Texas Dealer, April 2016 by Texas Independent Auto Dealers Association

In This Issue: – Transfer or Unwind: There Is No Try – Why “Side Agreements” with Your Customers Are a Bad Idea – NTTA’s Guide to Tolls and eTags – Michael W. Dunagan on Limited Warranties

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2016 TIADA Board of Directors PRESIDENT Phil Lathrop/VP Auto Sales Inc. 2921 S. Garland Avenue Garland, TX 75041 Office: 972.864.1300 Email: phillipl@vpautosales.com PRESIDENT-ELECT Kathrine Tolsch/CICO Auto Sales 11050 Harry Hines Blvd. Dallas, TX 75229 Office: 214.352.9282 / Fax: 214.352.8227 Email: cicoauto@verizon.net CHAIRMAN OF THE BOARD Brent Rhodes/Fiesta Motors 5150 Industrial Way Drive Buda, TX 78610 Office: 512.312.2201 Email: brent@fiestamotors.net SECRETARY Greg Zak/Dixon Motors 7902 North Freeway Houston, TX 77037 Office: 281.931.1300 Email: gzak@windstream.net TREASURER Trey Crouch/Trey Crouch’s Wheels On Credit, Inc. 636 E. Business 83 McAllen, TX 78501 Office: 956.972.0700 Email: trey@wheelsoncredit.com VICE PRESIDENT, WEST TEXAS (REGION 1) Paul Scott/Fiesta Motors – Lubbock 2599 74th Street Lubbock, TX 79423 Office: 806.765.3640 Email: pscott@gofiestamotors.com VICE PRESIDENT, FORT WORTH (REGION 2) Tommy Gregory/Abilene Used Cars Sales Inc. 497 E.S. 11th Abilene, TX 79602 Office: 325.676.8000 Email: aucsinc@sbcglobal.net VICE PRESIDENT, DALLAS (REGION 3) Wayne Meagher/M D Auto Sales 2002 W. Main Street Grand Prairie, TX 75050 Office: 972.641.9598 Email: wayne@navchiefs.com VICE PRESIDENT, HOUSTON (REGION 4) Juan Sabillon/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 Office: 713.644.2446 Email: brentfordct@yahoo.com VICE PRESIDENT, CENTRAL TEXAS (REGION 5) Robert Beck/Stop N’Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 Office: 210.432.1101 Email: stopdrive@texas.net VICE PRESIDENT, SOUTH TEXAS (REGION 6) Dan Keetch/Keetch Motors 1010 S. Staples Corpus Christi, TX 78404 Office: 361.882.3541 Email: dankeetch51@yahoo.com VICE PRESIDENT AT LARGE James Hobson/H-Town Motors 3714 Dyer Street El Paso TX 79930 Office: 915.564.9797 Email: htownmotors@sbcglobal.net VICE PRESIDENT AT LARGE Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 Office: 713.641.0980 Email: ryan.winkelmann@sbcglobal.net TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am - 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org

Volume XVI

Issue 4

A p r i l 2 016

texasDealer

4 Officers’ Message

contents

by Trey Crouch, TIADA Treasurer

8 New Members 11 Legal Corner: Offering Limited Warranties: The Dealer’s Options by Michael W. Dunagan

12 Upcoming Events 16 2016 VIP Auction Card Directory 18 On The Cover: TIADA Debuts All New Website at www.txiada.org by Danny Langfield

20 W hy “Side Agreements” with Your Customers are a Bad Idea by Sara Decatur Judge and Paul Marshall Harris

22 NTTA’s Guide to Tolls and eTags by Carrie Rogers

24 TIADA Annual Conference and Expo 30 The Toxic Mindset Threatening Your Dealership (and how to avoid it) by Kathi Kruse

35 Regulation Matters: Transfer or Unwind: There Is No Try by Danny Langfield

36 TIADA Member Application 39 Excerpts from The CARLAWYER© by Thomas B. Hudson and Nicole Frush Munro

44 TIADA Scholarship Application 45 Local Chapters 46 Behind the Wheel by Jeff Martin

What’s happening at w w w . t x i a d a . o r g ?

EVERYTHING; from the domain extension to the graphics! Read all about it in the featured cover story in this issue and make a point to check out the website when you get a chance. We hope it is a better experience than in the past and welcome any feedback that you may have.

The Editor of the Texas Dealer magazine is Teresa Orkun, Marketing Communications Coordinator of TIADA. To change your address for subscription and/or for other TIADA products, call the TIADA state office at 512.244.6060 or fax 512.244.6218. E-mail: info@txiada.org. New Membership/Subscriptions: If you are a member of TIADA, you may receive this magazine free of charge. Membership year runs from Jan 1 to Dec 31. Back issues are available for $20 each subject to availability. Send a check or money order, along with your name and mailing address to TEXAS DEALER, Attn: Back Issues, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750. Sorry, no billing. Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.

officers’ message by Trey

Keepin’ On Keepin’ On

e’re in the thick of 2016. The shiny sheen of the New Year has worn off, the glint of 2016 registration stickers no longer catches your eye, and with any luck y’all have stopped misprinting 2015 and marking it out on deal jackets. The last time I wrote to you I hammered on the importance of forecasting and adaptability. As the year marches on we will continue to rely on fluidity and adaptability that is afforded to us by our status as independents. While others are locked into systems and patterns trickled down from automobile factories and franchise demands we are equipped to make our own decisions and take our own risks as autonomous companies. However, we must remember that our autonomous state does not mean that we are in this business alone. You have partners — men and women all over the state of Texas that understand your challenges and rise to meet those challenges every day. You all know at least one car dealer that does not feel this support. You know a dealer that has dug in, him against the world (and all the world’s regulators), taking on the challenges of this business without the support of a dealer family that has more experience combined that he could ever dream. They’re the same old arguments: “I don’t have extra time, I don’t see the benefit, I don’t want any other dealers in my business, etc…” but we all know the truth. If you’re reading this article it’s because you know the benefit of a dealer family, of an entire state association of men and women that want nothing but the best for you,

Crouch

Trey Crouch’s Wheels on Credit, Inc. (McAllen) TIADA TREASURER

for your business, and for your industry. We, as a collective, are committed to success and to making 2016 more successful for all of us than any year in history. As you navigate your plans to succeed in 2016, look at the dealers in your area and what they’re doing to be successful. We all have competitors, and I’m not suggesting that you share every strategy with others in your area, but you have a weapon that non-TIADA members don’t have and that’s one you should share. Take a look at local advertising, at the sponsorship pages, at the sandwich shop (or taco stand!) during your lunch break. You know other dealers, and you know that TIADA dealers are among the most educated and successful dealers in the country. We won’t all win top recruiter Crystal Eagle Awards (the market is cornered on that!) but we all have the ability to change the business and life of another dealer by bringing them into the TIADA family. The support of this organization is unparalleled. There’s a reason that hundreds of dealers from all across the state show up to spend time learning and enjoying time together every year. Don’t you want someone else to experience that? The only people that can convince independent dealers of the importance of something are other independent dealers — maybe that independent streak runs extra deep in our family. Call the dealer down the street, your vendors, and suppliers and ask them “Don’t you want to be successful? Don’t you want the experience, advice, and support of other dealers? Don’t you want to join us?” We’ll keep moving forward, but we’d like to have them along for the ride.

I’m not suggesting that you share every strategy with others in your area, but you have a weapon that non-TIADA members don’t have and that’s one you should share. 4

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TIADA Dealer Academy 2016 Keeping Your Dealership Legal and Compliant a seminar with

Michael W. Dunagan, TIADA General Counsel

Author of the standard-setting books, “Dealer Financing of Used Car Sales” and “Texas Automobile Repossession: A Lien Holder’s Legal Guide.”

Michael W. Dunagan’s ongoing quarterly compliance seminar features updates on both federal and state regulations with a focus on advanced dealership financing issues. This is the practical side of compliance from the association that understands you have a business to run — and you want to run it right. The seminar will focus on advanced financing concepts, with special emphasis on in-house financing, repossession & bankruptcy issues, OCCC compliance and federal regulations. • Customer ID requirements – what is acceptable? • Privacy Notice requirements – do we need a new, custom form? • Risk-Based Pricing – what does the rule require? • Credit Card Convenience Fees – what is allowable? • Adverse Action Rule – who is affected? • Consumer Financial Protection Bureau (CFPB) – what can dealers expect? • Bankruptcy – when do we have to give the vehicle back? • Repossessions – When does the 60% rule apply? Is repo notice required? Do we have to return custom wheels? Do we have to disclose a GPS unit?

