Tampa, FLMartinez & Associates, CPAs, P.A. Winter Springs, FLPanama Motors Jacksonville, FLParkway Auto Sales, Inc. Homestead, FLWood Motor Company Ft. Myers, FL

20+ Year MembersChase Automotive Finance Corp. Tampa, FLUnted Acceptance, Inc. Smyrna, GA

10+ Year MembersAngelo Auto Wholesale Jacksonville, FLPro-Power Auto Sales Company Port Charlotte, FLWise Way Auto Sales, Inc. Ocala, FL

Under 10 Year MembersA & A Auto Sales, Inc. Fort Pierce, FLA.R.A. GPS Systems, Inc. Newnan, FLAdvanced Auto Sales Kissimmee, FLAlas Auto Brokers, Inc. Davie, FLAnswer One Motors Tallahassee, FLAuto Data Direct Tallahassee, FLAuto Plan, Inc. Tampa, FLBoca Motorcar Gallery Panama City, FLCredit Cars USA Miami, FLFinancial Insurance Brokers International Coral Gables, FLGibson Truck World Sanford, FLGSA Auctions, LLC Fort Lauderdale, FLHermanos Auto Wholesale DBA The Car Shack Hialeah, FLHoliday on Wheels of Panama City, Inc. Panama City, LIntegrated Dealer Solutions Miami Springs, FLInterstate Auto Sales Pensacola, FLLandrum Professional Pensacola, FLLKQ Dayton Pick Your Part Daytona Beach, FLManatee BuggyWorks, LLC Bradenton, FLMarch Auto, Inc. Jacksonville, FLMITS at CMI, LLC Largo, FLMorgan’s Car Sales, Inc. Fruitland Park, FLNowcom Corporation Los Angeles, CAQuality Discount Motors Pensacola, FLRiker’s Auto Financial Kissimmee, FLUltimate Motorcars of Florida, Inc. Tampa, FLUsed Car Supermarket Tallahassee, FLUzdCarz, Inc. Pompano Beach, FL

NORTh FLORIDa MOTORSPORTS, LLCGainesville, FLFrank CurcioSponsor: Leah Nash

PRO TOYz, INC.Clearwater, FLTodd WernerSponsor: Terry Myers


November 2012 — Independent Dealer — 11

One of the best tools at every member’s disposal is www.FIADA.com. Chances are you have logged on before to register for a class, find a link to an important resource or read archived issues of Independent Dealer, but there may be some less obvious benefits to the website that you may not be aware of. In the next few issues of Independent Dealer we will

highlight some of these unique features with tutorials and instructions that can help you get the most out of the web.

The first place to start is with updating your member profile. Each FIADA member has been issued their own username and password to log in to www.FIADA.com to access the member only content available. With that username and password, a default member profile is created and waiting to be populated with information. As the website evolves, and new member profiles are added, www.FIADA.com’s online community of members grows allowing you the chance to make more connections, share ideas and join topical groups and forums. Setting up your member profile is easy, and only takes a few minutes. Here is how to do it:

LO G G E D O N

how-to Set Up Your Member Profile

Step 1: Update/Edit Profile Information

Sign into www.FIADA.com with your username and password. At the top of the page, click on “My Profile.” A screen will appear that shows your current profile with fields for an avatar, contact information and professional experience and background. To update this information, simply click the “Edit” links for each section and fill in the forms. To add a photo for your avatar, point your mouse to the upper left corner of the photo box and click “Add Photo.”

Step 2: Using the My Profile Menu

Navigate additional profile options in the blue menu box to the right of your profile information. Choose “Manage Profile” for quick links to the community networking options currently available. Click “Edit Bio” to make updates or changes to your member profile. Click “Preferences” to manage notifications such as allowing other members to connect with you and receiving an email when you receive a connection invitation.

HELP DESK: If you need help using www.FIADA.com, please call the FIADA office at (800) 237-0448 for online assistance.


L E A D E R S H I P P R O F I L E

The FIADA Executive Committee is always a unique mix of dealers with different backgrounds, business models, leadership styles and experience. Even though their demographics may differ, they all have at least one thing in common: bringing value to FIADA members. Get to know this group better with a few questions and answers into

their philosophies, outlooks and vision for the future.

FIADA President Chris Leedom (right) takes time to answer members’ BHPH questions at the FIADA convention.

Meet the President:Chris Leedom

LEEDOM’S BACKGROUND:Christopher (Chris) Leedom started the Leedom Group, along with the founding of the dealer Twenty Group firm, Leedom and Associates, LLC in 2000. On July 7, 2003, the same day his son Colin was born, he received a dealer license for AutoMaxx of Sarasota on Tamiami Trail. Since then, AutoMaxx has sold and financed over 5,000 vehicles to customers in Manatee and Sarasota counties.

AutoMaxx is virtually 100% Buy Here Pay Here and finances all units through Leedom Capital Corp. They typically carry about 80 units and sell about 500 to 600 cars annually. General Manager, Butch Moore, runs the operation overseeing 15 employees. The typical inventory unit at AutoMaxx is between four to eight years old with an average of 85,000 to 95,000 miles. There is also a warranty with every unit sold, as well as road side assistance for towing.

Q&A:Can you share your best advice for making it in this business?One thing I have learned from fellow dealers and I preach it to our team is simply doing things right. We try to

make sure every step of the way we are doing things right, serving the customer well and making sure the product we deliver is one that will cause our customers to want to do business with us again. The other thing is it can be difficult to get good information for our business as independent dealers. That is why dealers should be members of their state and national associations like FIADA, NIADA and CAFA. Owning a dealership can be intimidating if you are not equipped with the right knowledge. I am always trying to seek out and find ways to improve our business model.

What is the best part about being an independent dealer?The satisfaction that you are serving your clients and creating a place for your employees to thrive. We have quite a few of our team members that have been with us for 5 to 10 years and it is rewarding to see them grow. Also, I am probably a serial entrepreneur so the concept of growing business is something I find very satisfying. As an independent dealer you are really master of your own destiny – you just have to plot the course and captain the ship.

When did you become a FIADA member, and why did you join?We were members through our Leedom and Associates since 2001 and AutoMaxx joined from its inception in 2003. We are very proud to be associated with FIADA and the great dealers that are members. I joined because I believe it is important for us to have a voice to help shape our industry as well as to give back. The auto business has been very good to me and being a supporting member of FIADA is a chance to give back. We need more good dealers to step forward and help carry the mantle.

What are some benefits to being an FIADA member?I particularly find there are three key benefits that I enjoy. First, the association and chance to interact

Continued on Page 14.


