R e g u l a t i o n M a t t e r s

Money Matters

Sometimes bad money decisions are not always apparent at the time to the person involved. When I think bad money decisions, the first thing that comes to my mind is Steve Martin’s quote “I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” Unfortunately, Steve Martin is not the only one to make bad decisions with money. Here are a few ways to handle some common money mistakes.

N o n r e f u n d a b l e D e p o s i t s

The question on accepting deposits is a tough one. I understand why a dealer who takes a car off the lot would want to be compensated for the possibility of lost sales during the hold period, but ultimately, I agree with my old sales managers who always said, “we are in the business of selling cars not taking deposits.” The Office of Consumer Credit Commissioner has said that you are not supposed to keep any money until you have a signed contract, so without a signed contract, you must refund the deposit. Also, even if you do have a signed contract, the risk of a complaint over a nonrefundable deposit is just not worth it. Why end up dealing with a complaint being filed with a lawyer, OCCC, or the DMV for the reward of keeping someone’s deposit?

D i s p u t e d C r e d i t C a r d D o w n Pa y m e n t

Although you are legally allowed to accept credit cards for a down payment, TIADA cautions and reminds dealers that consumers sometimes unfairly dispute legitimate charges. The Fair Credit Billing Act allows a consumer to dispute a credit card transaction for 60 days after the first bill with the error was mailed to them. The FCBA applies to disputes about “billing errors,” including unauthorized charges, charges that list the wrong date or amount, and charges for goods or services you didn’t accept or that weren’t delivered as agreed. However, consumers often use this right to dispute legitimate charges.

Should you receive a dispute from credit card company, you should provide as much necessary information as possible to help remedy the dispute in a timely manner with the credit card company. Each step in the dispute process has a defined time limit during which action can be taken. VISA outlines the different types of disputes and the necessary documents in their “Dispute Management Guidelines for Visa Merchants.” This document is available online at no charge and is probably the best resource for the proper steps to take when you receive a dispute from a consumer regarding a credit card transaction.

Often, TIADA receives inquires from dealers as to taking the customer to court and this is possible; however, as anyone who has ever dealt with litigation knows, it can be expensive. Before seeking a remedy with the courts, it is best to go through the dispute process with VISA.

by Earl Cooke

TIADA DIRECTOR OF COMPLIANCE AND BUSINESS DEVELOPMENT

“Although you are legally allowed to accept credit cards for a down payment, TIADA cautions and reminds dealers that consumers sometimes unfairly dispute legitimate charges.”

N o n - S u f fi c i e n t F u n d s C h e c k

Texas criminal code is extremely strict on NSF checks and treats NSF checks as theft. To have someone convicted of “issuance of bad check or similar sight order” the state must show the person passed the check with knowledge that the consumer did not have sufficient funds in or on deposit with the bank. The prosecution can show knowledge by either showing the customer did not have an account with the bank or payment was refused by the bank or other drawee for lack of funds or insufficient funds on presentation within 30 days after issue and the issuer failed to pay the holder in full within 10 days after receiving notice of that refusal. To meet the notice requirement a dealer should send a notice by (a) first class mail, evidence by an affidavit of service or (b) registered or certified mail with return receipt requested mail. The notice must be addressed to the issuer’s address shown on (a) the check, (b) the records of the bank or other drawee, or (c) the records of the person to whom the check or order has been issued. The notice must contain the following statement:

“This is a demand for payment in full for a check or order not paid because of a lack of funds or insufficient funds. If you fail to make payment in full within 10 days after the date of receipt of this notice, the failure to pay creates a presumption for committing an offense, and this matter may be referred for criminal prosecution.”

If payment is not received after 10 days of sending the notice, you should contact local law enforcement and ask for their help. I will note a lot of district attorneys use prosecutorial discretion to avoid criminal actions against bad check writers.

Po s t d a t e d C h e c k s

A postdated check offers little to no recourse under Texas law. Texas law provides that an “issuer’s knowledge of insufficient funds is presumed (except in a case of a postdated check or order).” Without this presumption, prosecution for a bad check is nearly impossible and the threat of criminal charges cannot be used to collect on the check. Therefore, TIADA recommends you do not accept post dated checks.

H o w t o P r o c e e d

Sir John Templeton, a famous investor, once said “The four most expensive words in the English language are, ‘This time it’s different.’” With that in mind, “To have someone convicted of “issuance of bad check or similar sight order” the state must show the person passed the check with knowledge that the consumer did not have sufficient funds in or on deposit with the bank.”

my best advice is no matter what the situation is, remember that this time is not likely to be different. Have a policy in place based on lessons learned from your past experiences, advice from TIADA, and counsel. Finally, remember that no matter how great of a job you do at creating a policy, it is ineffective if you do not adhere to it.