SINCE 1940
December 2010
www.FIADA.com
A Publication of the Florida Independent Automobile Dealers Association
Information and Insight for Florida Used Car Dealers
Don’t let the ball drop on your dealership in 2011. Find out how you can be ready on page 6, 10 and 20.
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Contents December 2010
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 Jeff Gann President Greg Edwards Chairman of the Board John Cousins Senior Vice President Dino Mercurio Secretary Brandi Noegel Treasurer Jim Kagiliery Regional Vice President Frank Fuzy Regional Vice President George Hickey Regional Vice President Steve Marbais, CMD Regional Vice President Chris Leedom Regional Vice President FIADA STAFF Steve Jordan Executive Director Ginger White Director of Membership Recruitment & Retention Terry Myers Educational Instructor Sarah Langley Membership Coordinator Alex Romans Education Coordinator Christy Taylor Editorial/Advertising
For members of the Florida Independent Automobile Dealers Association
C O LU M N S & F E AT U R E S 4
Jeff Gann
6
Steve Jordan
8
Federal Advocates, NIADA Lobbyist
10
President’s Message Executive Director’s Message Federal Advocacy Is It Time to Worry? Increased federal scrutiny should be a wake-up call for dealers. Start preparing for coming rules and regulations that may change the way you do business.
14
Lender Agreements Made Simple
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2010/11 Executive Committee
16
John Grant, FIADA Lobbyist
20
Industry Resources: Legal Counsel for Dealers
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2011 Tax Season
NIADA General Counsel Keith Whann explains what to look for in your paperwork.
Legislative Update
Changes in store for tax preparers and dealers now and in coming years for refund application loans.
UPCOMING EVENTS January 21-22, 2011 FIADA Board of Directors Meeting Hyatt Regency Grand Cypress Orlando, FL
POSTMASTER:
Send address changes to: FIADA • 1840 Fiddler Court Tallahassee, FL 32308 (850) 385-2712 • Toll Free: (800) 237-0448 Fax: (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 in Tallahassee and distributed to Florida new, used, wholesale and lease/retail car dealers. Advertising rates are available upon request. The statements and opinions expressed herein 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.
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PAC CONTRIBUTION FORM Use this form to make your contribution, or go online to www.FIADA.com.
CONTRIBUTOR’S NAME: DEALERSHIP: ADDRESS: Make your check out to FIADA-PAC and mail your contribution to: FIADA • 1840 Fiddler Court • Tallahassee, FL 32808 Enclosed is my check for: $1,000 $500 $250 $100 ______ Monthly Contribution _______ Cover photo credit: Countdown Entertainment, LLC
December 2010 — Independent Dealer — 3
FROM THE PRESIDENT
Change Isn’t Coming— It’s Already Here BY JEFF GA NN
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e have heard a great deal about change lately. From the promises of politicians to the rate of technological progress to the lack of it in our pockets, change is on our minds. We all instinctively know that nothing remains the same forever but we are nonetheless often caught off guard by change or the rapidity of it. In spite of the intellectual capacity of our species, our emotions are often to blame for our tendency to resist change or fail to see it coming. This was not a large problem for early man for life was considerably simpler before invention of the wheel. From early wheel-barrow to modern automobile the change and complexity that accompanied was to be a nightmare for dealers and a windfall for mechanics. In all due respect to mechanics, I always cringe when a customer tells me that a friend who used to be a mechanic told them how to fix a problem or worse, worked on the car for them but was unable to correct the problem leaving my tech to fix the fix and the original problem. The technology of the modern car has progressed more in the last ten years than the previous fifty before it. Any technician who has not kept up with these advances will be a parts changer at best. But just when you think it’s safe to go into the garage a hybrid or flex-fuel car shows up requiring another adaptation to new technology; and this is only the beginning. The propulsion of the next generation (which by now is counted in years instead of decades) automobile remains to be seen, but the level of innovation emerging is mind boggling. Tata Motors of India has successfully built a compressed air powered car for urban use, General Motors has produced Motor Trend’s Car of the Year with the electric Volt, and other technologies such as hydrogen fuel cells are being explored. 4 — Independent Dealer — December 2010
As car dealers it will be prudent to consider these changes and those we will have to make to our business to adapt and survive. As an industry we must be prepared to defend our free market rights to prevent proprietary obstacles from interfering with the ability of independent dealers to compete and obtain access to the information we need to work on these cars. In 1988 the SAE (Society of Automotive Engineers) recommended a standardized diagnostic connector and set of diagnostic test signals but it was not until 1996 that it was made mandatory in the United States. In order for businesses to compete with one another, a level playing field is required. It is often difficult, if not impossible for one to create and preserve such an environment alone. Fortunately you don’t have to. The FIADA in conjunction with our colleagues at NIADA will be looking closely at these and other legislative issues as they unfold and will be prepared to represent our members accordingly. The success and in some cases, the survivability of dealers facing the monumental and complex changes coming our way, will be dependent on their ability to adapt their current business model to the new changes. These changes will come from many directions and technology is only one. The new financial reform law at the federal level, legal issues at the state and local levels pose another; and the list goes on. It can be overwhelming if you go it alone. We are changing too. The newly re-energized FIADA has added new member benefits to the long list of existing ones. Your Association is constantly looking for ways to give the independent dealer the tools to thrive. If you haven’t taken full advantage of them yet, now is the time. Jeff Gann, FIADA President www.fiada.com
