Texas Dealer, January 2016

Patricia Harless

Texas State Rep. and TIADA Past President Steps Down from the Legislature

In This Issue: – “Two Step, One Sticker”: Year Two and Beyond – Michael Dunagan on Takeaways From Recent CFPB Enforcement Actions – Think You Know Your Way Around A Credit Report?

– Texas Dealers Bring Lone Star Flavor to Washington, DC

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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

Volume XVI

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Issue 1

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J a n u a r y 2 016

texasDealer

6 Officers’ Message

contents

by Greg Zak, TIADA Secretary

8 TIADA Annual Conference and Expo 10 2016 VIP Auction Card Directory 13 Legal Corner: Dealer Takeaways From Recent CFPB Enforcement Actions

by Michael W. Dunagan

14 Upcoming Events 16 On The Cover: Patricia Harless: Texas State Representative and TIADA Past President Steps Down from the Legislature

by Teresa Orkun

23 Texas Dealers Bring Lone Star Flavor to Washington, D.C.

by Danny Langfield

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

26 News & Notes 28 “Two Steps, One Sticker”: Year Two and Beyond

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

29 TIADA Scholarship Application 31 Think You Know Your Way Around a Credit Report? Think Again.

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

34 Excerpts from The CARLAWYER©

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 800.442.5944 • Fax 512.244.6218 jeff.martin@txiada.com

by Taurie Randermann

by Angelica Jeffreys

by Thomas B. Hudson and Nicole Frush Munro

39 Regulation Matters: Who’s On Your Team?

by Danny Langfield

42 I Just Want to Go to Auction!

by Wayne Herring

44 TIADA Member Application 45 New Members 45 Local Chapters 46 Behind the Wheel

by Jeff Martin

What’s happening at w w w . t x i a d a . c o m ?

DID YOU KNOW... Expired members can no longer view member-only

content published on the TIADA website, such as links to previous issues of Texas Dealer. However, you can still log in with your username and password to renew your membership for 2016. It only takes a minute!

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 800.442.5944, 512.244.6060 or fax 512.244.6218. E-mail: info@txiada.com. 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 Greg

It’s An Exciting Season

T

he holidays have just passed, college football is in the rear view mirror (for those like me who love college football) and the pros are still battling it out to win their division. Next, we have the Super Bowl in February and something else that really, really appeals to the independent car dealer…

TAX TIME! This is our super bowl. All of the pro football teams have been practicing and working on their game all season, and they are down to the end. So the question is, have you been working on your game since last season? One of the greatest mistakes we can ever make is to not learn from our prior mistakes. And, what did you learn from your last tax season?

This business continues to be more challenging every day. I found myself redefining my business model several times last year. I was redefining the business model to tweak the various areas in our ever-changing industry. One thing for sure, if your business strategy for tax season is to keep on doing the same thing you’ve always done, then I think your strategy has some flaws that need shoring up.

Our industry has seen more change than the green tree leaves in the Northeast during the fall. We have all experienced and certainly have read about finance companies being much more aggressive in the subprime arena. I don’t care if you are in BHPH or pure retail sales side; you’ve experienced the “subprime effect”. To not account for this momentum change during tax time is like the ostrich sticking his head in the sand.

So, how do we tackle this time and not spend time on the bench or suffer a season ending injury as they do in pro football? The football player practices and conditions his body. Like the football player we must

6

Zak

ixon Motors D (Houston) TIADA SECRETARY

do the same thing. Have you increased your inventory?

Have you reconditioned all of those new units? Have you detailed all of those new units? Are those vehicles ready to go? Do you have the Buyers Guide placed on all vehicles sitting on your lot? What’s your marketing game plan?

Have you — like the pros — run all of the plays with your staff? Meaning, is your staff ready to handle the increase of customer traffic? Are all of your loan documents up to date and in compliance? What about your collection personnel, do they have a game plan to work with delinquent customers in getting them caught up on their past due account? What about your BDC, are they prepared to handle the increase in customer calls and setting appointments? And the sales personnel?