• OCCC Audits – what are the most common mistakes dealers make? • TxDMV Enforcement – advertising violations, title management issues & more

PLUS:

• Texas Legislative Session – an update on bills that will affect the industry • Q & A – don’t leave until you get all your questions answered by the top industry expert in Texas, Michael W. Dunagan This class has been approved by NIADA as a Certified Master Dealer continuing education course.

Monday, April 11, 2016 Sponsored by: CP Insurance Associates www.cpiai.com

Temple, Texas

Seminar will be held from 9:00am - 4:00pm Holiday Inn 5247 S. General Bruce Drive • Temple, TX 76502 • 254.778.5511

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Please Welcome Our Newest TIADA Members DEALER MEMBERS Adobe Auto Sales, Inc Titus Weston 4711 Avenue Q Lubbock, TX 79412 Carriage Auto, LLC Greg Guthrie 2027 N Jackson St Jacksonville, TX 75766 Coast to Coast Motors Chris Donnely 1505 Interstate 45 S Conroe, TX 77301

Flexi Compras Autos – El Paso Gilberto Medina 8070 Gateway Blvd East El Paso, TX 79907

Rodriguez Motors Co. Julio Lira 8319 Airline Dr Houston, TX 77037

Flexi Compras Autos – San Antonio Jose Sandoval 6849 S. PanAm Expwy San Antonio, TX 78224

Smart Choice Motors James Smart 4018 W. Beauregard Ave San Angelo, TX 76904

Flexi Compras Autos – San Juan Fernando Abundis 700 E. Expressway 83-A San Juan, TX 78589

American Credit Acceptance Meredith Brown 961 East Main St Spartanburg, SC 29302 Spartan Financial Partners Meredith Brown 961 East Main St Spartanburg, SC 29302

Spring Auto Sales LLC Virgina Swanson 1402 Wunsche Loop Spring, TX 77373

M & L Auto Sales Victor Araiza 7337 Harrisburg Blvd. Houston, TX 77011

Spring Auto Service LLC Dana Dupu 22015 Briarvine Ct. Spring, TX 77389

Discount Auto Online Antonio Bohmer 714 East Highway 90A Richmond, TX 77406

Moore Auto Center Montgomery Moore 495 35th St NE Paris, TX 75460

Steve’s Garage LLC Steve Shubin 200 Trademark Drive Buda, TX 78610

F. J. Auto Sale Fadi Jaber 14403 Memorial Dr Houston, TX 77079

Ready To Roll Motors Emmy Spence 8006 Shumard Oak Dr. San Antonio, TX 78223

Valet Motorcars Michael Pelham 5239 Burnet Road Austin, TX 78756

Dealer Title Transfer, Inc Brian Long 3200 Brookfield Dr Houston, TX 77045

ASSOCIATE MEMBERS

Tax Refund Services Tax Max Bill Neylan 7815 Temple Terrace Hwy Tampa, FL 33637

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legal corner

Offering Limited Warranties: The Dealer’s Options by Michael

Dealer Question:

I have been selling all my cars on an “as is” basis, but I’d like to start offering a warranty. Do I have to be licensed to do so, and what are some of the regulatory and compliance issues I need to be aware of?

Answer:

You do not have to have a special license to give a warranty with the vehicles you sell, but there are a number of regulatory steps that have to be followed.

Discussion

In an increasingly competitive environment for car dealers, the offer of a limited warranty with a vehicle provides an edge to the seller. For many years,

independent dealers have sold vehicles on an “as is” basis, disclaiming all warranties. The recent trend, however, has been to provide customers some assurance that the dealer would undertake to assist in having repairs made and paid for, at least for some minimum period after the sale. Additionally, many buyhere-pay-here dealers — even when vehicles are sold “as is” — have been making voluntary repairs for customers. They may do this from a sense of customer service, or from the practical knowledge that many of their customers can’t afford repairs and would simply quit paying if their vehicles weren’t fixed. An additional

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Upcoming Events TIADA DEALER ACADEMY

April 2016 11 Keeping Your Dealership

Legal and Compliant Holiday Inn 5247 S. General Bruce Drive Temple, TX 76502

May 2016 11 Better Buy Here Pay Here

Financials Dallas, TX

June 2016 6 Keeping Your Dealership

Legal and Compliant Tyler, TX

22 Better Buy Here Pay Here Financials Houston, TX OTHER TIADA EVENTS April 2016 18 TIADA Board of Directors Meeting Austin, TX

July 2016 24 TIADA Board of Directors Meeting San Antonio, TX

24-26 TIADA Annual

Conference and Expo J.W. Marriott Hill Country Resort and Spa San Antonio, TX

incentive for voluntarily making repairs might be to avoid having mechanics liens placed on their collateral. Giving a written warranty to customers could thus formalize what is already happening, in a way that can be used for marketing and increased customer service.

Some Definitions First, it’s necessary to understand the definitions of the key terms. Even though the terms “warranty” and “service contract” are often used interchangeably, they are actually different things.

Warranty

Once the decision is made to give a warranty to buyers, a dealer should acquire a warranty agreement that is labeled as “Limited Warranty” and that spells out the specific terms of the warranty. The form should meet the requirements of the Magnuson-Moss Act and the FTC Used Car Rule.

Warranty is by definition an undertaking or promise given by a manufacturer or seller of a product to repair or replace merchandise if certain defects occur. There is and can be no separate charge for a warranty. An example of a warranty is the limited warranty given by automobile manufacturers on the new cars sold by their franchised dealers. There are no additional charges to the buyers, and the terms of the warranties are set forth in written documents given to the buyers.

Service Contract

to consumers). The issuers of service contracts are required in Texas to be registered with the Texas Department of Licensing and Regulation (TDLR) and must meet

Service contracts, on the other hand, are insurance-like products sold to car buyers to provide repairs that are not covered by a warranty. Service contracts are usually offered by third-party providers and sold through car dealers (although some are direct-marketed

rigorous financial requirements involving cash deposits and/or insurance backing of the product.

Full Warranty

This is a warranty that offers a full refund of all funds paid, or replacement of the merchandise, and pays for all repairs in full. These are very rare, especially in the motor vehicle industry.

Limited Warranty

Any warranty that is not a full warranty is a limited warranty. Most warranties given by vehicle manufacturers and dealers would fit in the limited category, since limits are placed on the duration of the warranty and what will be T e x a s

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covered, as well as a description of what will not be covered. The rules require that a limited warranty be identified on all documents and disclosures (such as the Buyers Guide) as a “limited” warranty.

The Warranty Agreement

Product warranties are governed by the federal Magnuson-Moss Act. Additionally, the Federal Trade Commission Warranty Disclosure Rule applies. When the product is a used motor vehicle, the FTC Used Car Rule (more commonly known as the “Buyers Guide Rule”) also applies. Once the decision is made to give a warranty to buyers, a dealer should acquire a warranty agreement that is labeled as “Limited Warranty” and that spells out the specific terms of the warranty. The form should meet the requirements of the Magnuson-Moss Act and the FTC Used Car Rule. Manufacturers and sellers have the flexibility to tailor the warranties to fit their needs. For example, deductible amounts, a maximum dollar limit for repairs, the duration of the warranty, and the percentage of costs covered (such as a 50-50 split) can all be determined by the dealer. Also,

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In the spirit of pre-purchase disclosure of whether there is a warranty, and if so, what the terms are, The Magnuson-Moss Act requires that warranty agreements be made available for inspection by prospective buyers prior to sale.

specified items can be excluded from coverage. (A limited warranty template form can be obtained from Burrell Printing Company at 800 531 5234.) The warranty agreement must inform customers what steps need to be taken to invoke warranty coverage, such as whether the vehicle must be brought to the dealer for warranty work. Most warranties exclude coverage of damage caused by abuse or misuse of the vehicle. Additional rules apply to what must appear in a written warranty agreement. There are, for example, certain required disclosures that must be placed on written warranty agreements. One such mandatory disclosure states: “This warranty gives you specific legal rights, and you may also have other rights which vary from state to state.” In the spirit of pre-purchase disclosure of whether there is a warranty, and if so, what the terms are, The Magnuson-Moss Act requires that warranty agreements be made available for inspection by prospective buyers prior to sale.