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LEaDERShIP PROFILE continued from Page 12.


with fellow dealers is most rewarding. I have enjoyed the relationships I have made with great dealers all over the state whether that be at conventions, board meetings, etc. Secondly, it is absolutely the best way to stay up to date on compliance and regulatory issues that we face in Florida and nationally. FIADA has an excellent dialogue with the state agencies and it is important to keep abreast of areas that could impact our business. Finally, the educational benefits are tremendous. Our business is constantly changing and FIADA helps you stay up-to-date and ahead of the curve. For the modest membership fee it is truly a no-brainer and every dealer should be a member.

Do you feel that being a member of FIADA has contributed to your success? If so, how?Absolutely. Because of the benefits you recognize as a member of FIADA you can’t help but improve your business. It is an excellent resource that has been here for over sixty years for dealers in Florida. FIADA has some wonderful member benefit programs that are top-quality products and services that help you run your dealership more efficiently. For dealers that have never attended our annual convention there were 60

or more exhibitors all with products and services to help you succeed.

What leadership positions have you held with FIADA and how are you prepared for the position you have now?I had the opportunity to be appointed as a Board Member in 2010. Shortly after that I served as a Regional Vice President, then as Senior Vice President last year. Last month I was elected President and am very honored to serve the members of FIADA.

My goal is to focus on three key areas during my year of leadership. First, we need to build our membership base. This is one area that I am going to beat the drum on and I frankly think every dealer should be a member. Secondly, we need to fund our FIADA PAC so that we can continue to interact and

Our business is constantly changing and FIaDa helps you stay up-to-date and ahead of the curve. For the modest membership fee it is truly a no-brainer and ever dealer should be a member.

—Christ Leedom, FIADA President

support legislators that understand our business. Finally, we need some dealer members to step up and help lead. It is a volunteer organization so we certainly welcome all volunteers!

What are your goals for the Association for the coming year?During my acceptance speech I set forth a goal to grow our membership by 20 percent. That would be a pick up of about 150 or so dealer members. I want to reach more dealers through our Town Hall program and I am working with Lisette Mariner, our Executive Director, to get those scheduled. Finally, I want us to all fund our PAC so that we can build a bit of a “war chest” so that we can react if adverse legislation comes to Florida. Finally, I want to enjoy the interaction with my fellow officers, directors and dealer members of FIADA.

FIADA is your number one source for advice and information. Technical questions, legal questions, regulatory questions...bring them on!

Our network of industry veterans, professionals and consultants can help you find the answers you are looking for. The best part is, it’s free to FIADA members. Call us anytime at (800) 237-0448!


Processing title paperwork correctly translates into faster processing by the tax collector’s office, helping dealers complete deals quickly and efficiently.

In FIADA’s new Title & Registration Training seminar students will use a manual, examples and case studies to help clarify ownership transfer starting with the MCO, ‘new’ title through the ‘used’ title. Training is hands on and students will get the opportunity to complete their own sample title paperwork. Special $79 rate for FIADA members if you register now.

What is acceptable proof of ownership in Florida, other states and/or countries?

When is notarization acceptable/required?

When and how does a lien get added/removed?

Where do I find proof of present and past ownership, odometer readings and brands?

To register, call (800) 237-0448 or go to www.FIADA.com

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Upcoming Seminars:Orlando, December 21 │ Tallahassee, January 25, 2013 │ Ft. Lauderdale, February 25, 2013Tampa, February 26, 2013 │ Orlando, March 4, 2013 │ Panama City, April 26, 2013

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Yes, It is Time to Renew Your “License to Make Money”

Have you marked your calendar to remind yourself to renew? If you have an

electronic calendar you might want to do an annual December 2nd reminder “Renew FINANCE LICENSE each EVEN NUMBER YEAR.” Don’t rely on a renewal notice. Every December when this pops up you can quickly decide what action or inaction to take.

Finance licenses run from January 1 of each odd numbered year to the December 31 in each even numbered year. Not remembering can mean $175 plus another $175 for being late, as well as fines for illegal transactions that took place because you forgot to renew on time.

MV: Motor Vehicle Retail Installment SellerThe primary license issued for retailers of motor vehicles who finance by installment contract to retail buyers. This license is required by firms that sell and finance automobiles, trucks, trailers, RV’s, motorcycles, and mobile homes. Only one license is required per legal entity per county. MVB: Motor Vehicle Retail Installment Branch officeAny subsequent location in another county other than the main office.

It’s an even number year, so that means it is time again to renew your Finance License

BY TERRY MYERS

B A C K T O T H E B A S I C S

Renewal is only $175.00 and you receive twenty-four months instead of twelve, unlike most licenses. The dealer renews over the Internet. To renew go to: http://www.flofr.com/Finance/MV-Sales.aspx. Use the special access number your dealership received when you first established this license. For more information, go to http://www.flofr.com/licensing/MV-Businesses.htm.

It does not matter if you charge interest. If you delay a payment or take more than one payment you have financed or facilitated financing the deal and must have a Motor Vehicle Retail Installment Seller license.

To complete your SALES FINANCE COMPANY license renewal or for the establishment of, a “Related Finance Company”. Go to: http://www.flofr.com/StaticPages/WelcomeToOnlineServices.htm

SF: Sales Finance – Chapter 520 Part III, Florida Statutes: The license authorizes any business to purchase retail installment contracts from entities licensed in Florida as motor vehicle installment sellers, retail installment sellers or home improvement finance sellers.

In addition to the main location license, any subsequent location other than the main office must be filed as a SFB: Sales Finance Company Branch by way of online services.

Talk with your CPA, Accountant or Tax Attorney about how this may help control the outflow of tax dollars.

Sadly, too many dealers don’t think they need this license. That is a big mistake. If you help, in any way, your customers with financing directly or indirectly – you need this license. The license is inexpensive and it opens sales opportunities your dealership would otherwise have to turn away. And, who likes to turn down business? It is a license to make money.Remember, “What you know makes you money. What you don’t know costs you a fortune.”

Terry Myers is an instructor for the FIADA Dealer Training School and owner of Florida Auto Dealer School.