Are they ready to handle several customers at one time?

If you have any new sales personnel that has never experienced tax-selling season, have you trained this person?

Every professional team, whether it is football, basketball, baseball or even a professional golfer has to practice, practice, practice. The team or the player just doesn’t show for the game and says, “ok I’m ready” without putting in the preparation time on the front end. We as professionals in our industry are no different. If we want to be successful in our game, then we need to take the time to practice, practice, and practice.

The last thing any of us want is to be on the bench (because we didn’t prepare for the game) or be injured (which is not paying attention to your business and keeping up with what’s going on).

So suit up and be ready for game day, and treat every day for the rest of the year like it’s tax time.

T e x a s

D e a l e r

January 2016

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January 2016

2016 TIADA VIP Auction Card Directory

Manheim ADESA Dallas Austin Manheim ADESA DFW Dallas Manheim ADESA El Paso Houston Manheim ADESA Houston San Antonio Manheim San Antonio AA Abilene Alliance Manheim Texas Hobby AA Dallas Alliance Alliance

Get up to $200 off a buy or sell fee at these participating auctions using your TIADA VIP Auction Card!

City AA SparklingChristi ew Corpus

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City AA Sparkling Antonio AA Waco San a’s a Americ Americ AA Austin/ antonio Can! Cars for Kidsn San Arlingto a’s Big Americ Dallas Valley AA AA Donna a’s Americ CM AA n ny Compa s Housto Auction a’s Americ El Paso AA North ndent Houston Indepe AA Belton n AA Auto Housto Auction Heart of

Big Texas Texas of Houston AA Auction Waco

Metro AA Texas Lone Star AA Austin Carrollton r Tyler

AA Greate AA Dealers of OKC

Insurance s Insurances Auto Auction Christi* Corpus Auto Auction Austin* Insurance s Insurances Auto Auction Auto Auction DFW* Dallas* Insurance s Insurances Auto Auction Auto Auction Houston* El Paso* Insurance s Insurances Auto Auction Longview* Auto Auction North* Houston Insurance s Insurances Auto Auction n* Auto Auctionk* McAlle Lubboc Insurance s Insurances Auto Auction* Auction Auto Basin* San Antonio Permian s

*valid for

ce AA location

at Insuran

ABILENE

CORPUS CHRISTI

Insurance Auto Auctions*

Alliance Auto Auction Abliene

Insurance Auto Auctions*

6657 US Highway 80 West Abilene, TX 79605 325.698.4391, Fax 325.691.0263 General Manager: Jimmy Compton Friday, 10:00 a.m.

4701 Agnes Street Corpus Christi, TX 78405 361.881.9555, Fax 361.887.8880 General Manager: Adriana Serrano Wednesday, 9:00 a.m.

204 Mars Road, Wilmer, TX 75172 972.525.6401, Fax 972.525.6403 General Manager: Henry Valenzuela Wednesday, 9:00 a.m.

www.allianceautoauction.com

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

www.iaai.com

Sparkling City AA Corpus Christi New! www.sparklingcityaa.com

2149 IH69 Access Rd Robstown, TX 78380 361.767.4100, Fax 361.767.9840 General Manager: Wade Walker Friday, 10:00 a.m.

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

www.adesa.com

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.

Insurance Auto Auctions* www.iaai.com

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

Metro Austin Auto Auction www.metroautoauction.com

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

BELTON Belton Auto Auction New! www.beltonautoauction.com

212 E Loop 121, Belton, TX 76513 254.899.2886, Fax 254.613.4582 General Manager: Joe Lavigne Thursday, 10:00 a.m.

* VIP card accepted for sell fees only 10

sell fee only

www.adesa.com

3501 Lancaster-Hutchins Rd. Hutchins, TX 75141 972.225.6000, Fax 972.284.4799 General Manager: Brad Garrett Thursday, 9:30 a.m.