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EXECUTIVE DIREC TOR’S MESSAGE
The New Year Brings More Changes BY STE VE J O RDAN
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s the calendar turns to a prosperous 2011 and you’re reviewing your New Year’s resolutions, make sure you complete these items on your dealership compliance checklist as January 1 is the starting line for some new changes in dealer operations: q Implement the new FTC Risk Based Pricing Form. q Rework the language on the Privacy Notice form. q Renew Motor Vehicle Retail Installment Sellers License online with Florida Office of Financial Regulation. q Hunker down for FTC enforcement of Red Flags Rule. If you haven’t made the changes already, you need to get started now to be prepared to comply as the New Year begins. For those of you just tuning in, here’s a quick recap. Starting Jan. 1, 2011 the FTC is requiring dealers to 1.) explain to your customers how their credit score is affecting their cost of credit and 2.) rework the language used on your Privacy Notice to help your customers better understand how your company will collect, share and protect their personal information. Let’s start with the Risk Based Pricing Form. If your dealership is engaged in retail installment sales and uses a credit report or credit score to determine the interest rate for a customer that is called risk-based pricing. Whether the customer has good credit or bad, if it affects their interest rate the responsibility lies with the dealer to comply with this new rule, not the finance company. The good news is many DMS providers have updated their systems with this form and the FTC has given dealers a template to use on the FTC website. The FIADA has the FTC link and the form template on our website at www.fiada.com. The bad news is the FTC doesn’t tell you how to fill the form out and unfortunately, because there are varying business practices across the FIADA membership base, we can’t either. That is an answer that needs to be determined between you and your legal counsel. Next, let’s discuss Privacy Notices. These forms generally tell your customers how you’re going to collect, use and protect their personal, non-public information. 6 — Independent Dealer — December 2010
Again, many DMS companies have updated their systems to ensure compliance and the FTC also has varying templates available on their website. We have added those links and templates to the FIADA website for you to review with your legal counsel to determine which form is needed and how it needs to be completed. Another option would be to go to www.Auttr.com, the website maintained by NIADA General Counsel Keith Whann, and use the Dealer Resource Center tab for access to government sites and compliance resources. Now let’s take a look at what Dec. 31, 2010 holds. If you are engaged in retail installment sales, your Motor Vehicle Retail Installment Sellers License will sunset on Dec. 31 and that will be the last day you can renew your license online. As a matter of fact, the only way to renew this two-year license is online using the Office of Financial Regulation’s R.E.A.L. system at www.flofr.com/REAL. Renewal licenses are renewed immediately using this system and a new license certificate can be printed upon receipt of payment. If you have any questions about this process or need clarification to set up your account, you can contact the Office of Financial Regulation at (800) 848-3792. The next item to expire on Dec. 31, 2010 is the most recent FTC delay in enforcing the Federal Red Flag Rules. You may have noticed over the last couple of years the FTC has delayed the enforcement of these rules, not the actual requirements to comply with them. If you have good Red Flag Rules in place at your dealership, than you shouldn’t have anything to worry about. If you are still unsure about what that means or you have never heard that phrase, now is the time to act and you can review the red flag information we have available at www.fiada.com. If you have questions about any of these items, you can contact us here at the FIADA by calling toll-free (800) 237-0448 and we can point you in the right direction for legal advice. Our outside general counsel, Rob Sickles, is also available to answer your technical & legal questions, but I would encourage you to seek out legal counsel specific to your dealership’s needs. Use the list of legal counselors for dealers on page 20 as a resource. www.fiada.com
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FEDERAL ADVOCACY
Working With Washington to Inform on Dealer Issues B Y S A N T E E S P O S I TO A N D M I C H A E L E S P O S I TO, F E D E R A L A D V O C AT E S
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IADA’s lobbyist group, Federal Advocates, has been speaking out for the interests of used car dealers in the nation’s capitol. At the top of the list are continual communication on the Wall Street/Consumer Financial Services Reform Bill and new legislation that could directly affect dealers. “Wall Street/Consumer” Financial Services Reform Bill On Nov. 17, Keith Whann and Federal Advocates met with senior staff of the FTC as a follow-up to the Sept. 21 meeting. A series of questions had been provided to NIADA for discussion at this Nov. 17 meeting and Keith walked them through the process of buying a car by providing samples of “purchasing” documents. The FTC is in the process of formulating questions for public comment regarding various aspects of the auto industry as it relates to consumers.