16 — Independent Dealer — November 2012

Vehicle Service Contracts I GAP Coverage I Credit Insurance I Lifetime Engine WarrantyLimited Warranty I Dealer Participation Programs I F&I Training I Advanced F&I Technology

Contact Protective’s Florida representative, Chris Behrens at 866 452 7335

A “National Corporate Partner” has met stringent NIADA criteria demonstrating that it can provide valuable products and services to NIADA members. No legal partnership has been created by the granting of this status, but NIADA does receive compensation from Protective. Lifetime Engine Warranty, Limited Warranty, Vehicle Service Contracts (VSCs) and GAP are backed by Lyndon Property Insurance Company in all states except NY. In NY, VSCs are backed by Old Republic Insurance Company. GAP, Lifetime Engine Warranty and Limited Warranty are not available in NY. Credit Insurance is backed by Protective Life Insurance Company in all states except NY, where it is backed by Protective Life and Annuity Insurance Company.

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Buy Here Pay Here dealers are well-acquainted with the importance of securing a debt

for protection in a bankruptcy case. A secured debt places greater importance on the debtor to pay back the loan and can get the claim to the “front of the line” over unsecured debts when a bankruptcy court is making payment arrangements and repayment plans.

When the automobile is purchased using a retail installment sales contract, the remedies for collecting on the debt in the midst of a customer’s bankruptcy are fairly straight-forward. The dealer files a Proof of Claim, has the option to attend the Creditor’s Meeting and emphasize his interest in being paid back and then waits for the process to unfold and, eventually, payments to be made. The situation gets riskier however, if the vehicle was leased instead of purchased.

When it comes to bankruptcy, specifically Chapter 7, leases are in somewhat of a no-man’s land; they are not considered secured or unsecured debt. In fact, they are given their own schedule, Schedule G – Executory Contracts and Unexpired Leases, keeping them separate from both Schedule D (Secured Claims) and Schedule E (Unsecured Priority

Claims). The Bankruptcy Code provides that leases can be assumed or rejected. Rejection, as its name implies, means that the Lessor has decided not to continue the terms of the lease and agrees to return the property. Furthermore, the Chapter 7 discharge removes personal liability for that lease giving both the lessor and the creditor the legal clean slate to walk away and start over.

When the lessor decides they want to keep the vehicle, then they have the option to assume the lease. The creditor presents the debtor with an assumption agreement which when signed and filed with the court is officially assumed. It is important to understand though at this point, an assumption of a lease agreement is not the same as a reaffirmation. Why does it matter? Assumption of the lease, rather than reaffirmation, can release the debtor of personal liability meaning if they stop making payments before the term of the lease there is no legal recourse for the creditor.

The bankruptcy code, 11 USC 524, gives instructions on how to re-impose personal liability on a debtor for a pre-petition debt. Similar to a reaffirmation, lease assumptions must be entered into before the debt

is discharged, or at least 60 days after the 341 hearing or creditor’s meeting which usually happens about a month after the case is filed. A major difference, and important one, between a reaffirmation agreement and a lease assumption is that the lease assumption does not have to be approved by the Court. This detail could be the key to understanding why personal liability cannot be maintained.

This issue was placed before the court in In Re: Creighton 2007 WL 541622 (Bankr.D.Mass.2007), a case where the court had approved a lease assumption with the notice that a reaffirmation agreement would be necessary to impose personal liability on the debtor. The creditor moved for reconsideration of requiring the reaffirmation agreement partly on the bases that the lease assumption included language that would impose personal liability. The court concluded that nothing in the 2005 Bankruptcy amendments changed requirements for re-imposing personal liability on a debtor. The takeaway: in the eyes of most bankruptcy courts, assuming a lease in the middle of Chapter 7 filing does not make the

When your lease customer files bankruptcy in the middle of the contract, understanding your options may be key to winning the game.

BY CHRISTY TAYLOR


lessor personally liable again on the contract and the creditor could find themselves out of luck.

What happens when the debtor wants to assume the lease, but the creditor does not? Is the Creditor obligated to oblige?

The answer is no, according to a recent Oregon Bankruptcy Court decision.When a Chapter 7 bankruptcy is filed, among the paperwork is included a Statement of Intention telling creditors what the debtor’s intention regarding the leased property and secured debts is. When the Bankruptcy Abuse Prevention and Consumer Protection Act was adopted in 2005, chapter 7 debtors were given three options for their lease agreements: surrender the item that secures the debt or lease (most likely the vehicle in question), redemption of the secured item by paying the creditor the market value, or reaffirm the debt. If the debtor chooses to reaffirm the debt then they not only agree to pay what is owed but also allow the creditor to pursue them personaly after bankruptcy if they fail to make the payments (as well as repossess the vehicle).

In the 2010 case of Smith vs. FMCC the debtors, Michael and Jamie Smith brought a lawsuit against Ford Motor Credit because Ford Motor Credit repossessed their leased automobile following their discharge, even when they were current on their payments. The Smiths had received a reaffirmation agreement from Ford Motor Credit, filled it out and returned it to Ford without filing it with the Court. The Chapter 7 Bankruptcy Trustee overseeing the Smith’s case declined to assume the contract on behalf of their estate. Ford, as the defendant, brought a motion to dismiss which was granted by the Court and summarized in three parts:

1. The debtor must, within 45 days of the petition date, file a statement

of the debtor’s intention to assume a lease.

2. Assuming the trustee does not assume the lease within 60 days of the petition date (failure by the trustee to assume constitutes a breach of the lease agreement), the debtor must then notify the creditor in writing of the debtor’s desire to assume the lease.

3. Whatever the debtor’s intentions, if the trustee does not assume the lease, the leased property ceases to be the property of the estate and continuation of the lease by the debtor is at the option of the lessor, who may choose to pursue its state law remedies for breach of its lease contract. Smith v. FMCC, 10-6091-fra, In re Smith, 09-64658-fra7 (Oregon, 9/13/10).

In the Smith case, the vehicle was not mentioned on the personal property schedule (Schedule B) but properly mentioned on the lease/executor contract schedule (Schedule G). However, there was no mention of the lease or the vehicle on the Statement of Intention. The Court found that the debtors had not complied with the 45-day requirement and that 11 USC Section 365(d) provides that the trustee may assume or reject the lease. If the creditor does not want to allow the assumption, then they may resort to state law breach of contract remedies and repossess the vehicle, even if as in the Smith case the debtors are current on the lease payments. In Smith vs. FMCC, the court dismissed the complaint because it found that Ford Motor Credit had not violated the bankruptcy code.

Another scenario to throw into the mix: a debtor that wants to purchase a pre-bankruptcy leased vehicle after the lease has expired. Sometimes, as creditors may well know, a person leasing a motor vehicle who files Chapter 7 before the lease is finished will continue making payments on the vehicle with the intention of

retaining it until the end of the lease term, without entering into a formal reaffirmation agreement. This is commonly called the “ride through” option. The original lease often contains a provision that will allow the debtor to purchase the vehicle for a predetermined price at the end of the lease term. Many times, the debtor chooses to obtain financing for the vehicle from the same credit source that financed the lease. For the sake of argument, imagine that the debtor was allowed the chance to “ride through” on the lease, made regular payments for the remainder of the lease’s term and wanted to purchase the vehicle from the dealer through the dealership’s financing arm. Would the new loan be enforceable in the event of a default or would it be invalid for failure to comply with the bankruptcy code’s rules governing reaffirmed debts?