Administering the Warranty

Vehicle sellers who issue warranties to their buyers are not required to obtain any type of license or registration. And, unlike with service contract providers, there are no requirements as to setting up special accounts, obtaining insurance coverage, or maintaining reserves for future repairs.

Shifting from selling “as is” to selling with a warranty also requires changes to the Buyers Guide disclosure forms that are displayed on vehicles offered for sale. The purpose of the Buyers Guide is to advise potential buyers whether vehicles are being sold “as is” or with warranty; and, if they come with a warranty, whether the warranty is “full” or “limited”, and what the extent of coverage is. The Buyers Guide for each vehicle covered by a limited warranty should have a mark next to “Warranty” (as opposed to “As Is — No Warranty”), and a mark next to “Limited Warranty” with the percentages of labor and parts which will be paid filled in. A description of the systems covered, such as: “engine,” “transmission,” “drive shaft,” or “differential” should be filled in (use of the terms “drive train” and “power train” are forbidden as being too vague), and any rules on deductibles (such as “A $50 deductible applies to each repair visit”) should be disclosed. The Buyers T e x a s

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Guide should show the duration of the coverage for each system. Some other considerations for proper use of Buyers Guides: Buyers Guides must be posted conspicuously on all used vehicles offered for sale. Spanish-language Buyers Guide must be displayed if negotiations take place in Spanish. Consignment vehicles offered by a dealer must display Buyers Guides.

Conclusion

Dealers can offer warranties to their customers without a special license or registration. No charge can be made for the warranty. A written warranty agreement that meets the minimum standards of federal laws and rules is required. Sellers have a great deal of flexibility over what is, and what is not, covered, and what the terms of the warranty are.

Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 35 years. He has written a number of books and hundreds of articles for trade journals and law reviews. His clientele includes dealers, banks, finance companies, auto auctions and credit unions.

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C.M. Company Auctions, Inc. www.cmauctions.com

2258 S. Treadaway, Abilene, TX 79602 325.677.3555, Fax 325.677.2209 General Manager: Gregory Chittum Thursday, 10:00 a.m.

AUSTIN

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ADESA Austin

DALLAS / FT.WORTH METROPLEX

2108 Ferguson Ln., Austin, TX 78754 512.873.4000, Fax 512.873.4022 General Manager: Steve Swanson Tuesday, 9:00 a.m.

ADESA Dallas

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America’s AA Austin / San Antonio www.americasautoauction.com

16611 S. IH-35, Buda, TX 78610 512.268.6600, Fax 512.295.6666 General Manager: John Swofford Tuesday, 1:30 p.m. / Thursday, 2:00 p.m.

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2191 Highway 21 West, Dale, TX 78616 512.385.3126, Fax 512.385.1141 General Manager: Geoffrey Rabb Tuesday, 9:00 a.m.

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8605 Cullen Ln., Austin, TX 78748 512.282.7900, Fax 512.282.8165 General Manager: Brent Rhodes 3rd Saturday, monthly

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9426 Lakefield Blvd. Dallas, TX 75220 214.646.3136, Fax 469.828.8225 General Manager: Christopher Dean Wednesday, 1:30 p.m.

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5333 W. Kiest Blvd., Dallas, TX 75236 214.330.1800, Fax 214.339.6347 General Manager: Jeff Modjeski Wednesday, 9:00 a.m.

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12101 Trinity Blvd., Fort Worth, TX 76040 817.399.4000, Fax 817.399.4251 General Manager: Nicole Graham-Ponce Thursday, 9:30 a.m.

Rockwall Auto Auction New! www.rockwallautoauction.com

1810 I-30 Frontage Rd. Rockwall, TX 75087 972.771.9919, Fax 972.722.4827 General Manager: Frank Post Tuesday, 7:00 p.m.

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2205 Country Club Drive Carrollton, TX 75006 214.483.3597, Fax 214.483.3814 General Manager: Jeff Dunning Tuesday, 1:00 p.m. / Thursday, 2:00 p.m.

1911 E. Division, Arlington, TX 76011 972.274.5437, Fax 214.944.1950 General Manager: Jennifer Kitchens Saturday, 9:00 a.m.

EL PASO

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7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 General Manager: Lori Pidgeon Wednesday, 9:30 AM In-op Video Sale / 10:00 AM Standard Sale.

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14651 Gateway Blvd. W El Paso, TX 79927 915.852.2489, Fax 915.852.2235 General Manager: Jorge Resendez Friday, 10:30 a.m. T e x a s

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16602 East Hardy Rd. Houston, TX 77032 281.443.1300, Fax 281.443.4433 General Manager: Louis Cappi Thursday, 9:00 a.m.

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Manheim El Paso

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485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 General Manager: Brian Walker Thursday, 10:00 a.m.

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Insurance Auto Auctions* www.iaai.com

900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 General Manager: Ydalia Sandoval Tuesday, 9:00 a.m.

HOUSTON

2535 West. Mt. Houston Houston, TX 77038 281.847.4700, Fax 281.847.4799 General Manager: Michelle Casper Wednesday, 9:00 a.m.

Manheim Houston www.manheim.com

14450 West Road Houston, TX 77041 281.924.5833, Fax 281.890.7953 General Manager: Eddie Pope Tuesday, 9:00 a.m. / Thursday 6:30 p.m.

Manheim Texas Hobby www.manheim.com

8215 Kopman Road Houston, TX 77061 713.649.8233, Fax 713.640.6330 General Manager: Rich Curtis Thursday, 9:00 a.m.

LONGVIEW Alliance Auto Auction Longview www.allianceautoauction.com

ADESA Houston www.adesa.com

4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 General Manager: Mark Lindenmuth Wednesday, 9:00 a.m.

6000 East Loop 281 Longview, TX 75602 903.212.2955, Fax 903.212.2556 General Manager: Jeff Loftin Friday, 10:00 a.m.

www.adesa.com

200 S. Callaghan Rd. San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 General Manager: Sam D’Amato Thursday, 10:00 a.m.

Insurance Auto Auctions* www.iaai.com

11275 S. Zarzamora San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 General Manager: Brian Sell Monday, 9:00 a.m.

Manheim San Antonio www.manheim.com

2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 General Manager: Mike Browning Wednesday, 9:00 a.m.

Sparkling City AA San Antonio New! www.sparklingcityaa.com

13510 Toepperwein Rd San Antonio, TX 78233 210.298.5477, Fax 210.298.5484 General Manager: Brandon Walston Tuesday, 10:00 a.m.; Thursday, 1:30 p.m.

TYLER Greater Tyler Auto Auction New! www.greatertyleraa.com

11654 Hwy. 64 W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 General Manager: Wayne Cook Tuesday, 5:00 p.m.

Insurance Auto Auctions*

WACO

1826 Almeda Genoa Rd., Houston, TX 77047 281.819.3600, Fax: 281.819.3601 General Manager: Rob Frazier Thursday, 2:00 p.m.

5577 Highway 80 East Longview, TX 75605 903.553.9248, Fax 903.553.0210 General Manager: Robert Dunning Thursday, 9:00 a.m.

Alliance Auto Auction Waco

America’s AA North Houston

LUBBOCK

15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 General Manager: Darren Darnell Friday, 10:00 a.m.

1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 General Manager: Buddy Cheney Monday, 6:30 p.m.

Insurance Auto Auctions*

Heart of Texas Auto Auction

5311 N. CR 2000 Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 General Manager: Lori Davee Tuesday, 9:30 a.m.

2508 Old Marlin Hwy. 6 Waco, TX 76705 254.755.7713, Fax 254.755.7746 General Manager: Allan Wichkoski Thursday, 7:00 p.m.