Alliance Auto Auction Dallas www.allianceautoauction.com

9426 Lakefield Blvd.

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

America Can! Cars for Kids www.charitycarauctions.org

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

America’s AA Dallas

www.iaai.com

Manheim Dallas

www.manheim.com

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

Manheim Dallas Fort Worth www.manheim.com

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

Texas Lone Star Auto Auction www.tlsaa.com

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.

EL PASO El Paso Independent Auto Auction www.epiaa.com

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.

Insurance Auto Auctions* www.iaai.com

219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 General Manager: Robert Hammonds Tuesday, 1:00 p.m. / Thursday, 1:00 p.m.

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

Insurance Auto Auctions*

Manheim El Paso

4226 East Main St., Grand Prairie, TX 75050 972.522.5000, Fax 972.522.5090 General Manager: Jennifer Wesner Tuesday, 9:00 a.m.

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

www.americasautoauction.com

www.iaai.com

www.manheim.com

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January 2016

Insurance Auto Auctions*

Insurance Auto Auctions*

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

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

Manheim Houston

Manheim San Antonio

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.

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

Manheim Texas Hobby

Sparkling City AA San Antonio New!

www.iaai.com

www.manheim.com

HARLINGEN / MCALLEN Big Valley Auto Auction www.bigvalleyaa.com

4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 General Manager: Lisa Franz Thursday, 9:00 a.m.

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.

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

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

HOUSTON 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.

America’s AA Houston New!

Insurance Auto Auctions* www.iaai.com

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

www.iaai.com

www.manheim.com

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.

WACO Alliance Auto Auction Waco www.allianceautoauction.com

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.

America’s AA North Houston

Insurance Auto Auctions*

Heart of Texas Auto Auction

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

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

www.americasautoauction.com

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

Insurance Auto Auctions* www.iaai.com

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

January 2016

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www.iaai.com

MIDLAND / ODESSA Insurance Auto Auctions* www.iaai.com

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

SAN ANTONIO

www.heartoftexasautoauction.com

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

OKLAHOMA CITY, OK Dealer’s Auto Auction of OKC, Inc. www.daaokc.com

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

ADESA San Antonio 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.

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legal corner

B

Dealer Takeaways From Recent CFPB Enforcement Actions

y now most dealers have become aware of the activity emanating from the Consumer Financial Protection Bureau (CFPB) concerning vehicle finance issues. Almost monthly since the beginning of 2015, a press release has been issued describing an enforcement action taken or law suit filed against a lender or dealer.

Usually, the press release includes the announcement that the accused has entered into an Agreed Order which reflects payment of a substantial penalty with additional amounts as restitution to consumers, plus a list of actions the accused agrees to take to become compliant.

The accused company often doesn’t admit or deny the allegations. Typically, businesses enter into such agreements to avoid the cost and lost time involved in extended litigation, and to hedge against the possibility that findings against them would result in even larger fines and penalties.

So far, the enforcement actions have involved major financial institutions. Two of the cases have been against large, multi-state dealers. It seems likely that larger operations are being targeted because of the sheer number of affected accounts and the impressive amounts of the penalties and refunds involved. It seems equally unlikely that smaller one-or-two store buy-here-pay-here operations would be the subject of enforcement actions.

However, there are lessons to be learned by all sized dealerships by looking at the enforcement actions and analyzing the specific

January 2016

T e x a s

D e a l e r

by Michael

allegations. You should then ask yourself the question: “If I were audited or investigated by the CFPB (or Federal Trade Commission or U.S. Justice Department), would I be found to be guilty of violating one or more of the items cited in the enforcement actions?”

If the answer is “yes” or even “maybe”, then steps should be taken now to made corrections or adjustments.

Enforcement Action No. 1

Dunagan

W.

TIADA GENERAL

COUNSEL

...ask yourself the question: “If I were audited or investigated by the CFPB (or Federal Trade Commission or U.S. Justice Department), would I be found to be guilty of violating one or more of the items cited in the enforcement actions?”