FTC staff was not forthcoming as to the timing of that effort, its scope, and its intended purpose. The timeline thus far: Keith Whann and Federal Advocates met with staff of the FTC on Sept. 21 regarding implementation of the above Wall/Street Consumer Financial Services Reform Bill and its impact on the auto industry. Following discussion of various issues, with Keith Whann leading the discussion and answering various questions as to how the auto industry works, including the auction practice itself, it was decided to schedule a half day session to allow for a more detailed discussion of issues on Nov. 17. To review further, on July 22, President Obama signed into law the so-called “Wall Street Reform Bill.” As reported previously, the new law exempts some auto dealers from increased oversight with respect to dealer-assisted financing. To get to that result, advocacy activities included numerous meetings, strategy phone conference calls, letters, talking points, legislative alerts, etc. The law does grant increased powers to the FTC regarding dealer oversight. Also, it requires coordination with the Department of Defense to ensure that service members and their families are treated fairly by automobile dealers. Senate Motor Vehicle Safety Act of 2010 NIADA is currently reviewing the Senate Motor Vehicle Safety Act of 2010 pending possible Senate Floor action in December. To review, on June 9, 2010, the Senate Committee on Commerce, Science and Transportation marked up and order reported S.3302, the so-called “Toyota Bill.” In earlier drafts of the Bill and just prior to markup, language was included (section 310) which would have specified that a dealer may not sell or lease a used passenger motor vehicle (both wholesale and retail sales) until the dealer first notifies the purchaser or lessee in writing of any recall notices. Working primarily with/through Senator John Thune, his staff (Brenden Plack), and Committee staff (Alex Hoehn-Saric and Chris Herndon), and as a
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White House Reform Request On Sept. 23 and Sept. 29, Federal Advocates was contacted by the White House, which is still trying to organize/ schedule a meeting to include “people who are working to setup the CFPB.” This meeting is in response to a letter sent by NIADA to President Obama requesting “the opportunity to work with you to reform our industry in common-sense ways that achieve real safeguards for consumers, that promote accountability and transparency, and that work.”
Small Business Jobs and Credit Act of 2010 On Sept. 23, the House passed the Senate-passed Small Business Jobs and Credit Act of 2010, which includes an increase in the amount that the Small Business Administration’s Dealer Floor Plan Financing program can guarantee. This permits the SBA to guarantee bank and finance company loans up to $5 million, which should help, the Committee believes, expand dealer access to floorplan lines of credit. We worked with Senator Mary Landrieu’s Committee and personal staff, in conjunction with others, on this. This bill may be the subject of subsequent meetings with the Hill and the SBA on how the program “really works.”
Department of Defense Regarding the issue of “how to ensure that service members and their families are treated fairly by automobile dealers,” Keith Whann and Federal Advocates also met on Sept. 21 with Frank Emery, Office of Personal Finance, Family Policy Outreach Directorate, U.S. Department of Defense. Keith relayed a specific example of how he helped a service member at Fort Bragg with an automobile situation, working with the JAG and others. He also talked about his plan for a special program to “teach” dealers on how to deal fairly with service members and their families. DOT continues to remain interested in looking for opportunities where Keith could lend his expertise. Details to be finalized at a later date.
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result of concern raised by Keith Whann and his proposed suggestion, language was included in the final reported version of the bill exempting wholesale transactions from the section’s application. While an initial “victory,” the remaining provision is still very troublesome and we continue to advocate on behalf of NIADA’s interest pending further action on the Senate Bill and/or on a House companion bill. The latest Senate draft and the companion House bill (H.R. 5381) are currently being reviewed by NIADA.