America’s AA Houston New! www.americasautoauction.com

www.americasautoauction.com

Big Texas Auction of Houston New! www.bigtxauctions.com

2000 Cavalcade St. Houston, TX 77009 832.204.7500, Fax 832.204.7499 General Manager: Joe Lavigne Friday, 10:00 a.m.

Houston Auto Auction

www.houstonautoauction.com

6767 North Freeway, Houston, TX 77076 713.644.5566, Fax 713.644.0889 President: Tim Bowers Tuesday, 1:00 p.m. April 2016

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www.iaai.com

www.allianceautoauction.com

www.heartoftexasautoauction.com

MIDLAND / ODESSA

OKLAHOMA CITY, OK

Insurance Auto Auctions*

Dealer’s Auto Auction of OKC, Inc.

701 W. 81st Street Odessa, TX 79764 432.550.7277, Fax 432.366.8725 General Manager: Barbara Hallmark Thursday, 11:00 a.m.

1028 South Portland Oklahoma City, OK 73108 405.947.2886, Fax 405.943.8370 General Manager: Gary Smith Thursday, 8:30 a.m.

www.iaai.com

www.daaokc.com

on the cover by Danny Langfield

TIADA Deputy Director

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e preferred to think of it as “vintage.” However, an argument could be made (and frequently was) that www.txiada.com was simply outdated. Regardless of terminology, about this time last year the TIADA board of directors agreed with staff that the time had come to substantially renovate the website, and funds were approved for just such an endeavor. Thus began the journey that has culminated in an entirely new digital user experience for our dealers, associate members and all other website visitors. Rare indeed are the situations where an association management

the bad: we can now offer you, our members, a vastly improved digital experience. To begin the process, we started with a simple question: what do our members want from our website? To help us get the answer, we hosted a day-long series of member focus groups asking what our priorities should be. The results came back as follows: 1. C reate a cleaner, simpler navigation structure. 2. O ffer more directly-accessible information, particularly on compliance issues. 3. P rovide a way for members to directly interact with each other.

the ability for dealers to respond to posts, and to each other. (Community >> Member Forum, Community >> Blog) Acknowledging the fact that our previous site was not very mobilefriendly, we took a mobile-first approach to design; every page and every function had to be fully responsive. That meant it had to work as well on mobile and tablet as it did on the desktop. We also switched our primary domain and email addresses from .com to .org, which is the more common URL extension in the non-profit world. (Don’t worry,

Teasing the TIADA membership value propositions.

issue and a dealership management issue are this similar. But anyone who has ever undertaken the unenviable task of switching DMS providers understands all too well the magnitude of the change we faced with our AMS switchover. Like many DMS’s, our AMS is a combination of a front end website tied directly to a back end database. So with the shiny new website came changes to nearly all our backend processes. The bad news is that this effort has been eating up our staff resources like a starving Labrador for the better part of the last four months. The good news, however, far outweighs April 2016

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For the first item, we chose a modern, icon-based design template with lots of white space and reduced our main navigation buttons from 13 to just five. For the second item, we selected an AMS provider that offered a searchable “Knowledge Base” function. We then loaded it up with links, forms and over 100 Regulation Matters and Legal Corner compliance columns. (Resources >> Knowledge Base) For the third item, we enabled a discussion forum and designated areas for dealer-only conversations. We also created a blog with

www.txiada.com and the old email addresses will still get there.) Finally, we really wanted to make it easier for non-members, both dealer and associate, to immediately understand TIADA’s value proposition (see graphic above). It is our hope that the Dealer Benefits and Associate Benefits pages will help drive new membership while also increasing our current members’ awareness of the TIADA benefits they can enjoy. As always, we appreciate any feedback from our members. So please, have a look at the new site and let us know what you think!

feature

Why “Side Agreements” with Your Customers are a Bad Idea by Sara Decatur Judge and Paul Marshall Harris Automotive Group at Burns & Levinson LLP

our Sales and F&I teams are probably willing to go the “extra mile” to close a sale with a customer, but when that “extra mile” includes making a “side agreement” to lend the customer money to close the deal, it’s time to re-evaluate the transaction. You might be surprised to learn that Sales and F&I employees will sometimes cut “side agreements” with the customer, in which the dealership will lend the customer a small amount of money as necessary to assign the loan and close the deal. Your initial reaction might be “but that doesn’t happen in my dealership,” and while we hope that is true, it is happening more often than it should. As attorneys who represent many dealers, we have seen a variety of situations where the dealership’s employees have extended credit to customers in an effort close the deal. This often occurs when the customer just needs a few more dollars down in cash to get financing. For example, we recently had a situation where a Sales Manager had a customer sign an “I Owe You” form documenting a loan from the dealership in the amount of $1000. The customer then used the loan money towards his cash down payment. We have also seen examples where F&I employees have drafted promissory notes where the dealership lends the customer money for insurance premiums on new vehicles sold. Not surprising, “side agreements” are a bad idea all the way around. Typically, the employees making these deals think that the loans are “low risk,” but they are not. The employees will often try to document the “side agreement” in writing, so there is an enforceable contract between the dealership and the customer, but these “side agreements” might not be in compliance with federal “Truth in Lending” requirements. Regardless, your dealership certainly does not want to be in the position of playing the role of debt collector when one of these customers fails to pay their loan back. More often than not, these customers disappear and dodge all efforts for collection. The dealer loses money. But there is a bigger liability associated with this practice that your employees likely do not know about. If your employees are making “side agreements” with your customers, your dealership is likely in violation of your indirect lending agreements with your lenders. For example, the M&T Massachusetts Dealer Agreement (“M&T Agreement”) contains language that forbids these “side agreements.” Under the M&T Agreement, a dealership

assigning its contracts to M&T makes an affirmative representation that the contract being assigned is the only agreement between the customer and the dealership concerning the transaction. The dealer also represents that the amount identified as the “down payment” in the purchase agreement is correct and was actually received by the dealer in the form of a check or cash from the customer. A “side agreement” between the dealer and the customer violates these provisions and could jeopardize your lending relationship. In addition, these “side agreements” could violate the representations made by the customer when he or she signs the purchase and sale agreement. For example, the Reynolds and Reynolds Massachusetts standard form motor vehicle purchase agreement (“P&S”) states that “Purchaser represents and warrants that no credit other than that stated above has been extended to him by dealer.” When your employees enter into “side agreements” with the customer, your dealership is extending “credit” to the customer in violation of the P&S. As soon as you make a “side agreement” regarding the extension of credit, that “representation” by the customer in the P&S is no longer accurate. Your lenders rely upon the accuracy of the documents that your dealership prepares during the financing process. When misrepresentations are made, the lender could try to hold your dealership responsible for any losses if the customer defaults on the loan. The risk is simply not worth it. We recommend that you educate your employees about the dangers of this practice. A transaction that might appear to be “low risk” to a Sales or F&I employee could come back to haunt the dealership if the lender discovers the “side agreement” with the customer. [This article originally appeared in the May 2015 issue of MSADA Magazine.] Attorneys Sara Decatur Judge and Paul Marshall Harris are partners in the Automotive Group at Burns & Levinson LLP in Boston, Massachusetts. For over 20 years the experienced attorneys in the Automotive Group have been dedicated to advising and assisting motor vehicle dealers in all aspects of their business. You can contact Sara Decatur Judge at 617.345.3211 or sjudge@burnslev.com and Paul Marshall Harris at 617.345.3854 or pharris@burnslev.com. To learn more about their Automotive practice, visit burnslev.com. T e x a s

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feature NTTA’s Guide to Tolls and eTags by Carrie Rogers

NTTA Director of Government Affairs

Myth Debunked: No Free Rides for Paper Plates

ontrary to what you may have heard, there are no free rides for vehicles with temporary paper plates. NTTA (North Texas Toll Authority) tracks temporary license plates — both Dealer eTags and Buyer eTags — and bills the tolls to the registered owner of vehicles, just like permanent plates. Dealerships are considered the registered owner for any vehicles riding on a Dealer eTag.