If the vehicle lease was reaffirmed according to the requirements outlined in section 524, then the loan should be enforceable. If the lease was not reaffirmed, than the argument for enforceability could be made that when the lender extends new credit to finance the purchase of the formerly leased vehicle for the price specified in the discharged lease agreement, the consideration for the purchase is based “in whole or in part” on the discharged lease agreement. This brings the new, post-bankruptcy loan within the limits of section 524c if the lender of the new loan is the same creditor that he debtor owed payments to under the discharged vehicle lease and the purchase price is dictated to the debtor by the old lease.

Continuing a relationship in any aspect with a debtor who has filed bankruptcy is always a game of balance and chance. Only the creditor, in counsel with their attorney, can make the call on what the dealer’s next move should be.



The FTC Used Car Rule and Window Sticker Made Easy

While there are many aspects to a motor vehicle sale, one area that continues to pose compliance challenges for dealerships is the correct way

to offer a warranty. While the concepts in this area are relatively straightforward, the issue becomes complicated because of the various federal and state regulations that often have an overlapping effect on the subject matter. The Uniform Commercial Code, the Magnuson-Moss Warranty Act, and the FTC Used Car Rule each impose specific requirements on dealerships when offering or disclaiming warranties. In addition, state UDAP statutes generally require that every retail sale of a motor vehicle be preceded by a written contract that contains all of the agreements of the parties, including all material statements, oral or written, made prior to obtaining the customer’s signature on the contract. With respect to the sale of a used motor vehicle, the Buyers Guide is perhaps the key document concerning warranty issues and can provide the dealer with a roadmap to the other warranty related disclosures and documents that must be used in the transaction. Despite the fact that the Federal Trade Commission has issued a publication, A Dealer’s Guide To The Used Car Rule, which provides a copy of the proper format for the Buyers Guide and covers in detail many of the issues pertaining to proper completion of the Buyers Guide, our review of Buyers Guides submitted from motor vehicle dealerships across the Country indicates that dealers are still having numerous compliance problems.

The Used Car Rule was enacted to prevent and discourage oral misrepresentations and unfair omissions of material facts by used motor vehicle dealers concerning warranty coverage. The main purpose of the Guide is to provide important information to consumers about used vehicles they are considering purchasing and to ensure that consumers get

information in writing about any warranty protection they have if there is a problem with the vehicle. Dealerships are required to post a Buyers Guide on every used vehicle before it is offered for sale. A vehicle is considered used under the Rule if it has been driven more miles than are necessary to deliver it to an ultimate purchaser.

A used vehicle is offered for sale when the dealer allows a customer to inspect it for the purpose of buying it, even if it is not fully prepared for delivery. The Buyers Guide must be prominently and conspicuously placed on or in a vehicle when it is made available for sale, and in such a way that both sides of the Guide are readable. The layout for the Buyers Guide is set forth in the Rule. The dealership must use the wording, type style, type sizes and the format as specified in the Rule. Furthermore, the Guides must be printed in one hundred percent black ink on white paper cut to at least eleven inches by seven and one-quarter inches. Colored ink may be used to fill in the blanks on the Guide. It may be removed during a test drive, but it must be posted again as soon as the test drive is over.

Dealers must give specified vehicle and dealer information on every Buyers Guide. With respect to the vehicle information that must be included, the dealer must fill in the vehicle’s make, model, model year, and vehicle

identification number (VIN) that are located at the top of the form. The dealer may also write in a dealer

stock number if it wishes to do so. On the reverse side of the Buyers Guide, the dealer

must fill in the name and address of the dealership and the name and telephone

number of the person the consumer should contact in the event that he or she has complaints about the vehicle. This information can be pre-printed on the Buyers Guide.

In addition to providing vehicle and dealer information, the dealer must also

state whether or not a warranty is being provided to the consumer and, in the event

Continued on Page 22.

Correctly completing the Buyer’s Guide Window Sticker and following instructions of the FTC Used Car Rule should be a part of every dealer’s compliance protocol. Make sure you are doing it right and staying out of trouble.

BY KEITH WHANN

October 2012 — Independent Dealer — 21 www.fiada.comAugust 2012 — Independent Dealer — 21 www.fiada.com

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that a warranty is being provided, describe the warranty coverage. There are two versions of the Buyers Guide: One for states that permit “as is” sales and another for states that limit or prohibit dealers from disclaiming the implied warranties in connection with the sale of a motor vehicle. If state law allows it, and the dealer chooses not to offer a warranty, written or implied, the dealer must use the “As Is” version and check the box next to the heading “As Is-No Warranty” on the Guide. If the state law limits or prohibits the elimination of implied warranties, the dealer must use the “Implied Warranties Only” version and check the box next to the “Implied Warranties Only” heading if the dealer does not offer a written warranty.

If the dealer offers the vehicle with an express warranty, it must check the box next to the heading “Warranty” and fill out the remaining portion of that section of the Buyers Guide. Warranties that are required by state law must also be disclosed in this section. If a warranty is offered with the vehicle, the dealer must briefly describe the warranty terms in the space provided. This description must include the following information: Whether the warranty is “Full” or “Limited”; what systems are covered and for how long; whether the manufacturer’s warranty still applies; and what percentage of costs the warranty covers.

The FTC’s Used Car Rule sets forth five points that must be considered to determine whether the warranty offered is “Full” or “Limited”. For a warranty to be considered “Full”, warranty service must be provided to anyone who owns the vehicle during the warranty period free of charge when necessary, even for services like removing and reinstalling a system covered by the warranty. The consumer must be able to choose either a replacement or a refund if the vehicle cannot be repaired after a reasonable number of tries. The consumer may not be required to take any action to receive service, except to give notice that service is needed, and service must be rendered after notice unless the warrantor can demonstrate that it is reasonable to require the consumer to do more than give notice. Finally, the length of implied warranties must not be limited. If any of these conditions do not apply, the warranty is considered “Limited”. Most warranties offered by motor vehicle dealerships will traditionally fall within the Limited Warranty category.