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B Y C H R I S T Y TAY LO R
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here’s a reason you might feel like car dealers have been put under the federal microscope lately. When Congress approved the DoddFrank Wall-Street Consumer Finance Reform Bill back in July, nearly all lending institutions found themselves exposed for thorough, federal examination including banks, credit card companies and yes, even car dealers. Flashback to September 2008. A chaotic crumbling of the sub-prime mortgage crisis slows with the Federal Housing Finance Agency placing government sponsored enterprises Fannie May and Freddie Mac in government conservatorship. Lehman Brothers Holdings files for Chapter 11. The Federal Reserve Board authorizes a loan of $85 billion to the American International Group (AIG). Less than a month later, Congress passes the Emergency Economic Stabilization Act of 2008, establishing $700 billion for the Troubled Asset Relief Program (TARP). The floodgates open as one after another large, companies and corporations begin making requests for relief. In the midst of the loud clamoring of banks, investment firms, and life insurance agencies looking for a piece of the pie, the automotive industry makes a discreet, shocking announcement: Ford, GM and Chrysler reveal the reality of an endangered financial situation, and request access to TARP funding to stay in business. At the same time all of this is happening, independent dealers of all shapes and sizes are buckling down and preparing for the worst. Dealers scramble to find lenders and funding sources for their credit-challenged customers while sub-prime finance companies all but leave the industry. From mom-and-pop stores to franchised second-chance credit chains, buy here pay here dealers review their lending criteria and cut their expenses. Access to capital is as precious as gold and if you don’t have it, you might as well call it quits. Jump back to today—December 2010. For those who have survived the past two years, you probably feel blessed, fortunate, and maybe even
a little lucky. These days, you are actually thankful to get up early and head to work. You work hard, knowing this isn’t government bailout money you’re playing with. Your business runs on your money and you have no other choice than to make it work. A glance at the newspaper says things are getting better. For the second month in a row, the Consumer Confidence Index rose, up 4.2 points in November. A December stock market rally is a welcomed Christmas gift for investors. Whispers of a tax compromise in congress give tax payers something to smile about, hoping it means they will keep a little more money in their pocket next year. At your dealership, by now you have secured funding
But, just as you pause for a moment to sip a cup of coffee and line-up your daily to do’s, something in the mail causes you to stop in your tracks.
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streams and located the capital you were struggling to find a year ago. Quality inventory is still scarce, but you’re getting what you need. You, your employees and your customers have settled into this new, almost-post-recession normalcy and your business is positioned to move ahead. But, just as you pause for a moment to sip a cup of coffee and line-up your daily to do’s, something in the mail causes you to stop in your tracks. A certified letter from the Federal Trade Commission requesting your help with an informal inquiry into the way dealers process third-party paperwork and immediately you have a new worry—federal regulation. As federal legislators have started analyzing the economic problems of the past two years, they have been asking questions to understand how it all happened and what can be done to keep it from happening again. The answer, in their eyes, is more regulation. Dodd-Frank was the beginning of a new era in federal oversight: consumer protection. Leading the way is the birth of the Consumer Financial Protection Bureau, a brand-new government, regulatory agency created to oversee and regulate the financial industry and look out for credit-confused consumers. Established
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agencies such as the Federal Trade Commission and Federal Reserve will transfer some of their power to this new agency, but once the transition is complete the CFPB will have its own autonomous power to enforce consumer-complaint issues, and for the auto industry, that is an automatic signal to be on high-alert. “There is always anxiety when a brand new agency is formed and there is no history with it,” NIADA General Counsel Keith Whann said. “With the FTC, we have a history and you tend to know where they stand on enforcement.” Whann was tapped by the federal government to be the leading advisor for the new board on issues that deal with the automotive industry. Thus far, he has participated in dozens of hours of trainings, question and answer sessions and testimony concerning CFPB. Most recently, Whann gave FTC employees, who post-transition will oversee automobile finance aspects of the CFPB, a three-hour training session on the complexities of selling
a car. With photocopies of a real car deal in hand, Whann explained the process to regulators step-by-step. “Most had never laid eyes on a car deal,” Whann said. “Their viewpoint is so different than the reality of what we have to deal with.” Right now, the question of exemption from CFPB power is not who but what. Automobile dealers, per se, are not exempt. What is exempt is the transaction of a dealer who arranges financing for a vehicle through an installment sales contract and then transfers the deal to a third-party lender. That means if you are a buy here, pay here dealer you better familiarize yourself with the CFPB and stay up-to-date with its development. Exempted or not, the door is wide open for dealers to be contacted by the FTC for an “informal” information inquiry disguised in a certified mail envelope, that requests examples and snapshots of your paperwork and existing deals. Though no official number has been given, the FTC has sent out dozens and dozens of these requests to dealers around the country looking for a representative sample of paperwork, in particular how disclosures of the holderin-due-course rule are made. If you do receive one of these inquiry letters in the mail, Whann advises to consult with your attorney, or other knowledgeable contact, which can guide you through the process and take on the role as your advocate. He stresses that this expert should be someone who is thoroughly familiar with the automobile dealer industry and its complexities. Asking for compliance help from an attorney whose only involvement with
To do an audit of your business, consult an attorney who specializes in the auto industry. Find a list of FIADA member licesned attorneys on page 20.