A large indirect lender was accused of racial discrimination in the interest rates charged customers. Specifically, an analysis of rates found that higher rates were charged to minority customers.

Interestingly, the cause of the variation in rates was due largely to the mark-up added by dealers after a “buy rate” was given to the dealer.

Nonetheless, the finance company was cited for not exercising more control over dealers and the mark-up they charged.

Another interesting aspect of the case was that the finding of discriminatory credit pricing as based on a study of customer last names and zip codes. No actual definitive determination of race was made as federal law prohibits creditor

from asking questions about race or ethnic background on credit applications.

To settle the enforcement action, the finance company agreed to pay $80 million in damages, plus $18 million in penalties. The company also agreed to hire administrators to oversee refunds to 235,000 affected 13

Upcoming Events

TIADA DEALER ACADEMY Online registration available www.txiada.com

February 2016 8 Keeping Your Dealership

Legal and Compliant Sheraton Houston Brookhollow 3000 North Loop West Houston, TX 77092

April 2016 11 Keeping Your Dealership

Legal and Compliant Temple, TX

May 2016 25 Better BHPH 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 January 2016 18 TIADA Board of Directors Meeting Austin, TX

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

14

minority customers and to either monitor dealer mark-ups or eliminate them altogether.

An interesting post-script to this case is that the U.S. House of Representatives has passed a bill to invalidate the CFPB Bulletin 2013-02, which provides guidance to indirect auto lenders regarding compliance with federal fair lending laws. Additionally, Republican members of the House Financial Services Committee issued a report questioning the validity of the CFPB’s use of the legal theory of “disparate impact” to determine that discrimination had taken place.

Dealer Takeaway: To avoid even the appearance of credit discrimination, BHPH dealers should try to use consistent rates for all buyers and special finance dealers should keep mark-ups consistent.

Enforcement Action No. 2

A national chain of used-car stores was charged with abusive debt-collection practices.

Specifically, collectors were accused of calling debtors at their work places after they had been requested to stop; of calling references after they had been requested to stop; and making excessive, repeated calls to numbers that the collectors had been informed were wrong numbers or numbers that had been reassigned.

The dealer had 290 collectors in two domestic call centers and 80 contractors in Barbados. According to CFPB findings, tens of thousands of collection calls were made each weekday.

The dealer, without admitting or denying the allegations, agreed to pay an $8 million civil penalty, Further, the company agreed to end all unfair collection practices, and fix any credit reporting problems.

Dealer Takeaway: Collectors should be monitored to assure that no unfair or abusive tactics are being employed. If collections are

contracted out, the dealer is still responsible.

Enforcement Action No. 3

A large sub-prime finance company was accused of using deceptive and abusive collection tactics.

Specifically, the company allegedly used caller ID “hacks” to disguise the source of collection calls.

Collectors were also accused of making false threats of criminal action being taken against debtors and of calling employers, friends, and family members without permission.

The Agreed Order included payment of $70 million in restitution and refunds and a civil penalty of $4.25 million. Agreement was made to cease deceptive and unlawful debt collection practices and to cease disclosing loan information to third parties.

Dealer Takeaway: Don’t use devices that deceive the person being called; remind collectors that they can’t threaten that debtors will be arrested or jailed for not paying; break off calls to third parties if they request.

Enforcement Action No. 4

A Texas-based sub-prime finance company was cited for “knowingly” reporting false credit information to credit agencies. Specifically, some of the reported data included understatements of amounts paid and overstatements of past due amounts. Additionally, incorrect dates of first delinquency were reported which, in effect, kept detrimental information on a debtors credit report for a longer time that it should have been. Other allegations were that the company inflated the number of delinquencies and mischaracterized voluntary surrenders as repossessions.

The company responded that the problem was caused by a third-party vendor whose software contained glitches. CFPB found that the company knew of the glitches, and had T e x a s

D e a l e r

January 2016

contacted the vendor about them, but failed to follow up or independently monitor the accuracy of the information being reported.