Once the dealer determines the type of warranty it is offering, it must specify the systems covered by the warranty and list the duration of the warranty for each system. The dealer must state specifically each system that is covered by the warranty in the left-hand column on the Buyers Guide. The Rule prohibits the use of shorthand

phrases such as “drive-train” or “power-train” when it is not clear what specific components are included within the definition of the terms. Keep in mind also that the systems covered should coincide with the systems that the dealership lists in the separate limited warranty document required by the Magnuson-Moss Warranty Act. In the right hand “duration” column, the dealer must state how long the warranty lasts for each warranted system. If all systems are warranted for the same length of time, the dealer is only required to state the duration once.

Communicating the percentage of parts and labor costs that the warranty covers is relatively simple. The dealer merely fills in the percentage of parts and labor costs it wishes to cover. If a deductible applies, the dealer should put an asterisk by the number (i.e. 100%*) and explain the deductible in the space provided under the “Systems Covered/Duration” section. A sample explanation of a deductible may read as follows: “*A $50.00 deductible applies to each repair visit”.

If a manufacturer’s warranty on the vehicle has not expired, the dealer should disclose this fact by adding the following paragraph below the “Full/Limited Warranty” disclosure: “MANUFACTURER’S WARRANTY STILL APPLIES. The manufacturer’s original warranty has not expired on the vehicle. Consult the manufacturer’s warranty booklet for details as to warranty coverage, service location, etc.” If the consumer must pay a fee to obtain coverage under the manufacturer’s warranty, then the dealer may not state that a warranty is being provided. If the dealer provides a warranty in addition to the balance of the manufacturer’s warranty, it should explain the terms of the warranty on the Buyers Guide as well. If the dealer offers its customers a service contract for repair coverage and state law permits, the dealer may check the box beside “Service Contract”.

Because the Buyers Guide is completed prior to offering a motor vehicle for sale, there may be instances when as part of the negotiation process the dealer offers a warranty that differs from that stated on the Buyers Guide posted in the vehicle. If that is the case, the dealer may modify the Buyers Guide to reflect the agreement reached between the dealer and consumer, in which case both the consumer and an authorized dealership representative should initial any such changes, or the dealer may complete a new Buyers Guide. If a dealer conducts a used car transaction in Spanish, a Buyers Guide written in Spanish should be posted on the vehicle prior to offering it for sale.

The information on the final version of the Buyers Guide is incorporated in the contract for each dealer sale of a used

FTC USED CaR RULE continued from Page 20.


vehicle to a consumer. Information on the Buyers Guide expressly overrides any contradictory statement in the contract. In order to inform consumers of this fact, dealers must include the following statement or language similar to the following on each and every Buyers Order or purchase contract for a used vehicle: “ The information you see on the window form for this vehicle is part of this contract. Information on the window form overrides any contrary provisions in the contract of sale.”

The Rule also requires dealers to give the purchaser a copy of the Buyers Guide at the time of the sale and contains penalties for non-compliance. The dealer may include a signature line on the Buyers Guide and ask the buyer to sign to acknowledge that he or she received a copy, but a signature line is not required by the Rule. If the dealer opts for a signature line, the following statement must appear in close proximity to the signature line: “I hereby acknowledge receipt of the Buyers Guide at the closing of this sale.” The signature line and required disclosure must appear in the space containing the name of the individual

to be contacted in the event of complaints after the sale. Dealers who violate the FTC Used Car Rule may be subject to statutory penalties of up to $11,000 per violation and various other enforcement actions, including civil penalties and state and federal enforcement actions.

Many dealerships struggle with how to comply with the various disclosure requirements and maintain consistency throughout their forms. In order to comply with all of the state and federal warranty laws, the dealership must ensure that the Retail Buyers Order, FTC Buyers Guide and Limited Warranty Document contain the required disclosures and those disclosures must be consistent and properly integrated into the appropriate forms. Remember, all material statements (including warranty information) must be integrated into the Retail Buyers Order; the Buyers Guide must communicate whether a warranty is being offered and, if so, the type of warranty offered; and, if a Limited Warranty is offered by a dealership, a separate Limited Warranty Document must be provided in accordance with the Magnuson-Moss Warranty Act.

Keith Whann is a leading national authority on dealer and consumer protection issues facing the automobile industry. Read more of his articles at www.keithwhann.com.

www.sanfordautodealers.com


Here is a monthly collection of selected legislative and enforcement highlights, and a recap of some of the many auto sale and financing lawsuits Hudson Cook,

LLC follows each month. (Note that this column does not offer legal advice. You should consult your dealership lawyer with any legal questions.)

FEDERAL LAwDebt Collectors Now Subject to Federal Supervision. In October, the Consumer Financial Protection Bureau published a final rule, effective January 2, 2013, defining “nonbanks” that are “larger participants” in the consumer debt collection market, thereby allowing the agency to supervise the larger consumer debt collectors for the first time at the federal level. The CFPB has the authority to supervise “nonbank covered persons” of all sizes in the residential mortgage, private education lending, and payday lending markets, but has the authority to supervise only nonbank “larger participants” of markets for other consumer financial products or services, as defined by rule. The consumer debt collection market covered by the final rule includes three main types of debt collection:

• firmsthatbuydefaulteddebtandcollecttheproceedsforthemselves;

• firmsthatcollectdefaulteddebtownedbyanothercompany in return for a fee; and

• debtcollectionattorneysthatcollectthroughlitigation.

Under the rule, any firm with more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervision. The CFPB’s actions are unlikely to directly affect any dealers, but BHPH dealers and sales finance companies may find that the debt collectors that they employ will be pressed to make changes in their collection practices.

Check Your Calling Practices. In October, the Federal Communications Commission announced that amendments made earlier to the Telephone Consumer Protection Act rule will take effect on November 15, 2012. Amendments to the FCC’s regulation of prerecorded sales messages take effect on January 14, 2013. Amendments to the FCC’s regulation of sales calls to cell phones placed using an automatic telephone dialing system or prerecorded message and prerecorded sales calls to residential lines take effect on October 16, 2013. Make sure that you discuss these changes with your attorney and make any required changes to your calling practices.

