D oes Si ze M at t er?

Transcription

1 D oes Si ze M at t er? W hen i t C omes t o t he C FPB, i t D oesn t. U nder st and W hy C ompl i ance Shoul d be a Pr i or i t y N o M at t er Your Si ze. Thomas B. Hudson, Esquire 2016 O C T O BE R

2 COMPLIANCE

3 Compliance Strategies That No Longer Work Flying Under the Radar We re Too Small for the CFPB to Care About Us Taking Care of the Customer We Tried to Comply! We Can t Afford to Comply Those are Just Technical Violations

4 The Cost of Noncompliance Has Become too Great Some recent CFPB fines are staggering Legal costs can be crippling Compliance is Now a Bet the Business Proposition

5 Small Dealers Get a Couple of Breaks Some Laws and Regulations Have Varying Requirements Based on Size But. ALL the Laws and Regulations Apply

6 A Small Dealer and CARMAX Have Nearly Identical Compliance Requirements CARMAX Has a Legal Staff Trained in Compliance Small Dealers Have???????

7 When it Comes to the CFPB Size Does Matter CFPB is the Bully on the Playground It Wants to Target Dealers Too Small to Fight Back Latest Example - Herbies

8 THE CFPB AND HERBIES

9 January, 2016 CFPB action against Herbies Auto Sales Herbies a single location CO buy-here-pay-here used car dealer The CFPB alleged that Herbies unlawfully advertised a misleadingly low 9.99 percent APR, without disclosing charges for a required warranty, a payment reminder device and other credit costs as finance charges. The CFPB claimed that this helped Herbies convince consumers that they would get the 9.99 percent APR instead of a much higher rate actually charged. Also, the CFPB claimed that Herbies engaged in abusive practices.

10 The CFPB alleged that Herbies: Hid finance charges and advertised a far lower APR than consumers received: Herbies lied to consumers about finance charges and APRs in marketing materials, showroom window displays, and in Truth-in-Lending Act disclosures. Hidden finance charges included $1,650 for a required repair warranty and $100 for a required GPS payment reminder device.

11 The CFPB alleged that Herbies: Hid finance charges that stemmed from a refusal to negotiate car prices: Herbies refused to negotiate prices with credit customers, but did negotiate with cash customers. The difference in price was a finance charge that should have been included in the APR.

12 The CFPB alleged that Herbies: Used abusive practices: Herbies financing scheme lured consumers with misleading advertising and then kept them in the dark about the true cost of financing, taking advantage of consumers inability to protect their interests in selecting or using Herbies financing.

13 The CFPB required Herbies to: Pay $700,000 to consumers who financed cars with Herbies and pay a civil penalty of $100,000 (suspended if consumers are paid). Stop misrepresenting interest rates, finance charges, or amounts financed, or any other fact material to consumers concerning the financing of any vehicle.

14 The CFPB required Herbies to: Clearly and prominently post the purchase price on all automobiles for sale when offering auto financing. Provide consumers certain information about the financing offer, including the actual APR, price of the car, and all finance charges, and get a signed acknowledgment from consumers that they received the required information before or at the time financing is offered.

15 The Herbies Enforcement Action is a Textbook Example of CFPB Tactics Pick a target that can t fight back Identify Slam-Dunk Violations Use the Basic Violations to Leverage Target to Agree to Iffy Other Violations

16 Why the CFPB Operates This Way Enforcement Actions Quicker than Rulemaking Enforcement Actions Reflect the CFPB s Political Agenda Enforcement Actions Create Law Dealers and their Trade Associations Have No Voice

17 At the End of the Day Herbies Violations Are Now Violations for All Dealers Herbies Required Remedies Are Now Required for All Dealers

18 Herbies Laws Don t Charge the Buyer for Required Service Contracts Don t Charge the Buyer for Required GPS Collection Devices Don t Sell Cash Cars for Less Than Cars Sold on Credit Don t Hide the Car Price From the Buyer Don t Violate the Advertising Laws and Regulations

19 DEALER CHALLENGES

20 Avoiding CFPB and FTC enforcement actions Complaint portals, private suits, state AG actions, whistleblowers, hidden camera investigative news reporters

21 Really understanding legal requirements - Training AFIP Certification Program NAF Certification program (for BHPH or for advanced training) NIADA Training

22 Addressing compliance written Compliance Management System Board (ownership) Management oversight Written compliance program Complaint response program, audit

23 Dealer Challenges You cannot just buy a form, manual or program off the shelf There is no plug and play No substitute for a hard slog, actually learning compliance You cannot outsource the responsibility for getting it right You are responsible for everything done in your name

24 Dealer Challenges Continued Resources are available, but at the end of the day, YOU have to get this compliance stuff right! We ve always done it that way won t work for compliance

25 Go to Click on Tips and Advice, then on Business Center, then on Advertising and Marketing You will find these publications: Advertising and Marketing Basics Online Advertising and Marketing Telemarketing Read Them!!!!! Resources

26 More Resources State Auto Dealer Associations State Independent Auto Dealer Associations NADA NIADA DealerSocket Vendors (but be very careful) Spot Delivery F&I Legal Desk Book

27 Questions?

28 Thomas B. Hudson Hudson Cook, LLP 7037 Ridge Road, Suite 300 Hanover, MD Don t forget to rate my class on the DSUS app. Visit usersummit.dealersocket.com for class notes. THANK YOU