Metal Dealer Plates

You may also ask your employees to sign up for TollTag accounts for their dealer-assigned vehicles riding on metal dealer plates so that they can be charged directly for toll road usage. You can save your dealership the hassle of ZipCash bills and even better; pay the lowest toll rate, by getting TollTags for your entire fleet with NTTA’s corporate account program. The corporate account works similarly to a traditional TollTag account, but it is tailored just for businesses. You can have unlimited number of vehicles on a cor porate account You can save money — vehicles without a TollTag pay 50 percent more every time you drive a vehicle on a tollway

There is no cost for the standard TollTag TollTags can be branded with your logo and service phone number. Contact 214.461.2053 for details on this program Prepaid deposit on the account will be based upon the number of vehicles and monthly usage Manage your corporate account online or via Tollmate, a FREE app to manage and update your account Adjust your prepaid balance based on the usage of your corporate account NTTA staff is available to work beside you in setting up the corporate account, installing TollTags in vehicles, and maintaining/updating the corporate account as vehicles are added or removed Start saving money and time. Call NTTA today at 214-461-2000 and ask for a corporate account representative or visit www.NTTA.org to download your corporate account application. Got a question about a TollTag charge or a ZipCash bill? NTTA has partnered with TIADA to offer a direct point of assistance. Dealers are welcome to contact John Bannerman at (214) 461-2077 or jbannerman@ntta.org, or Robbie Jacobson at (214) 224-2129 or rjacobson@ntta.org, with any questions about specific toll charges or other dealer-related toll issues.

Specializing in Software for the “BHPH” Dealer! Visit us at

www.wincarsdms.com or call

817-927-5994 22

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July 24â&#x20AC;&#x201C;26,

2016

JW Marriott San Antonio Hill Country Resort and Spa * www.TiadaAnnualConference.com

Learning T

Featured

PRESENTERS Tom Hudson

The CFPB

Wondering about the CFPB’s action against Herbie’s? Tom Hudson of Hudson Cook, one of the premier attorneys in the nation, will be there with the answers.

Kate Frost

Digital Marketing Last year’s best-reviewed speaker, Kate will be back with her expert take on taking your dealership deeper into the digital realm.

CONFERENCE by the

NUMBERS

With 250 dealer attendees last year, we’ve averaged 35% annual growth over the last 4 years.

Brent Wees

Gamification Fiery entertainer Brent Wees will deliver the goods on bringing games back into the business case, and how to incorporate this technique in your own website.

A packed education schedule will offer 15 more breakout sessions than last year.

Number of years in a row the Expo has sold out and grown, 112 booths to visit this year

230

Additional poolside lounge chairs added to the J.W. Marriott* River Bluff Water Park during their recent renovation *TIADA has arranged a discounted rate of $199/night for conference attendees. Call (210)276-2500 for reservations.

Thank You to Our Current Sponsors P L AT I N U M

GOLD

Sponsorship & Exhibiting Opportunities Are Still Available. 26

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Thank You to Our Current Sponsors S I LV E R

Specialty Sponsors Hotel Keycards: ADESA Auctions

Mondayâ&#x20AC;&#x201C;Wi-Fi: Alliance Auto Auction

Guestroom Mirror Clings: DealerSocket Meeting Directional Signage: Peritus Portfolio Services H a p p y H o u r E X P O : Te x - C a p F i n a n c i a l , L L C

TRUECar

and

W i n d o w D e c a l : S TA R S G P S

Lanyards: v12 Software

Bronze PLUS and Bronze A M A C A c c e p t a n c e C o r p o ra t i o n

A r c a n a I n s u ra n c e S e r v i c e s

A u t o m o t i v e F i n a n c e C o r p o ra t i o n ( A F C ) C A R FAX

CarMax Auctions

Equifax Automotive Services I t u ra n U S A , I n c .

PrimaLend Capital

SDA, Inc.

S t ra t e g i c D e a l e r S e r v i c e s

Te x a s D i r e c t D e a l e r S e r v i c e s

AutoZoom

C P I n s u ra n c e A s s o c i a t e s GO Financial

MicroBilt Corp.

SiriusXM Radio

AutoAction

C a d e n c e I n s u ra n c e n

Dealer Center

I n s u ra n c e A u t o A u c t i o n s

Ke v i n S m i t h I n s u ra n c e / Tr i S t a t e D e a l e r S e r v i c e s , I n c .

Route One

S i g m a P ay m e n t P r o c e s s i n g SSW Dealer Supply

Floorplan Xpress, LLC

Lobel Financial

AutoZone

Copart Auto Auctions

Ke l l e y B l u e B o o k

L a n e G o r m a n Tr u b i t t, P L L C P ay m a x x P r o

A u t o t ra d e r

Auto One Acceptance

United Acceptance

Way n e R e av e s S o f t w a r e

NextGear Capital

Passtime

Shilson, Goldberg, Cheung & Associates, LLP

S ky p a t r o l G P S

S o l u t i o n s b y Te x t

Ta x R e f u n d S e r v i c e s -Ta x M a x

vAuto

Wa y m e r & A s s o c i a t e s

We s t l a ke F i n a n c i a l S e r v i c e s

C O N TA C T : P a t t y H u b e r p a t t y. h u b e r @ t x i a d a . o r g / 5 1 2 . 3 1 0 . 9 7 9 5 April 2016

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Dealer Registration 2016 TIADA Annual Conference & Expo July 24-26, 2016

JW Marriott Hill Country Resort â&#x20AC;&#x201C; San Antonio, TX Customize your conference experience by selecting from the options below. Prices will increase on registrations received on or after June 25, 2016. Please complete the registration form and return it with payment in full to the address listed or go to www.TiadaAnnualConference.com to register online. EARLY BIRD RATE

CONFERENCE OPTIONS

through June 24th

Full Conference Pass- Dealers Only (includes Welcome Reception, Monday & Tuesday Education/Sess ions, Expo Hall, Legislative Luncheon & Awards Dinner) 1st Registrant 2nd Registrant* 3rd + additional Registrant*

One Day Pass (Monday 7/25 or Tuesday 7/26) (includes Monday or Tuesday Education and Expo Hall on your selected day)

TIADA Wristbands (10 Years and Older)

(prices will increase $100 after June 24th ) $495 $395 $295

$300

$75

(includes Welcome Reception, Expo Hall & Awards Dinner; education not included)

TIADA Child Wristband (9 and under)

Free

(includes Welcome Reception, Expo Hall & Awards Dinner with childâ&#x20AC;&#x2122;s plate; education not included)

Non-Member (Dealers Only) TADA and out-of-state IADA members are eligible for TIADA Member rate (coupon code required)

$795 (except as noted)

Special Membership Ticket ~ Win $10,000 Each $100 membership donation enters you in the $10,000 drawing to be held at the Co nference. For every $500 you donate you are entered in a second chance to win a Harley Davidson !

$100/each

You need not be present to win!

*Registrants must be from same dealership to receive discounted rate

Hotel Accommodations

Discounted rooms are available for $199/night for TIADA Conference attendees. Please contact the hotel directly to book your room. JW Marriott Hill Country Resort 23808 Resort Parkway, San Antonio, TX 78261 Room Reservations: 210.276.2500 Rooms must be reserved on or before June 24, 2016 in order to receive the discounted rate.