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your business has been filing its articles of incorporation is as ineffective as consulting your bookkeeper about creating a related finance company. Seeking informed, professional advice from a licensed attorney, with specific experience in automotive sales, can help your dealership identify any problems or compliance risks that need to be addressed before moving forward. Only licensed attorneys, not compliance trainers or industry experts, have the legal authority to represent you in a court of law or in federal investigations. Whann was able to speak with FTC representatives about the scope and intention of this records request project. What he found out was that there is no “magic number” of dealers who will be asked to participate, giving regulators the opportunity to continue sending notices until they feel enough data has been collected. He also concluded that even though this is a voluntary request for information, if a dealer chooses not to participate they could be forced to provide the information under subpoena and face potential federal penalties. Just because you did not receive a request letter (yet) does not mean you should not be prepared for it all the same. Conduct an audit of your dealership now to review paperwork and processes asking critical questions about all aspects of the dealership, from the website to the filing cabinets. Scrutinizing every detail of how your current operation stacks up to your business plan is crucial and could save your business in more ways than one. “A fresh look at what you are doing will not only make you more compliant, but it will make you more money, too,” Whann said. What else can you do? Get involved with the Florida Independent Automobile Dealers Association. www.fiada.com
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FIADA membership guarantees you will have access to the right information, assistance and resources to tackle these types of issues as well as give you the legislative power you would not have alone. Whann says when he talks with regulatory agencies and government leaders such as the FTC, or even The White House, a strong Association membership only strengthens his point. Testifying on behalf of 20,000 members gives Whann, as NIADA General Counsel, additional credibility and respect as a qualified representative of the automotive retail sales industry. Going one step further, dealers who get involved personally with legislative issues and legislators have great power in the equation as well. When a legislator is personally invested with a car dealer, they start to understand the dealer’s perspective a little better and may have a different viewpoint when it comes to voting on legislation. This first round of inquiry is just the beginning. An ever-expanding, all-encompassing philosophy of government encourages additional regulations and rule-making. The Dodd-Frank bill already has provisions for 243 rule-making proceedings, 67 studies and reports and 22 periodic reports, and it still is being analyzed and implemented. “In the next year to 18 months, a lot is going to happen,” Whann warned. Knowing that an automobile is the largest purchase a household makes, besides a house, the process of buying, selling and collecting on it will be of great importance to federal regulators. Topics like taxation, safety recall notices, buy here pay here restrictions, risk-based pricing and credit disclosures are still being discussed and reviewed. So, should dealers be worried about what is coming down the line? Probably, but perhaps more importantly, they should be prepared. 14 — Independent Dealer — December 2010
Lender Agreements Made Simple
BY KEITH WHANN
With so much talk about the holder-in-due-course rule, it might be worth the time to brush up on the basics. NIADA General Counsel Keith Whann takes a look at what lender agreements should include.
contract (whether or not these To sell a car we need three things: cars, customers and credit. claims or defenses are valid), to all documents being used in a Dealers tell me that they know transaction complying how to find the with all federal and cars and customers, state laws (when was the challenge the last time your is often finding dealership reviewed lenders willing to and updated its extend credit in paperwork to ensure our industry and legal compliance?). knowing how to Many of these lender review a lender’s agreements also dealer agreement. extend the warranties As with many Keith Whann to the accuracy of of the legal and information far beyond business issues the dealership’s knowledge. that arise in the motor vehicle Therefore, when the agreement industry, reviewing lender dealer includes a warranty that all agreements can seem like an statements contained on any form overwhelming task. In reality it (such as a credit application) are is quite simple if you understand true, a dealership, even though a few basic principles. misled by a customer, may become Most of the standard dealer obligated to repurchase the loan. agreements used by lenders are, In addition to these legal on the surface, non-recourse. issues, lender agreements raise While under the traditional a whole host of business related concept of a “non-recourse” issues that should be carefully deal this may be so, most of considered by the dealer. Often these agreements contain other times these agreements have onelanguage which can negate sided indemnity provisions, i.e. the non-recourse concept and if something goes wrong due to may obligate a dealership to a dealership error, the dealership repurchase various loans in holds the lender harmless for a portfolio, an event which all damages, costs and expenses, the dealer thought could not including attorneys’ fees. There occur. For example, virtually may not be, however, a reciprocal all lender agreements contain provision if the problem arises sections where the dealership because of an error on the part provides various warranties and of the lender. Choice of law and representations to the lender. forum (location) selection clauses Within these sections are for dispute resolution can also warranties from the dealership cause problems. Many lender for everything ranging from agreements seek to apply the law the purchaser having no of and settle any dispute in the claims or defenses against the www.fiada.com
