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lAWS &
REGULATIONS

Automobile dealerships are among the most heavily regulated industries in the nation. According to the National Automobile Dealers Association (NADA), motor vehicle dealers must comply with over 85 different federal regulations, and states have additional and differing regulations.  Below are some examples:

Equal Employment Opportunity Commission (Title VII - Harassment)
Harassment is unwelcome conduct that is based on race, color, sex, religion, national origin, disability, and/or age. To be unlawful, the conduct must create a work environment that would be intimidating, hostile, or offensive to reasonable people. An employer should ensure that its supervisors and managers understand their responsibilities under the organization's anti-harassment policy and complaint procedure. Periodic training of those individuals can help achieve that result. Such training should explain the types of conduct that violate the employer's anti-harassment policy; the seriousness of the policy; the responsibilities of supervisors and managers when they learn of alleged harassment; and the prohibition against retaliation. In Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257 (1998), and Faragher v. City of Boca Raton, 118 S. Ct. 2275 (1998), the Supreme Court made clear that employers are subject to vicarious liability for unlawful harassment by supervisors.

Unfair & Deceptive Trade Practices
The federal UDTP prohibits using unfair methods of competition in or affecting commerce, and prohibits unfair or deceptive acts or practices in or affecting commerce. Most states also have their own form of UDTP statutes that regulate unfair competition, advertising and deceptive acts or practices. Examples of practices considered to be deceptive are payment packing and "yo-yo" financing.

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Truth in Lending Act
The Truth in Lending Act (TILA - Regulation Z) requires that creditors who deal with consumers make specific written disclosures concerning any finance charges and related terms of credit transactions.

Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) protects information collected by consumer reporting agencies such as credit bureaus. Among other requirements, it also dictates when a credit report can be obtained and with whom that information can be shared. Financial Institutions (and dealers in many cases) must notify the consumer when an adverse action is taken on the basis of such reports.

Equal Credit Opportunity Act
The Equal Credit Opportunity Act (Title VII of the Consumer Credit Protection Act) prohibits discrimination when offering or providing credit, on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act. It also requires that upon request, creditors must provide applicants with the reason or reasons for a decision denying credit.

Consumer Leasing Act
The Consumer Leasing Act amends the Truth in Lending Act. It regulates personal property leases longer than 4 months, and that are made to consumers for personal, family, or household purposes. It does not apply to products purchased for commercial use. It requires that certain lease costs and terms be disclosed, imposes limitations on the size of penalties for delinquency or default and on the size of residual liabilities, and dictates what disclosures must be made in lease advertising.

Magnuson Moss Warranty Act
The Magnuson Moss outlines the disclosure and designation requirements for written warranties, specifies requirements for full warranties, and establishes consumer remedies for breach of warranty or service contract obligations.

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Suspicious Activity Reports (SAR)
Financial institutions are required to file a Suspicious Activity Report (SAR) whenever a fraudulent transaction is presented to the institution. So, if a bank or credit union receives a credit application or loan documents with falsified applicant information (even though the dealer didn't know it was false) from a dealership, it must file a SAR naming your dealership as the party perpetrating the fraud. It does not matter when the institution discovers the alleged fraud, whether it is a straw purchase discovered during collections, or power booking is uncovered when the vehicle is repossessed, or falsified income becomes evident during the customer interview process.

FTC Red Flags Rule
Financial institutions and creditors are be required to implement a program to detect, prevent, and mitigate instances of identity theft. Dealership personnel must be properly trained on Red Flag procedures.

Telemarketing and Consumer Fraud and Abuse Prevention Act
This Act restricts the calling of consumers who have put their phone numbers on the National Do-Not-Call Registry In addition, it requires disclosures of specific information; prohibits misrepresentations; limits when telemarketers may call consumers; requires transmission of Caller ID information; prohibits abandoned outbound calls, subject to a safe harbor; prohibits unauthorized billing; sets payment restrictions for the sale of certain goods and services; and requires that specific business records be kept for two years.

Gramm-Leach-Bliley Act
GLB requires that financial institutions protect the privacy of consumers' personal financial information. Auto dealerships are included in the definition of financial institutions and must comply with GLB. Institutions must develop privacy notices and provide consumer's with their privacy policies at least annually. Under certain instances, before disclosing any consumer's personal financial information to a nonaffiliated third party, the institution must give notice and an opportunity for that consumer to "opt out" from such disclosure. The Act also limits how institutions can share information with other financial institutions and their affiliates. It also prohibits obtaining customer information of a financial institution by false pretenses.

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Odometer Statutes
The federal odometer statute prohibits tampering with motor vehicle odometers; and protects consumers from unknowingly purchasing a motor vehicles with altered or reset odometers. There are also state odometer statutes that require specific disclosures and information is provided when vehicle title is transferred.

Office of Foreign Asset Control (OFAC)
OFAC administers various laws that impose sanctions against certain individuals, companies and countries that pose possible threats to national security or to further U.S. foreign policy. Businesses are required to check all customers, private and commercial, against the Specially Designated Nationalist list (SDN) to ensure they are not conducting business with a sanctioned party.

Used Car Rule
The Used Car Rule applies to all states except Maine & Wisconsin. It requires the disclosure and posting of Buyers Guides on all used vehicles sold.

IRS Cash Reporting
The IRS requires that any cash transaction in excess of $10,000 or any suspicious transaction be reported timely to the IRS and Financial Crimes Enforcement Network. The regulation has specific time lines for reporting and also defines what types of funds are considered cash for reporting purposes.

Safeguard Rule
The Safeguard Rule was written by the FTC as required under Gramm-Leach-Bliley. GLB requires that financial institutions protect the privacy of consumers' personal financial information. Auto dealerships are included in the definition of financial institutions and must comply with GLB. Institutions must develop privacy notices and provide consumer's with their privacy policies at least annually. Under certain instances, before disclosing any consumer's personal financial information to a nonaffiliated third party, the institution must give notice and an opportunity for that consumer to "opt out" from such disclosure. The Act also limits how institutions can share information with other financial institutions and their affiliates. It also prohibits obtaining customer information of a financial institution by false pretenses.

California Car Buyers Bill of Rights
A new law establishing the Car Buyer's Bill of Rights substantially impacts the purchase of new and used vehicles. The law, which took effect July 1, 2006, affects retail vehicle sales handled by licensed car dealers in California.

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The material provided in this website is for informational purposes only and is solely intended to provide an overview of legal compliance issues relative to automotive dealerships. Dealer Compliance Consultants, Inc. is not a law firm and the information contained in this website is not to be considered legal advice. Dealer Compliance Consultants, Inc. assumes no liability whatsoever for the use of information contained in this website.

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