The company agreed to pay a $2.7 million fine and correct or delete inaccurate credit reports. Also, the company would establish an audit program to safeguard against further problems. Debtors were to be notified of the corrections and given assistance in obtaining free copies of their credit reports.

Dealer Takeaway: Creditors should independently review reports that are automatically submitted for inaccuracies in data or calculations. They should stop sending in information if flaws in the program are discovered until they are sure the glitches have been fixed. Finally, creditors should understand that they are responsible for the accuracy

of reported information, and liability for inaccurate information can’t be passed off to a third-party vendor.

Enforcement Action No. 5

A Texas-based chain of dealerships was charged with having violated the Fair Credit Reporting Act by failing to have adequate procedures in place to assure accurate reporting and in failing to properly investigate disputed credit reports.

The company agreed to pay $82,777 in civil penalties and to prepare written procedures for its employees for reporting credit and investigating disputes.

Dealer Takeaway: Dealers who are reporting customer credit to an agency or agencies should have procedures in place to verify the accuracy of information being submitted. Due diligence should be

exercised in verifying credit information after complaints about the inaccuracy of posted information are received. It would also be helpful to review reporting policies with regard to voluntary returns and the differences between reporting deficiencies on private sales and reporting debt forgiveness under strict foreclosures (see Texas Automobile Repossession: A Lien Holder’s Legal Guide, available from TIADA. Turn to page 22 for more details).

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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on the cover

by Teresa Orkun

Texas Dealer Editor

Patricia Harless Texas State Representative and TIADA Past President Steps Down from the Legislature

I

t was six months ago that State Representative Patricia Harless (R-Spring) announced she wasn’t going to seek re-election to the Texas House. The Texas Tribune’s announcement of her decision on June 8, 2015, indicated that Harless had become frustrated with infighting among Republicans in the Legislature and had hoped to stay involved in consensus and moderation while urging members to see that working across the aisle was not a bad thing.

In that same interview, Harless emphasized that she represented everybody in her district and not just the 4 or 5% that vote in the primaries. She confirmed that sentiment to TIADA in a recent conversation regarding her future as she felt that lately the legislature had become all fighting without accomplishing much. Harless felt that she couldn’t talk about the system being broken when she was a part of the system, so she has decided it was best not to run for re-election and to become more active politically on the grassroots level.

Passionate. Committed. Loyal. These are three adjectives that can be easily attributed to Patricia Harless, who has been a friend of TIADA, not just during her five terms in the legislature but for many years before she was first elected in 2006.

See, Patricia is one of us; she was raised in her father’s dealership, Fred Fincher Motors in Houston, where she started working full time in 1984, first cleaning cars and then working her way through the body shop and all other departments until she was running the dealership in 1995, after her father became ill.

Her brother Don Fincher, also an independent dealer who owns Fincher Motor Co. in Houston, shared an anecdote with TIADA about the time Patricia worked in the family dealership: “Patricia was very loyal to our dad. I remember when times were not so good financially for us, there was this one day that Patricia was at the dealership and a wholesaler came in wanting a check and we just couldn’t give it to him and he started talking bad about my dad. Patricia got so mad she chased him

16

out of the lot and the guy had to lock himself in a car because he was so afraid of her reaction.”

Family has always been very important to Patricia as she tells us that the person that influenced her the most in the automobile business was definitely her dad but the person that influenced her the most in life was her mom. “She was a smart, strong, and successful business T e x a s

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woman. She taught me from an early age that I could do or be anything I wanted as long as I was willing to work hard,” Patricia said, “She also taught me to embrace being a woman in a male-dominated world; that it was more important to be recognized for your work than your gender, and that being successful was all about helping others be successful (women and men).“ Patricia also told TIADA that she never felt like a “woman” in the auto industry and that her peers treated her like a dealer and not a “woman dealer,” something that was not the case in the Texas Legislature where, Patricia added, “There is a definite advantage to being a man.” Phil Lathrop, current TIADA president and owner of VP Auto Sales in Garland has known Patricia for many years. “I am no wallflower but when I first met her she was so together, she intimidated me. Having six brothers might have fashioned her this way,” said Lathrop, who added, “When she found out I was scared, she reached out to me in a friendly fashion and I was relieved.”