lender’s home state, which may be disadvantageous to the dealership and can be a large economic problem should a dispute arise under the agreement. In addition, the following types of provisions can have a significant impact on the business relationship between the parties: • The method of payment accepted for the down payment; • The time period within which the dealership is required to file a lien and perfect the security interest; • Prohibitions or limitations on the dealership’s ability to accept deferred down payments; • Overly broad or vague default provisions;
• The time period within which the dealership has to deliver the loan documents; • One-sided attorney fee and damage waiver provisions; and • Clauses that purport to hold the dealership liable for “any claims or defenses”, even those asserted against third parties over which the dealership has no control. Unfortunately, in some agreements, and in a number of real life examples, a violation or breach of the representations and warranties by a dealership in a non-recourse lender dealer agreement has led to the dealership being required to repurchase some, if not the entire portfolio, of loans with that particular lender. Experience has shown that if these agreements are carefully
scrutinized prior to signing, the dealership can minimize its risk of potential liability and increase its profitability by considering various legal, business, and financial issues raised in the agreement and taking action to protect its interests. Reviewing lender dealer agreements will not only help to ensure your dealership’s future financial health and keep you from experiencing a variety of problems that could have been easily avoided, but will also form a solid foundation for your business relationship with the lender.
Information from Keith Whann, The Car Counselor, is available in both written and video formats on this and hundreds of other topics here on Auttr. Just type the topic or subject you would like information on in the “Search Keith’s Posts” Section of The Car Counselor’s Corner and a complete listing Keith’s written and video posts on the subject will appear.
2010-2011 Executive Committee Are you looking for advice or suggestions? As the Association’s leadership, these men and women have volunteered to make themselves available to all members for advice, discussion and assistance.
President Jeff Gann Lakeshore Motors East Lake Weir, FL 352.288.4512 lakeshoresales@embarqmail.com
Chairman of the Board Greg Edwards Greg Edwards Enterprises Daytona Beach, FL 386.323.1888 gregedwards@bellsouth.net
SENIOR VICE PRESIDENT John Cousins Southeast Car Agency Gainesville, FL 352.377.7787 cousj1@aol.com
TREASURER Brandi Noegel Noegel’s Auto Sales Starke, FL 904.964.6461 brandi@noegels.com
SECRETARY Dino Mercurio Independent Credit, Inc. West Palm Beach, FL 561.686.8673 primeauh@bellsouth.net
SENIOR VICE PRE
REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT George Hickey Steve Marbais Jim Kagiliery Frank Fuzy Bond Auto Sales, Inc. Marbais Enterprises, Inc. Brightstar Financial Group, Inc. Century Motors of South FL Tampa, FL 34761 Ocoee, FL 34761 Jacksonville, FL Pompano Beach, FL 813.238.7478 407.877.7422 904.400.6190 954.785.0369 bondauto@gte.net centurymotorscar@aol.com jzk@drive100.com marbais@cfl.rr.com www.fiada.com
REGIONAL VICE PRESIDENT Chris Leedom AutoMaxx Sarasota, FL 941.309.1111 jon@goautomaxx.com
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L E G I S L AT I V E U P D AT E
Gearing Up BY HO NO RAB L E JOHN GRANT, F I A DA LOBBYI S T
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ith elections behind us and the 2011 regular legislative session ahead, it is time for FIADA to gear up to promote legislation that helps our industry and defeat legislation that does not. The FIADA Legislative Committee, under the direction of Dino Mercurio will be meeting soon to map our legislative plan for the upcoming session. We still are appreciative of their effort in assisting with passage of the anti-curbstoning legislation passed in HB 631 this past session and will be on guard to see that no one attempts to modify or weaken it. Two weeks after the General Election, the Florida Legislature convened in the biannual Organizational Session to swear in new members and select their respective legislative leaders. Committee chairmen have been announced and members will soon get their committee assignments.
to committees for hearings and by the time the legislature convenes in March, some bills will have gone through all committees and be ready for floor action the first week of the session. We will be planning a “FIADA Day on the Hill,” where we will try to have as many dealers and members as possible come to Tallahassee and walk the halls meeting with legislators, telling our story. Those dates will soon be established so members can get them on their calendars and plan to attend. While we are automobile dealers, and hence interested in automobile related legislation, we are also the poster children for small business men and women in Florida. The Association will therefore be in favor of legislation that will lower taxes, create jobs, eliminate bureaucracy and red tape and create an overall more favorable climate for small business to operate in Florida.