STATE DEVELOPMENTSCalifornia Regulates BHPH Dealers. California AB 1447 requires buy-here, pay-here dealers to issue a 30-day or 1,000-mile warranty to the buyer or lessee of a used vehicle bought or leased at retail price and requires the warranty to cover specified parts. The BHPH dealer is required to either repair those covered parts that fail or, at the dealer’s election, cancel the sale or lease and reimburse the buyer or lessee. The new law also prohibits the BHPH dealer from requiring the buyer to make payments in person, with the exception of the down payment for the vehicle, prohibits the BHPH dealer from repossessing the vehicle or charging a penalty following timely payment of a deferred down payment on the grounds that the payment was not made in person, and prohibits the BHPH dealer from, after the sale of the vehicle, tracking the vehicle using an electronic tracking device and disabling the vehicle with starter interrupt technology unless it satisfies certain disclosure requirements. AB 1534 requires BHPH dealers to prominently and conspicuously display a label on any used vehicle offered for sale that states the reasonable market value of the vehicle. The new law requires the label to contain certain information used to determine the vehicle’s reasonable market value and the date the value was determined. The law also requires the BHPH dealer to provide a prospective buyer of the used vehicle a copy of any information obtained from a nationally recognized pricing guide that the BHPH dealer used to determine the reasonable market value. Let’s hope that what happens in California stays in California, but you and your state association need to be alert for consumers offering “copy cat” legislation like this in your state.

LITIGATIONClass Certification Denied in Suit over Spot Delivery Transactions Where Individual Analysis Required: Two individuals went to a dealership to buy cars. They both signed retail installment sales contracts and spot delivery agreements. Later, the dealership asked the individuals to sign new contracts with different terms. The individuals filed a class action against the dealership, alleging violations of the Truth in Lending Act, the Equal Credit Opportunity Act, the Ohio Consumer Sales Protection Act, and the Ohio Uniform Commercial Code. The plaintiffs moved to certify a class, and the magistrate judge recommended that certification be denied. The plaintiffs objected to the magistrate’s recommendation, but the U.S. District Court for the Northern District of Ohio adopted the recommendation. As to the TILA claim, the court found that the dealership had various customers sign different sales documents, which were

L E G A L R O U N D - U P

A Look At Current Legal IssuesBY THOMAS B. HUDSON AND NICOLE FRUSH MUNRO, HUDSON COOK, LLC


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Thomas B. Hudson and the Attorneys of Hudson Cook, LLP

Desk BookThe Answer Book forFinance and Insurance Professionals

360 things to know about auto dealer finance

360 things to know about auto dealer finance

The Answer Book forFinance and Insurance

ProfessionalsCar dealers, boat dealers, RV dealers–all businesses that sell personal property on credit–are subject to a bewildering thicket of federal and state laws and regulations. Responsibility for compliance usually falls on the general manager of the dealership or the manager of the “finance and insurance”, or “F&I” department. Sometimes the person responsible for sales and credit compliance has received some training dealing with these legal issues. But sometimes, the person shoved into the deep end of the pool as the compliance officer doesn’t have a clue what he or she is responsible for, and doesn’t know where to start. CARLAW ® F&I Legal Desk Book: 360 Things to Know About Auto Dealer Finance provides a compliance roadmap for “green pea” and seasoned compliance officers alike. Each chapter addresses a topic of crucial interest to dealerships. The topics cover the compliance waterfront, and include: ● The Truth in Lending Act and Regulation Z

● The Consumer Leasing Act and Regulation M

● The Equal Credit Opportunity Act and Regulation B

● The Fair Credit Reporting Act

● The Federal Trade Commission’s Used Car Rule

● Federal Advertising Rules

● The Magnuson-Moss Warranty Act

● Arbitration

● and more . . . Each chapter is authored by lawyers who deal with that chapter’s subject every day and in detail. The authors present their information in an easy-to-follow, Q&A format, with as little “legalese” and as much useful and practical information as possible. The goal each time is to give the reader a solid, basic working knowledge of the topic covered. For years, dealers have needed a source for comprehensive, no-nonsense information on the legal requirements they face. Now they have one that quickly will become their principal resource for credit compliance information:

CARLAW ® F&I Legal Desk Book:360 Things to Know About Auto Dealer Finance.

F&I Legal Desk Book “This new book may be called a ‘guide’ but it’s more likely a ‘bible’ for every dealer, F & I manager, and trainer in the country. A timely and invaluable reference that covers all legal and regulatory touch-points in a dealership’s purchase transaction by a consumer. AFIP’s endorsement confirms that the stable of authors know the ‘rights’ to follow and the ‘wrongs’ to avoid. It is on the recommended list by F&I Magazine.”

Ed Bobit, PublisherBobit Business Media

“Ignorance of the law is no excuse. And given the penalties for violating even one of the many legal obligations facing today’s auto dealer, including stiff fines and even imprisonment, a dealer must be well informed to make sound business decisions. There has never been a reference book for auto dealers and their professional advisors ... until now. This book is extremely well written and easy to read. It should be on the desk of every car dealer. It’s on mine.”

Adam Goldfein, Host of the Nationally Syndicated Talk ShowAutoScoop—The Inside to Car Buying

“If a dealer had to decide between renting an inflatable gorilla for his dealership’s rooftop or purchasing this book for every single sales manager and office manager in the dealership, I hope the dealer would make the business decision that could save him or her thousands of dollars in unnecessary legal fees.... Put the gorilla on hold and insist that every manager read this book and keep it on their desks. I’m making it required reading for every Northwood University Automotive Marketing major.”

Joseph J. Lescota, ChairmanAutomotive Marketing DepartmentNorthwood University

“The F&I Legal Desk Book is the official course text for the AFIP Certification Program. Hudson Cook, LLP, is now the course authority for the applicable state and federal regulations. I can count on one hand the law firms in the United States who could have met our curriculum requirements. The F&I Legal Desk Book will dramatically reduce the time required for candidates to prepare for the 200-question final exam. Hudson Cook, LLP, has made a major contribution to AFIP’s efforts to raise the bar for regulatory compliance and ethical conduct within the F&I trade.”

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“A unique exploration of the Do’s and Don’ts for dealers without the legal maze.”

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Thomas B. Hudson

The Answ

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Thomas B. Hudson has practiced consumer vehicle sales, finance and leasing law since 1973. Mr. Hudson chairs the law firm of Hudson Cook, LLP. He is President of CounselorLibrary.com, LLC, and is the Founder and Editor-in-Chief of CARLAW ®, an Internet service that reports auto finance and lease legal developments. He has served as President of the American College of Consumer Financial Services Lawyers, and Chair of the American Bar Association Consumer Financial Services Committee’s Personal Property Finance Subcommittee. He represents the National Automotive Finance Association, Reynolds & Reynolds, auto finance companies, major banks and independent finance companies and many companies who supply services to the auto finance and lease industry. He is a frequent writer and speaker on topics relating to vehicle finance and leasing. He is also author of the book: CARLAW ® ~ A Southern Attorney Delivers Humorous Practical Legal Advice on Car Sales and Financing! Mr. Hudson can be reached at [email protected].