A member of TIADA since the early 80’s, Patricia served in many positions and committees at both the local chapter and the state level, including as TIADA President in 2002.

Patricia always saw the value the association provided to the dealers. “The dealers I knew that were members of

Patricia Harless conversing with Blake Ingram, from Auto City in Dallas, during the 2012 TIADA Annual Conference and Expo.

TIADA were the cream of the crop in the industry and I wanted to be like them,” Patricia said. “My involvement in politics helped me understand that 20% of the people do 100% of the work and I wanted to be in the 20%. If you show up to enough meetings, eventually you will be recruited for leadership roles. I think that is how the TIADA presidency happened, showing up to meetings.”

Her contributions were rewarded in 1999, when Harless was recognized as the Texas Quality Dealer of the

Patricia Harless among the TIADA Past Presidents at the 2012 Annual Conference and Expo.

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Representative Harless welcomes Texas independent dealers as she addresses them from the Capitol floor during Lobby Day 2013.

Patricia Harless among the dealers participating in TIADA Lobby Day 2013.

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Patricia Harless with TIADA Executive Director, Jeff Martin, during the 2013 TIADA Annual Conference and Expo.

Year; and again in 2004, when she became the first female, and only the fifth person, inducted into the TIADA Hall of Fame.

Jackie Gill, the association Executive Director during Patricia’s presidency remembers her as one of the most active, vital members on the board. “She was always there if you needed her, no matter what the issue was. As president she was a beacon of leadership; she met problems as challenges and always had a good resolution for those problems. She served our members wisely and in a way that helped the association become stronger and more influential. Patricia’s commitment to the association was strong and well-balanced.”

Patricia shared with TIADA the three main changes she’s noticed since she started in the industry over 30 years ago: 1. The availability of money, whether you floor your inventory or sell A/R. It continues to be a challenge for small dealers to find capital to finance their business.

2. Selling cars online. The bigger online presence you have the more vehicles you sell.

3. B ecause of GPS and other technology, it is much easier to find past due customers.

Even though Patricia ran a successful dealership business for many years, her plan had always been to attend January 2016

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law school and run for public office. Her appointment by then-Governor Bush to the Texas Department of Transportation Motor Vehicle Board was her first opportunity for public service, but to Patricia, the most important thing was the fact that it was also the first time in the agency’s history that an independent dealer had been appointed to the board. Patricia attributes this achievement to TIADA’s legislative team and therefore saw her role on the board to be the voice for and of the dealers. She believes her most significant achievement was building a new and better relationship between the regulators of MVD and the members of TIADA as she helped to educate MVD about the quality of the independent dealers.

TIADA’s general counsel, Michael Dunagan, fully agrees with this as he tells us that, “The importance of having a buy-here-pay-here dealer on the board to explain some of the unique perspectives of the independent dealer can’t be overstated. Certainly, Patricia’s intelligence and persuasive abilities made her even more effective in that role.”

Dunagan also commented that, “Patricia brought to the legislature the same unique perspective that had made her so effective as a member of the Motor Vehicle Board. The positive impact of her service will be felt, not just by independent dealers, but by all Texas citizens for years to come.”

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Representative Harless raises one finger which means she is voting in favor of the legislature in question.

Rep. Harless with former Speaker of the House, Tom Craddick.

At the end of this year Patricia will step down after completing five full terms in the Texas House of Representatives; her absence will certainly be felt by all.

“The next legislative session will be odd” said Jeff Martin, TIADA’s Executive Director. “During my tenure at TIADA I’ve never been through a session without Patricia in office.

Most people know about the big victories but the dealers in this state will never know the debt of gratitude owed to her and all the small things she’s done that made a significant positive impact on this industry. I know this story is about what she has accomplished and it should be celebrated but I really can’t wait to see what she does next. I would sum

Rep. Harless with Joe Straus, current Speaker of the House.