Once we know which legislators will be assigned to those committees, such as transportation and the like, we will be visiting with those members specifically to make sure they know who we are, what we do and what our legislative issues are. Our recent successful support of these legislators with endorsements and political contributions from the FIADA PAC, will help us in that process. From now on, the legislative pace will accelerate. Bills have already been filed and soon will be assigned 16 — Independent Dealer — December 2010
Details Coming Soon www.FIADA.com
After seeing who was elected and hearing what they said on the floor and from the rostrum during the Organizational Session, I am confident that the 2011-2012 Florida Legislature will be strongly inclined in that direction with strong backing and support from the Governor. This will be a good session for FIADA, but with more support, participation and input from our members and dealers, it can be even better. Plan to be on board, gear up and buckle up as we get ready for a great ride. www.fiada.com
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INDUSTRY RESOURCES
Legal Counsel for Dealers
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n this month’s Independent Dealer, we have recommended on several occasions the need for dealers to seek legal counsel in an effort to comply with upcoming changes in law. The Risk Based Pricing form, a reworked Privacy Notice and Red Flags Rule enforcement are all critical issues that you need to be consulting with a licensed attorney on to make sure your forms and dealer operations are in compliance. Your forms and practices need to stand the legal scrutiny of a regulatory audit or even worse a law suit. An essential key in selecting someone to review your forms or practices is whether or not they can represent you in a court of law. If someone is going to tell you that your forms or practices are legally compliant, they need to be willing to say that in a court of law and have the ability to legally represent you to that affect, in a worst cased scenario. Anything else is just an educated opinion. Dealers beware of consultants or companies that offer compliance reviews of your forms or practices that are not licensed attorneys and cannot represent you in a court of law. Many of you may already have solid legal counsel from a licensed attorney that has deep experience in representing dealers and ensuring compliance, but if you are in need of legal assistance or seeking out counsel, the FIADA can recommend the following Associate Members of the FIADA who are licensed attorneys. Rob Sickles Hinshaw & Culbertson, LLP Tampa, FL 813.868.8838 rsickles@hinshawlaw.com
Please note that Rob Sickles is the outside General Counsel for the FIADA and is available for members to call for legal and technical assistance through our office at (800) 237-0448 anytime. He is also available to assist you and your dealership with specific legal issues you may have on a case by case basis. Chuck Geitner Hinshaw & Culbertson, LLP Tampa, FL 813.868.8838 cgeitner@hinshawlaw.com Mark Ornstein Killgore, Pearlman, Stamp, Ornstein & Squires, P.A. Orlando, FL 407.425.1020 mlornstein@kpsos.com Bill Denius Killgore, Pearlman, Stamp, Ornstein & Squires, P.A. Orlando, FL 407.425.1020 wjdenius@kpsos.com
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Keith Whann Whann & Associates, LLC Dublin, OH Auttr.com
Keith Whann is the outside General Counsel for the NIADA and has over 20 years of experience in the automotive industry. You can reach him by going to Auttr.com and sending a message through the “Ask Keith a Question” widget. Lewis Kuhl Pathman Lewis, LLP Miami, FL 888.379.3459 lkuhl@pathmanlewis.com Thomas Hudson Hudson Cook Hanover, MD Phone: 410/865-5438 Email: thudson@hudco.com Dennis LeVine Dennis LeVine & Associates, PA Tampa, FL Phone: 813.253.0777 Email: Dennis@bcylaw.com Bill Sharpe The Sharpe Law Firm Tallahassee, FL Phone: 850.222.0124 Email: Bill@thesharpelawfirm.com www.fiada.com
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2011 Tax Season: Changes in Store for Tax Preparers and Dealers Now and In Coming Years for Refund Anticipation Loans BY P E T ER S AL I NAS, D EALER BUSINESS J OU RN A L
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ight around April 15 this past year most Americans heard the refrain from many anti-tax and conservative bloggers and pundits— about 47 percent of Americans pay no federal income taxes. That’s a good news, bad news bit of information for buy here-pay here dealers who might be concerned about the federal deficit, but still want to enjoy a profitable tax season. Tax Season, the words conjure up images of sales climbing anywhere from 50 to 100 percent for a few months in the lead up and just after the April 15 federal income tax deadline. Tampa, Fla.-based TRS Tax Max, one of the oldest tax refund and refund anticipation loans firms in the U.S. serving the automotive marketplace, says the 2010-2011 tax season should be strong for dealers, but there are a number of changes occurring in the tax refund business of which dealers should be aware. Bill Neylan, president and CEO of TRS Tax Max, said the number of dealers his firm has in his database dropped from a high of 4,537 in 2007-2008 to just over 3,200 today. “Most of these were through dealers going out of business as a result of the Great Recession,” Neylan said. “What’s happening, however, is that the players that are left in the marketplace are strong. We’re seeing dealers who have strong balance sheets and are growing their operations. Our sign-ups of