Registrant Information

Dealership: ________________________________________________ Phone: _______________________ Address: ______________________________________ City/ST/Zip: ____________________________ ❑ 1st REGISTRANT

❑ FIRST TIME ATTENDEE

❑ Primarily BHPH Dealer

❑ Primarily Retail Dealer

Name: ___________________________________ Name for Badge: _______________________ Title: _____________________ __ Email: ____________________________________ ___________ Spouse/Guest: __________________________________________ FULL CONFERENCE ($495 early bird through June 24th $595 begins June 25th) ONE DAY PASS - Monday ($300) ❑ ONE DAY PASS- Tuesday ($300) TIADA Wristbands GUEST/SPOUSE/CHILD 10&over ($75 x ____) TIADA CHILD Wristbands 9&under (free) ____ TIADA Special Membership Tickets ($100 x ____)

❑ ❑ ❑ ❑

RSVP total # tickets: Awards Dinner (Adult/Child10+) ____ (Child 9&under) ____

❑ 2nd REGISTRANT

$___________ $___________ $___________ $___________

1st Registrant Subtotal $__________

❑ FIRST TIME ATTENDEE

Name: ___________________________________ Name for Badge: ________________________Title: _______________________ Email: _______________________________________________ Spouse/Guest: __________________________________________ FULL CONFERENCE ($395 early bird through June 24th $495 begins June 25th) ONE DAY PASS - Monday ($300) ❑ ONE DAY PASS - Tuesday ($300) TIADA Wristbands GUEST/SPOUSE/CHILD 10&over ($75 x ____) TIADA CHILD Wristbands 9&under (free) ____ TIADA Special Membership Tickets ($100 x ____)

❑ ❑ ❑ ❑

RSVP total # tickets: Awards Dinner (Adult/Child10+) ____ (Child 9&under) ____

❑ 3rd REGISTRANT

$___________ $___________ $___________ $___________

2nd Registrant Subtotal $__________

❑ FIRST TIME ATTENDEE

FULL CONFERENCE ($295 early bird through June 24th $395 begins June 25th) ONE DAY PASS - Monday ($300) ❑ ONE DAY PASS- Tuesday ($300) TIADA Wristbands GUEST/SPOUSE/CHILD 10&over ($75 x ____) TIADA CHILD Wristbands 9&under (free) ____ TIADA Special Membership Tickets ($100 x ____)

RSVP total # tickets: Awards Dinner (Adult/Child10+) ____ (Child 9&under) ____

$___________ $___________ $___________ $___________

3rd Registrant Subtotal $__________

Payment Information

Total Amount Due $ ____________

❑ Make check payable to TIADA.

❑ AMEX ❑ Visa ❑ MC ❑Discover

❑ TIADA is hereby authorized to execute payment to the following credit card:

Credit Card Number __________________________________ _____________ Exp.Date ___________ SVC _________ Name on Card ____________________ ___________________ Authorized Signature __________________________________________ Complete this form and return with payment before June 25th to receive Early Bird pricing listed. Prices will increase on June 25, 2016. For more information or to register online: www.TiadaAnnualConference.com TIADA | 9951 Anderson Mill Rd, Suite 101; Austin, TX 78750 | Phone 512.244.6060 | FAX 512.244.6218 | conference@txiada.org

feature

The Toxic Mindset Threatening Your Dealership (and how to avoid it) by Kathi Kruse

Kruse Control, Inc.

hat I’m about to say is not based on anything particularly new. It’s actually a mindset and behavior that’s killed off many good dealerships. Those of us in the field of digital marketing run into this toxic mindset regularly. It’s not my job to change it, only to bring it up so that we can find better solutions. Even though it’s not my job to convince toxic thinkers that they’re missing opportunities, I still suffer from disappointment. I spent my life running dealerships so I can’t help it. Seeing good ideas and good cars not reaching those consumers that can benefit from them, will always disturb me. I was recently doing an all-day workshop at a large automotive digital marketing event. I’m the type of trainer who enjoys hearing about the real world issues from students because I know that if one person is speaking up about their issues, then at least 10 more probably have the same problem. A guy named Justin, who wears many hats including ‘marketing manager’ at the dealership where he works, asked, “I’ve proven the value of it, but my boss doesn’t believe we need to do social media and content marketing. He’s says we’re successful enough. What do I even say to that?” A few heads bobbed up and down in the room. Now, if you’ve been in this digital marketing space for a few years, the boss’ mentality probably seems nonsensical. You may even say, “Too bad, so sad for him” and move onto the next thing that commands your attention. But Justin has a real problem. He’s witnessed consumers’ appetite for trustworthy information and he sees the change in how they consume it. He’s seen leads and sales come from social and content marketing; he knows things are changing rapidly. Justin just wants to do a good job and there’s a toxic mindset keeping him from creating more revenue for his company: “We’re successful, so we don’t need to

change.”

Understanding customers’ needs and wants, and connecting with them on a deeper level through content and social media, is paramount to your business’ success. Not feeling like you need to adapt to these changes is the most dangerous place to be. In this same workshop, I had the students map out

FEATURED PRESENTER

what makes their company unique; what does the company do that differentiates it from its competitors? First you have to define what makes you different. Then you have to communicate that unique value in profound ways with your digital and offline marketing. One of the students mentioned, “We’re a family-owned business for 50 years.” What a great accomplishment! However, there are many other companies who can claim a similar feat and very few can show exactly what that equates to. • Stories about your heritage and why people keep buying from you is something your competitor probably hasn’t even thought of... and there’s your differentiation. Another student said, “We offer a 125 point inspec tion.” That’s great. You told me you have that and everyone else has something similar. How can you differentiate yourself? Create content, post it on social media and promote it: • What are the 125 points you check? • How do you do that inspection? Create a 5-10 minute video of how you perform that inspection. • You could even create 125 videos about each point. Who has done that? Answer: nobody I know... yet.

Interesting content is time well spent.

There’s an assumption that customers are busy and won’t take the time to check out informational videos and other content. That’s just not true. Never underestimate what the consumer will do when you’ve developed trust with them and they are interested. We’re at a point now where it’s crucial to get inside the head and heart of your target customers. You may think you know what they want but do you really know? Are you producing the kind of content on your site and social media that’s worthy of them hanging around a little longer?

Are you measuring?

What I’ve found is that those who say, “Social Media is a waste of time.” (or something to that effect) are not now nor have they ever set goals for their social/inbound marketing and then measured the results. T e x a s

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It’s easy to say it’s a waste of time, especially to ‘prove’ to yourself that measuring is worthless. If you’re the boss, and you’re suffering from a toxic mindset, you’ve just taken a really important component of today’s sales process and tossed it out the window. Expressing disdain for social media is like bragging that you can’t read. It’s hard to believe it but I wrote an article 3 years ago entitled, “5 Ways to Tell if You’re Suffering from Social Media Denial.” A lot has changed since then... and a lot hasn’t. There’s still a toxic mindset permeating throughout the halls of dealerships today.

What’s changed?

Social Media is no longer in a “silo” as a marketing and customer relations tool. Social ads, especially Facebook ads, are killin’ it when it comes to driving target customers to take action. Social, content and SEO are the

magic combo to attract, engage and sell to the modern, hyperconnected buyer. Much to the dismay of the “spray and pray” advocates, consumers continue to be skeptical about display ads. • The average clickthrough rate of display ads across all formats and placements is 0.06% (Source: Display Benchmarks Tool) • Ad blocking grew by 48% in the U.S. in the last 12 months. (Source: PageFair) • 33% of Internet users find display ads completely intolerable (Source: Adobe) Display ads are perceived as in truders. 61% of users say don’t want to be interrupted or distracted. Advertisers apparently also need to work on targeting – 58% of users claim that the banners they see aren’t relevant to them. (Source: Bannersnack)

What hasn’t changed?

Many, many dealerships are still on the fence with social, digital and content marketing (and how it relates to SEO). Lots of ad budgets are still being spent on banner ads, while 54% of consumers don’t trust the ads they see and are concerned about privacy and security (57% of users are afraid of receiving spam from advertisers or of getting a virus). The toxic mindset: “We’re success ful, so we don’t need to change.”

What are you willing to do today to remain successful in the future?

When Justin shared his boss’ toxic mindset rejecting the need to change, I proposed a question for him to ponder: Will the new car dealership model exist in the next 5-10 years?

GARAGE LIABILITY WAYMER & ASSOCIATES

TIADA texas independent automobile dealers association

(Black & White with gray gradient)

TIADA texas independent automobile dealers association

1-800-447-5152 April 2016

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Proud Member for over 20 years

After all, there is huge pressure on many fronts that could make auto dealerships irrelevant and obsolete: Tesla’s ‘testing’ of the US Franchise laws Consumers want to buy cars online Uber and Lyft becoming the better financial solution in some metro areas Vehicle sharing Environmental factors Changing social behaviors People just don’t like going to car dealerships No matter what your current business model is, a toxic mindset will create a false sense of security and it’s a very dangerous place to allow yourself to be. New threats and pressures will continue to appear.

Success today does not mean success tomorrow.