Michael A. Benoit is a partner with Hudson Cook, LLP and the author of “A Dealer’s Guide to Red Flags Compliance,” a comprehensive resource tool to help auto dealers create and maintain their internal Identity Theft Prevention Programs. His practice focuses on the practical application of a wide range of consumer financial services and dealer laws and regulations to the operational realities of auto dealers, finance companies, technology providers and financial services vendors. Mr. Benoit is a member of the DealerTrack Compliance Council, the National Association of Dealer Counsel, and is a regular speaker at industry events, including the NADA Annual Conference, National Vehicle Leasing Association Annual Conference, and numerous other national programs and private client-funded engagements. He is frequent contributor to a number of trade publications and journals, including Auto Finance News and F&I Management and Technology magazine, and was the principal author of the NADA’s Management Guide to Information Safeguarding. Mr. Benoit can be reached at [email protected].

F&I Legal

Third Edition

3rd Edition

Edited byMichael A. Benoit

not always the forms signed by the plaintiffs. Therefore, the proposed class was not ascertainable because of the significant differences in forms signed by the various proposed class members. With respect to the ECOA, OCSPA, and UCC claims, the court found that it would need to make individual factual determinations for each class member, rendering a class action unfeasible. See Givens v. Van Devere, Inc., 2012 U.S. Dist. LEXIS 131931 (N.D. Ohio September 17, 2012).

Lease Assignor Liable for Failing to Repurchase Lease Executed by Identity Thief: Any dealer who has an agreement with a finance company, bank or credit union to sell its retail installment contracts or leases will be interested in this case. A leasing company entered into a dealer agreement with a finance company to assign leases and leased vehicles to it. The agreement contained certain warranties, including a warranty that the lease and all related instruments would be executed by individuals authorized to do so. The leasing company was required to repurchase any lease if any warranty was breached. The leasing company assigned a lease to the finance company that was executed by someone involved in identity theft. After the finance company discovered the fraud, it demanded that the leasing company repurchase the lease. The leasing company refused. The finance company sued for breach of contract and moved for summary judgment. The trial court granted the motion. On appeal, the leasing company argued that it was not obligated to the finance company because it was only responsible for making a good faith effort to verify identity, as established by the other warranties. The Court of Appeals of Texas affirmed. The appellate court determined that the leasing company was liable to the finance company because the dealer agreement stated that the leasing company was obligated to repurchase a lease if it breached any warranty, so the other warranties did not establish that only a good faith effort was required. See Transworld Leasing Corporation v. Wells Fargo Auto Finance, LLC, 2012 Tex. App. LEXIS 8275 (Tex. App. October 3, 2012).

Court Refuses to Dismiss RICO and Negligent Misrepresentation Claims Against Dealership and its Owner: An individual went to a dealership to buy a used car after seeing numerous advertisements by the dealership featuring its owner. The advertisements included a trademarked phrase by the owner – “I don’t care about your credit, I care about you.” The individual signed a sales contract for a used car. After leaving the dealership, she realized she had paid a larger down payment than she had discussed with the salesman, which the dealership attributed to sales tax. She had many problems with the car and attempted to return it, but the dealership refused. The vehicle was eventually inoperable, and the individual sued the dealership, the owner, and the salesman for violating numerous federal and state laws. The dealer moved to dismiss the Racketeer Influenced and Corrupt Organizations Act and negligent misrepresentation claims, but a magistrate judge entered a recommendation to deny the dealer’s motion. The U.S. District Court for

the Western District of Tennessee adopted the magistrate’s recommendation. First, the court found that the individual properly pled the elements of wire fraud as the predicate act for purposes of RICO liability and the use of interstate electronic communication - in this case, the advertisements - in furtherance of a fraudulent scheme. The court also found that the individual adequately alleged a RICO enterprise and a pattern of racketeering activity, a relationship between the predicate acts, and a threat of continuing activity. The court also concluded that the magistrate judge correctly recommended that the negligent misrepresentation claim against the owner not be dismissed where it could not find at this stage of the litigation that the owner’s trademarked phrase was mere puffery as opposed to a negligent misrepresentation. The individual also alleged that the owner failed to display required Federal Trade Commission disclosures on vehicles for sale at the dealership, which could support a claim of negligent misrepresentation. See Moore v. It’s All Good Auto Sales, Inc., 2012 U.S. Dist. LEXIS 141190 (W.D. Tenn. September 30, 2012).

Tom ([email protected]) and Nikki ([email protected]) are partners in the law firm of Hudson Cook, LLC. For information, call 410-865-5411, 410-865-5430, or visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2012, all rights reserved. Single publication rights only, to the Association. (10/12) HC# 4849-1314-9969.


Use this form to make your contribution, and mail to the FIADA office at 1840 Fiddler Court, Tallahassee, FL, 32808

The 2012 Presidential elections are over, now what? During this election cycle the FIADA

PAC supported 16 candidates for state office. Of those only three were defeated, resulting in an 80% success rate. This election cycle 26 Republicans and 14 Democrats were elected. There are 14 Freshmen Senate members. The even numbered senate districts will be up for re-election in 2014. On the House side, 76 Republicans and 44 Democrats were elected. There are 43 Freshmen House Members. Democrat Mike Clelland defeated GOP incumbent and FIADA PAC supported Chris Dorworth by a slight margin.

Now that the elections are behind us, we can concentrate on preparing for the legislative session that begins March 5, 2013 through May 3, 2013. The Florida Senate and House will convene November 20 for organizational session which determines officers. Earlier this month, state agencies submitted their legislative budget requests to the Florida Cabinet. This is the first peek at what state agencies will be promoting this session.

As part of our effort to increase lien holder rights, the FIADA will actively support legislation to correct the recent Department of Motorist Services decision to discontinue enforcement of surrender stops. We have drafted bill language that we will find a legislative sponsor for in the coming weeks. In 2009, the FIADA worked very hard to have this legislation passed. Many FIADA members find this law to be an effective tool. They have been able

to collect on otherwise uncollectable accounts. Tell us what the financial impact has been for your dealership with this law. Visit www.fiada.com and complete a brief survey.

At the FIADA Convention, Chris Leedom put out a call to action

Where Do We Go From Here?

to support the FIADA PAC and started with a generous contribution. Don’t forget it’s easy to support the FIADA PAC with either a one-time contribution or monthly contributions visit www.fiada.com to help support the FIADA PAC too.