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up Patricia like this; she is a friend who loves her family, loves Texas and loves her industry with undying passion,” Martin concluded.

“Representative Harless has done an outstanding job representing her community in the Texas House,” said House Speaker Joe Straus. “She has been a thoughtful and important voice on many important issues, earning the respect and admiration of her colleagues. She brought grace and needed humor to the floor of the House and I wish her the best.”

Her fellow dealers also have an opinion about this.

“The dealers of Texas can never thank her enough for

Just another day at the office.

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all her leadership and the financial benefits she helped bring the association. She is a shining star, from HIADA to TIADA to the legislature. Any time we visit the Capitol she comes to see us. Our boys use her office as a base. I just hate to see her go,” said Keith Hagler from Taylor Auto Credit who has known Patricia for 20 years and considers her to be like a sister to him.

Phil Lathrop added, “Patricia has served dealers well and is an example of what a great dealer should be. We are losing a lioness at the capitol, but the respect and recognition she helped bring to independent dealers and TIADA will go on and on.”

Patricia plans on returning to work in her car dealership which her husband has been running since she started spending more time in Austin. Patricia made it clear that he will continue to be the boss as she plans to devote more time to politics and nonprofit organizations in her community. Patricia closed her conversation with us by saying, “God has opened doors my whole life and I blindly walked thru them. I would like to think He would allow me to coast through the rest of my life but I doubt it. I don’t want to run for elected office again, but never say never. Hopefully I’ll have the opportunity to become more involved with TIADA again!”

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Ignorance is no defense.

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feature

Texas Dealers Bring Lone Star Flavor to Washington, D.C.

by Danny Langfield

TIADA Deputy Director

A

merica’s dysfunctional Capitol got a jolt from the independent dealership industry’s best and brightest leaders late last October when the National Independent Automobile Dealers Association convened its 3rd annual National Leadership Conference & Legislative Summit in Washington, D.C. A delegation of Texas dealers joined nearly 150 of their dealer peers and associated members at the event, which aimed to grow NIADA’s grassroots efforts while also targeting two specific issues of serious concern to the independent auto industry.

“The voice of the independent dealer is needed now more than ever, and the good news is, that voice has never been stronger,” stated NIADA Senior VP of Legal and Government Affairs Shaun Petersen. “Congress heard those voices loud and clear! As a result, dealers are not burdened with recall legislation that harms both consumers and businesses, and the House overwhelmingly voted to roll back the CFPB’s overreach into dealer-assisted financing.”

The two specific issues dealers were lobbying on were: 1) Motor vehicle recalls — lobbied to prevent Congress from adding language to the massive highway bill that would prevent dealers from selling vehicles with

open recalls until repaired. The House version of the bill passed without any such prohibition in early November. The conference committee resolving the differences between the House and Senate version released their report in December. No such language in there either, although it did include a prohibition against rental car companies with fleets of 35 or more from renting or selling vehicles with open recalls until repaired. This was compromise language that NIADA was involved in negotiating. All in all, a successful effort.

2) HR 1737 — reforming the CFPB’s indirect auto guidance document. NIADA lobbied for the passage of this bill. It would rescind the CFPB’s indirect auto finance document and require them to go through a public process of notice, comment, and study if they want to reissue it. The bill passed the House 11/18 with overwhelming bi-partisan support, 332-96 with 88 Democrats voting for it. This was a HUGE success for dealers all across the country. At press time the bill awaited a signature or veto from President Obama.

According to NIADA, the event included 63 meetings with legislators or their staffers - by far the most the association has had over the last three years. Six state

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IADAs — Texas, Georgia, Alabama, Carolinas, Ohio and Pennsylvania — each had their own delegations and NIADA had four, for a total of 10 separate lobbying groups, significantly more than in years past.