Innovation, expertise and raving fans are what constitute future success (ie: 2016). Social and content marketing help you get there. If you hear yourself or anyone around you exclaim, “We’re successful, so we don’t need to change.” remember, there’s a stream of bodies left in the wake of today’s informed, connected customers. I just don’t want you to be one of them.

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April 2016

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In Stock for Immediate Shipment!

MOTO

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ETAIL

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SALES

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regulation matters Transfer or Unwind: There Is No Try

by Danny

“

o or do not. There is no try.” This famous quote from the diminutive Star Wars Jedi Master may seem like an unusual way to begin a column on transferring titles... and it probably is. However, let’s see if we can tie it in to a discussion of how, when and under what conditions a vehicle must be transferred. The facts are these: If a vehicle is sold by a dealer, the title must be transferred into the customer’s name or the deal must be unwound, period. It is one or the other. Why? First let’s look at the more common scenarios where this could be an issue. After all, we all know the dealer must transfer the title on behalf of the customer (with the exception of export, out-of-state sales and vehicles with a gross weight in excess of 11,000lbs). So what would motivate a dealer to NOT transfer a title? In the BHPH world, the obvious situation is a first or second payment default. Why, the reasoning goes, would a dealer transfer a car they are about to repo, or already have repo-ed? More on that in a moment. In the retail world, the situation is more likely to revolve around a customer’s failure to provide complete and/or valid stips (paycheck stubs, proof of address, etc...) to the finance company after the contract is signed. In that case the finance company rejects the deal and the dealer never gets funded. The end result is essentially the same; why transfer when the deal is dead and the vehicle must be repo-ed? The answer to, “Why transfer?” is this: A sale either has or has not occurred. If a sale has occurred, state law provides that a dealer must collect and remit motor vehicle sales tax as well as apply for registration and title on behalf of the customer. In the scenarios described above, a sale has clearly occurred. The only way for a dealer to avoid tax and transfer obligations is to unwind the deal completely; in other words, take the vehicle back and return the customer’s money. In BHPH, most dealers utilize deferred sales tax, meaning they only collect and remit tax on monies received. This takes much of the sting out of transferring a vehicle on a first or second payment default repo, since tax is only due on the down payment (and any other monies received). The dealer is still on the hook for the title, registration and other fees due at the county, however.

April 2016

T e x a s

D e a l e r

Langfield

TIADA DEPUTY DIRECTOR

If a sale has occurred, state law provides that a dealer must collect and remit motor vehicle sales tax as well as apply for registration and title on behalf of the customer. In retail, that transfer is a lot more painful because motor vehicle sales tax is likely due in full, since a nonBHPH dealer may not hold a deferred sales tax permit. In this case the dealer may actually be better off unwinding the deal, as the TT&L might exceed the down payment received. As discussed in the December 2014 Regulation Matters column, retail dealers might consider utilizing a conditional delivery agreement to avoid some of the headaches associated with being an unintended lienholder. (By the way, you can access that column at www.txiada.org >> Resources >> Knowledge Base, with a Keyword Search “Conditional.” All my columns are Members-Only, so be sure you are logged in. Isn’t the new website great??) Obviously there are a lot more considerations, complications and other problems associated with defaults and repossessions. But when it comes to titles, the mantra is simple: you need to transfer the title or you need to unwind the deal. 35

TIADA Membership Application

2016

Business Name: ____________________________________________ Select one:

Dealer Member

TIADA texas independent automobile dealers association

Associate Member

Contact Person: ____________________________________________ Address: __________________________________________________

2016 TIADA Membership Dues:

City: _________________________________________ State: _______

Join Date:

Dues:

Zip: __________________ County: _____________________________

Jan. / Feb. / Mar.

$425

Apr. / May / Jun.

$320

Jul. / Aug. / Sep.

$215

Oct. / Nov. / Dec.

$425

E-mail address: _____________________________________________ Phone: _______________________ Fax: ________________________ Dealer P Number: ___________________________________________ Who referred you to TIADA? __________________________________ Mailing Address (if different from above): __________________________________________________________ City: _________________________ State: _______ Zip: ___________

(includes all of 2017) (all dues include NIADA membership)

PLEASE INDICATE PAYMENT METHOD: Check or Money Order payable to TIADA Check # __________ Credit Card Card Number: __________________________________________________ Sec.Code: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Expiration Date: ____________ Monthly Payments - $35.42 per month Via Credit Card (Please enter card information above. Authorization Agreement required - contact state office) Via Bank Draft (Authorization Agreement & voided check required - contact state office)

Mail or Fax Application To: TIADA Membership Services, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750 FAX 512.244.6218

www.txiada.org

512.244.6060

Dues are not deductible as charitable contributions for income tax purposes but may be deductible as miscellaneous itemized deductions, subject to IRS restrictions. It is estimated that 20 percent of your dues dollars is used for lobbying activities and is therefore not deductible.

T e x a s

D e a l e r

April 2016

America’s Auto Auction

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Houston

THURSDAYS AT 2PM 1826 Almeda Genoa Rd, Houston, Texas 77047 Phone: 281.819.3600

Austin/San Antonio

TUESDAYS & THURSDAYS AT 1PM

16611 South IH 35, Buda, Texas 78610 Phone: 512.268.6600

America’s Auto Auction Austin, Dallas & Houston Feature Units From:

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T e x a s

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April 2016

s winter gets serious in some areas of the country, we hunker down and peruse developments in the auto sales, finance and lease world. This month, we feature developments from the Consumer Financial Protection Bureau and the Federal Trade Commission we thought might interest folks during the winter doldrums. We also recap some of the auto sale and financing lawsuits we follow each month. Remember — we aren’t reporting every recent legal development, only those we think might be particularly important or interesting to industry. Why do we include items from other states? We want to show you new legal developments and trends. Also, another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state. Note that this column does not offer legal advice. Always check with your own lawyer to learn how what we report might apply to you, or if you have questions.

FEATURED PRESENTER

percent APR, without disclosing a required warranty, the cost of a required payment reminder device and other credit costs as finance charges. The CFPB claimed that the ads helped Herbies convince consumers they would get the 9.99 percent APR instead of the much higher rate actually charged. According to the CFPB, Herbies violated the Truth in Lending Act and the Dodd-Frank Act by hiding finance charges and advertising a lower APR than consumers received and by misrepresenting finance charges and APRs in marketing materials, showroom window displays, and TILA disclosures. Hidden finance charges, according

This Month’s CARLAWYER© Compliance Tip Offering cars that are “certified pre-owned,” “inspected” or “guaranteed”? If some of those cars you are offering are subject to open recalls, you urgently need to review your advertising in light of the recent FTC action described below.

Federal Developments Spanish, Anyone?

On January 22, the FTC issued its newest Spanishlanguage fotonovela in an effort to educate Spanishspeaking consumers about the car buying process and increase awareness of possible scams.

The CFPB Rides Herd on a BHPH Dealer.

{Editor’s Note: the TIADA Weekly Email of 1/28/16 contained an article on this matter.} In late January, the CFPB announced a consent order with Herbies Auto Sales, a Colorado buy-here pay-here used car dealer. The CFPB alleged that Herbies engaged in abusive acts or practices through its sales process and misled consumers about the cost of credit. The CFPB charged that Herbies unlawfully advertised a misleadingly low 9.99

April 2016

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D e a l e r

FOUND IT. Improve Customer Payment Performance and Reduce Repossession Risks.

If It Runs on PassTime, It Doesn’t Run Away. 39

to the CFPB, included costs, only in financed transactions, for a required repair warranty and for a required GPS payment reminder device. The Bureau also alleged that Herbies hid finance charges because Herbies refused to negotiate prices with credit customers but did negotiate with cash customers, resulting in a finance charge for credit customers that should have been included in the disclosed cost of credit. Finally, the Bureau claimed that Herbies’ sales process lured consumers into the dealership with an inaccurate APR and then kept them in the dark about the true cost of financing the cars they were buying, thereby taking advantage of consumers’ inability to protect their interests in selecting or using Herbies’ financing. Although you would never know it from the CFPB announcement, Herbies did not agree to any of the CFPB’s allegations, entering into the consent order solely for purposes of settlement. Under the order, Herbies must provide $700,000 in consumer redress. A civil penalty of $100,000 is suspended as long as the consumer redress is paid. Herbies also agreed to stop deceiving consumers during the financing process and must not misrepresent interest rates, finance charges, or amounts financed, or any other fact material to consumers concerning the financing of any vehicle. Herbies also must clearly and prominently post the purchase price on all automobiles for sale when offering financing. Finally, Herbies must give consumers certain information about the financing offer,

including the actual APR, the car price, and all finance charges, and get a signed acknowledgment from buyers that they received the required information before or at the time financing is offered.