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new dealers coming on to our program are up 10 percent over last year.” Refund Anticipation Loans (RALs) are funded by banks, and last year Santa Barbara Bank and Trust was unable to provide tax preparer Jackson Hewitt about 75 percent of its funding for financial products for the 2010 tax season. Jackson Hewitt and some other larger tax preparers couldn’t deliver their services for dealers, giving a competitive advantage to those dealers on Neylan’s Tax Max program. “We expect to see a similar situation in the marketplace this year and other major providers will have trouble as well,” Neylan said. In addition, smaller tax preparers face increased regulatory hurdles to
conduct business as they did in the past, and that will likely force many out of business, according to Neylan. He said the tax preparers will have to register with the IRS, pay a fee, complete a competency test and will be required to complete continuing education. The cost to meet those regulations could reach $15,000 to $20,000 for us, he said. “Some dealers trying to fund deals with tax refunds by using a small mom and pop tax preparer in their towns will find that’s no longer an option,” Neylan said. “Those that remain in business will have no choice but to pass along their increased costs to taxpayers and to dealers.” Another change to the tax laws will prevent any new tax services created in 2010 and thereafter from offering RALs. Tax season has shifted forward, according to Neylan, because of the availability of RALs and the advent of e-filing returns. Tax season used to occur between February and late April, but now with Fourth Quarter program RALs, some dealers are pulling sales into November and December. E-filing means taxpayers get their returns back in days rather than weeks, compressing what used to be a several month tax season in half. “Tax season used to be especially great for dealers in the 1990s and we’re seeing a return to those kinds of numbers for people on our program,” Neylan said. “We’ve seen dealers prepare 150 to 160 tax returns and sell 150 units as a result.” www.fiada.com
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Some dealers report that using a or discontinued this will remain the service such as Tax Max is a hassle for same,” Neylan said. “It will not affect sales people who must now collect and this year’s returns. Remember, the enter tax data instead of focusing on Earned Income Tax Credit will be in selling vehicles. effect for all the low-wage earners. “If the program you’re in is a For instance, a consumer who earns hassle, something is wrong,” Neylan around $20,000 and has two or three said. “The systems are so fast, and so children will get a tax refund of $8,000 little data must be entered, it could to $10,000 in one lump sum.” take eight to ten minutes to enter the “In 2011, the average return for data and then the dealer can print a those who e-file will be delivered check with their printer in just a few in 7-12 days, when the checks are hours.” automatically deposited into a The fourth quarter program does checking or savings account,” Neylan pose some risk to the dealer. This said. “Four years from now the IRS has program allows the consumer to get an a stated goal of releasing a tax payer’s “advance” on their tax return or RAL, funds in 48 hours.” which means there is a possibility He said this will eventually do some consumers will not return with away with the RAL, but Neylan said their W-2s when they get them in that’s not a bad thing. January. “The money will be there quickly “The stats on consumers who enough that the consumer won’t need don’t return with their W-2 have held a RAL, however, the consumer will about the same for the past five years,” need a bank account to deposit the Neylan said. “About 90 percent of the money,” Neylan said. “More than 50 consumers come back with their W-2, percent of the lower income citizens of 95 percent if a starter-interrupt and the U.S. do not have a bank account, GPS device are added to the vehicle. meaning they will need a way to get “Remember, you have also their funds. The mail is an option, but collected a sizeable down payment they’ll always want the money sooner from this customer and by the time rather than later, and that’s where the W-2 is available, they have already programs such as ours will always be in made three demand.” or four He said Rising Returns bi-weekly consumers will Average Tax Return Refund from 2009 to 2011. payments. always have They have a need for skin in someone to the game prepare their and are taxes, and be not going willing to pay to just say a fee out of good-bye their check to to that cash get the funds and the car.” immediately. Neylan said since 2009 the size Neylan cautions dealers who are of the average return has shot up considering doing tax preparation significantly. In 2009 the average themselves without the use of an return was about $3,900. That rose accountant or third-party provider. dramatically to $4,500 in 2010, and “With the new regulations you will increase an additional $100 to could be treading in very dangerous $4,600 in 2011. territory,” Neylan said. “Regardless of whether the socalled Bush Tax Cuts are continued 24 — Independent Dealer — December 2010
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