Senate 4 Aaron Bean elected8 Dorothy L. Hukill elected17 John Legg elected21 Denise Grimsley elected24 Tom Lee elected26 Bill Galvano elected34 Ellyn Bogdanoff defeated

House 21 Keith Perry elected29 Chris Dorworth defeated30 Scott Plakon defeated34 Jimmie T. Smith elected57 Jake Raburn elected71 Jim Boyd elected85 Pat Rooney, Jr. elected89 Bill Hager elected106 Kathleen Passidomo elected

Election Results (FIaDa Endorsed Candidates)

L E G I S L AT I V E U P D AT E

BY SANDRA MORTHAM, FIADA LOBBYIST

Make your check payable to FIADA-PAC and mail your contribution to:FIADA • 1840 Fidler Court • Tallahassee, FL 32808

September 2012 — Independent Dealer — 27 www.fiada.comPAID

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With the effects of Hurricane Sandy leading to business closures this past week, many employers are asking if they are required to pay their employees for missed work time if their business shut down

due to inclement weather. The answer depends on how employees are classified under the Fair Labor Standards Act.

Non-Exempt Employees (Hourly Employees)An employer is not required to pay a non-exempt employee for business closure due to inclement weather or a natural disaster. The employer may have a policy of paying employees on such occasions, but it is not a requirement to do so. If business closure results in lack of work for employees, the decision should be consistently applied to all employees.

Salaried Non-Exempt, Salary Fluctuating workweek, and Salaried-Exempt EmployeesWhen it comes to these categories of employees, the Department of Labor Wage and Hour division states that employers must look at whether or not work is available for the employees. If an employee in one of these categories works one or more days in a workweek during which a business closure takes place, the employee must be paid for the entire week. You are not required to pay these employees for an entire workweek in which he or she performs no work. An employer may, however, make deductions from an employee’s leave bank (vacation/PTO) to cover the time the employee is out of work due to business closure.

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Guidelines for paying employees when inclement weather shuts down your business

how employees are classified under the Fair Labor Standards act, typically hourly or salaried, determines whether employers must pay them for missed work as the result of inclement weather.

Looking For A Way To Help Hurricane Sandy Victims?One of the most respected disaster relief organizations is the American Red Cross. Since the Sandy relief effort began the Red Cross has deployed nearly 5,900 Red Cross workers, served more than 3.5 million meals and has distributed over 177,000 relief items. Find out more,or make a donation, at www.redcross.org.


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Got news? Send it to us for consideration at [email protected]

INDUSTRY NEWS

Don’t forget to Like us on Facebook! Check out our page and follow our timeline at www.facebook.com/FLIndAutoDealersAssoc

Department Announces Updated form HSMV 86720

The updated form HSMV86720 renewal form for dealers, with a revision date 11/12 has been posted on the Department’s website. The form HSMV 86720 can be accessed at: at this link: http://www.flhsmv.gov/dmv/forms/BFO/86720.pdf The changes on this form are: • Addedandhighlighted“Pleasesubmitthis

application to the Regional Office responsible for your dealership.” This can be found on the top and bottom of the first page of the application. This has been added to the top of the instruction sheet.

• Movedthefieldfor“WhoisyourETRVendor”below the field for “Cell Phone Number”.

• AddedinformationintheinstructionsheetonSalvage Dealers being exempted from Garage Liability Insurance.

Thank you all so much for the “Auction Person

of the Year” Award. I don’t know what I did to

deserve that but I really appreciate it. I enjoy

working with all of you and the board and feel

privileged to be part of this great organization. I

have enjoyed becoming friends with each of you. I

found a little saying from Charles Swindoll that I

would like to share.

I cannot even image where

I would be today were it not for that

Handful of friends who have given

Me a heart full of Joy. Let’s face it,

Friends make life a lot more fun.

Thank you all for this wonderful

cherished award.

Ellen Westpfahl

Assistant General Manager,

Manheim Central Florida Auto Auction

Auction Person of the Year

Claims About Flood-Damaged Cars Aren’t True DETROIT — In the days since Superstorm Sandy, an alarming prediction has flashed across the Internet: Hundreds of thousands of flood-damaged vehicles will inundate the nation’s used-car market, and buyers might not be told which cars have been marred. Not true, according to insurance-claims data reviewed by The Associated Press. The actual number of affected vehicles is far smaller, and some of those cars will be repaired and kept by their owners. The dire predictions are being spread by a company that sells vehicle title and repair histories and by the largest group representing American car dealers. They claim the number of cars damaged by Sandy could be larger than when Hurricane Katrina hit the Gulf Coast in 2005 and marred more than 600,000 vehicles. But an AP analysis of claims data supplied by major insurance companies shows the number of cars reported damaged so far is a fraction of that. The companies — State Farm, Progressive, New Jersey Manufacturers, and Nationwide — have received about 31,000 car-damage claims. Because many communities are still cleaning up from the superstorm, more claims are bound to come in. But the total will probably not grow significantly. Ten days after Sandy, the rate of claim submissions is already starting to slow. And many of those cars will have relatively minor damage unrelated to water, meaning they can be fixed and returned to their owners. About 14,000 new cars were also damaged by Sandy while they sat on docks in the New York area awaiting shipment to dealers. But most of those vehicles won’t end up on sales lots. Automakers will have severely damaged cars crushed because they don’t want their brand names hurt by substandard vehicles circulating in the marketplace.

—Source: The Associated Press

30 — Independent Dealer — November 2012


ChRISTOPhER LEEDOMPresidentAutoMaxx

Sarasota, FL(941) 309-1111

DINO MERCURIOSenior Vice President

Independent Credit, Inc.West Palm Beach, FL

(561) 686-8673

BRaNDI NOEgELChairman of the Board

Noegel’s Auto SalesStarke, FL

(904) 964-6461

DavID COX, CMDSecretary

Cox Motors, L.L.C.Lakeland, FL

(863) 686-9300

PaUL MaTTONTreasurer

Park Auto MallPinellas Park, FL(727) 639-1112

gEORgE hICkEYRegional Vice President

Bond Auto SalesTampa, FL

(813) 238-7478

FRaNk FUzYRegional Vice PresidentCentury Motors of S. FL

Pompano Beach, FL(954) 785-0369

JIM WINTERICk, SR.Regional Vice PresidentGulfstream Motor Credit

Miami, FL(305) 253-2335

STEvE MaRBaISRegional Vice PresidentMarbais Enterprises, Inc.

Ocoee, FL(407) 877-7422

JIM WINTERICk, JR.Regional Vice PresidentGulfstream Motor Credit

Miami, FL(305) 253-2335

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independent dealer magazine november 2012 issue

Documents

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leaseretail car dealers

new course

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