CPO, Warranted and Guaranteed Cars With Open Recalls.

{Editor’s Note: the TIADA Weekly Email of 2/12/16 contained an article on this matter.} On January 28, the FTC announced proposed consent orders with General Motors Company, Jim Koons Management and Lithia Motors Inc. under which the companies have agreed to settle separate FTC administrative complaint allegations that each touted how rigorously they inspect their cars, yet failed to disclose that some of the cars they were selling were subject to unrepaired safety recalls. The FTC’s complaint against GM cited the company’s representations for “Certified Pre-Owned Vehicles,” while the complaint against Koons dealt with that company’s purported “guarantee,” and the Lithia complaint involved the company’s “warranty.” For each company, the charge was similar — in describing the program and touting the inspection of the vehicles, the companies failed to disclose that some of the vehicles were subject to open (unrepaired) recalls. The proposed consent orders remain in effect for 20 years, and prohibit the companies from claiming their used vehicles

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April 2016

are safe or have been subject to a rigorous inspection unless they are free of unrepaired safety recalls, or unless the companies clearly disclose the recalls in close proximity to the inspection claims. The proposed orders also would prohibit the companies from misrepresenting material facts about the safety of used cars they advertise.

Litigation

GAP Insurance Provider Did Not Misrepresent that Insurance Would Fully Pay Off Debt When Payment Was Actually Limited to 25% of Vehicle Value:

A consumer bought a GAP insurance policy. After she suffered a total loss of one of her covered vehicles, she sued the insurer for fraud, misrepresentation, and deceptive practices, claiming that it misrepresented that her policy would pay off her indebtedness in full in the event of a total loss, when her recovery was actually limited to 25% of the actual cash value of the vehicle. The insurer moved to dismiss the complaint, and the federal trial court granted the motion. First, the insured argued that the title of the GAP insurance option on the insurer’s website — Loan/Lease Payoff — is misleading because the insurance does not necessarily provide for a complete payoff. The court disagreed, noting that the heading, alone, is insufficient to mislead and that the website includes a full explanation of the 25% limitation language behind a link directly next to where the insured clicked to receive the insurance. Next, the insured argued that the insurer amended its rules-and-rate filing to omit the 25% limitation language, and this amendment misrepresented the benefits of the policy. The court disagreed, finding that a rules-and-rate filing is not required to contain policy language, so removal of that language could not be misleading. Moreover, the court noted that the insured did not know of the rules-and-rate filing at the time she bought her insurance, so she could not have relied on the filing in deciding to buy the insurance. Finally, the insured argued that a claims adjuster misrepresented to her when she totaled her car that the entire debt would be covered by the insurance. The court found that she could not have relied on this misrepresentation in connection with her insurance purchase because it took place after she bought the insurance. See Lacy v. Progressive Direct Insurance Co., 2016 U.S. Dist. LEXIS 24 (N.D. Ill. January 4, 2016).

for up to $25,000 for costs in defending against suits arising from the sale of a car. The dealership sold a car to consumers and later repossessed and sold it for nonpayment. Prior to the sale of the car for nonpayment, the dealership sent the consumers a notice informing them that for a $25 charge, they could request an accounting. After the sale, the dealership sent them a notice charging them attorneys’ fees. The dealership sued the consumers for the deficiency balance, and they counterclaimed, alleging that the dealership’s preand post-sale notices violated the Uniform Commercial Code and the Missouri Motor Vehicle Time Sales Act. The dealership tendered the counterclaims to the insurer for defense and indemnity under the larger policy. The insurer refused, asserting that the claims did not constitute claims for “wrongful repossession.” The dealership sued, and the insurer moved for summary judgment. The trial court granted the motion, concluding that the larger policy only applied to repossessions that were wrongful, not to wrongful debt collection practices after repossession. The U.S. Court of Appeals for the Eighth Circuit affirmed. The appellate court found that the procedures required by statute for disposition of repossessed property are not part of the repossession process because sale of repossessed property is a separate event that takes place after repossession is complete. See Wolfe Automotive Group, LLC v. Universal Underwriters Insurance Company, 2015 U.S. App. LEXIS 21649 (8th Cir. (W.D. Mo.) December 15, 2015).

SCRA Does Not Apply to Obligations Incurred While on Active Duty, Even if Orders Changed While on Duty:

A servicemember obtained a loan with a 34.37% annual percentage rate while he was on active duty in the National Guard. He asked that the lender reduce the interest rate to 6% per year pursuant to the Servicemembers Civil Relief Act. The lender notified the servicemember that he was not eligible for the interest rate reduction because the SCRA applies to obligations made before entry onto active duty, and he was on active duty when the debt was incurred. The servicemember sued, arguing that his orders were revised and that, arguably, he got the loan while he was not on active duty. The federal trial court disagreed, noting that although his orders may have changed, he was always on active duty during the relevant time frame, and granted summary judgment for the lender. See Hall v. Springleaf Financial Services Inc., 2015 U.S. Dist. LEXIS 154139 (S.D. Miss. November 13, 2015).

Insurance Policy Covering “Wrongful Repossession” Did Not Cover Claims that PreDealer May be Liable for Misrepresentations and Post-Sale Notices Violated State Law: A dealership was insured under two insurance policies. about Condition of Car in “As Is” Sale: One provided up to $500,000 for indemnity from and defense against suits for damages arising from the dealership’s “wrongful repossession” of an automobile and was linked to a separate $25 million umbrella policy. The other provided

April 2016

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A creditor repossessed a car after it was repaired following an accident. The creditor sent the car to auction, where the auctioneer disclosed that the car had suffered damage to its frame. A dealership bought the car at the

auction and offered to sell the car to a buyer “as is.” The dealership told the buyer that the car never had repairs that cost more than 25% of the value of the car. The dealership gave her a copy of a CARFAX vehicle history report that did not mention the accident or the repairs. After the buyer learned about the damage, she sued the dealership for fraud, tortious breach of contract, civil conspiracy, unfair and deceptive trade practices, and negligence. She also sued the repossessing creditor for all but the breach of contract claim. The defendants moved to dismiss, and the trial court granted both motions. The North Carolina Court of Appeals agreed with the trial court’s decision to dismiss all the claims, except for the UDAP claim against the dealership. The appellate court dismissed the fraud, negligence, and tortious breach of contract claims against the dealership, finding that the buyer could not argue that she relied on any misrepresentations the dealership might have made about the car because the sale was an “as is” sale. The appellate court refused to dismiss the claim under the state UDAP statute. It concluded that the buyer could make a UDAP claim if she could prove that the dealership’s actions or statements had the capacity or tendency to deceive her and that she suffered harm because of those statements. She did not have to show that she relied on the statements; she only had to show that she

might not have bought the car if the dealership had not told her that the car had not incurred significant damage. The appellate court dismissed all the claims against the repossessing creditor. The appellate court concluded that the creditor was not liable under the state UDAP law because the buyer did not buy the car at the auction and had no knowledge of any statement or disclosure the creditor or the auctioneer made about damage to the car at the auction. The appellate court also dismissed the fraud and negligence claims because the creditor did not owe a duty to the buyer to make sure the dealership disclosed complete or accurate information to her when she bought the car from the dealership. See Sain v. Adams Auto Group, Inc., 2016 N.C. App. LEXIS 58 (N.C. App. January 5, 2016). Tom (thudson@hudco.com) and Nikki (nmunro@hudco.com) are partners in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is Editor in Chief of CARLAW®,® a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2015, all rights reserved. Single publication rights only, to the Association. (2/16). HC# 4848-8454-3277.

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April 2016

TIADA DEALER ACADEMY 2016

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