“I thought it was the most successful lobby day ever for NIADA,” stated TIADA past president and current NIADA board member Scott Allen. “(TIADA executive director) Jeff Martin, Michael Thomasson and I really pounded the pavement and the halls of Congress between various meetings with our representatives from Texas.”

“Members of Congress want to hear from their constituents,” Petersen said. “I personally witnessed both Senators and Congressmen spend upwards of an hour listening to the concerns of our members while on Capitol Hill. During one of those meetings, a Congressman picked up his cell phone to make a call right then and there about an issue raised by one of his constituents,” Shaun continued. “He provided his cell phone number to the member and invited a followup call at any time. That kind of attention only comes through grassroots relationship building.”

“This is now a must-attend event,” said Allen. “I would encourage all of you to make plans to attend the next Leadership Conference hosted by NIADA September 25–29 at our nation’s capital in 2016.”

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news & notes

Happenings in the Industry…

compiled by Texas Dealer staff

NIADA Foundation Scholarship

T

he NIADA Foundation sponsors four students annually who have displayed outstanding abilities in education. These students will each receive a $3500 scholarship to the college or university of their choice. The awards are presented each June at the National Independent Automobile Dealers Association Convention. Eligible students must: 1. B e classified as a high school senior during the current 2015-2016 school year and legally reside in one of the four NIADA Regions. (Texas students qualify as part of Region III.)

2. Have maintained an outstanding academic achievement record as reflected by an official high school transcript; and 3. Demonstrate an aptitude for college work as measured

by SAT or ACT scores.

Applications for the scholarship must be postmarked no later than March 18, 2016. For details and an application form, visit http://www.niada.com/foundation_scholarship.php.

TIADA Quality Dealer Nominations

E

very year TIADA awards a Texas independent auto dealer the distinction of “Quality Dealer of the Year.” Nominees for this award demonstrate exceptional business ethics, service to TIADA, good citizenship and service to the community. The TIADA winner will be eligible for the National Quality Dealer Award, which is presented at the NIADA Convention.

Nominations for this award are now being accepted online. Visit www.txiada.com and click on the Awards link found under the “About TIADA” tab for more information and to submit your nomination.

• The Dealer Inspection Report on Page 27 of the December issue includes a requirement under “Sales Records” that reads, “Buyer tag receipt with customer signature.” That is incorrect. A buyer tag receipt is required to be retained, but a customer signature is not required. The Texas Dealer regrets any confusion this may have caused.

• In the November issue a picture of Ahmed Belmeshkan was wrongly labeled as working the crowd at Manheim DFW. That is incorrect.

Ahmed was working the crowd at Manheim Dallas. We regret this oversight and appreciate it being brought to our attention.

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feature “Two Steps, One Sticker”: Year Two and Beyond

by Taurie Randermann TxDMV

B

y now, just about every vehicle in the state has successfully transitioned to “Two Steps, One Sticker.” A vast majority of vehicle owners are already enjoying a better view out of their windshield with the elimination of the inspection sticker, and they will soon experience the convenience of only having to remember one expiration date for both inspection and registration.

In an effort to make the transition as smooth as possible, certain exceptions were permitted during the first year of the program for motorists and dealers of used vehicles. However March 1, 2016 marks the start of a new requirement for used vehicle sales. Beginning on that date, used vehicles which have a current inspection may be sold without obtaining a new inspection only if the inspection occurred within 180 days of the date of sale. If, on the date of sale, it has been more than 180 days since the vehicle was last inspected, the vehicle must be inspected before the registration and title paperwork is submitted to the county tax assessorcollector’s office.

The TxDMV developed a handy tool to assist dealers in determining the date of last inspection, since the inspection sticker is no longer displayed.

Dealers can check the date of last inspection by

visiting www.TwoStepsOneSticker.com and entering the VIN into the look-up tool. The tool will give you invaluable information about the type of inspection performed, the date of last inspection, and associated fees.

Here’s a few friendly reminders about how “Two Steps, One Sticker” impacts you: webDEALER is equipped to help your dealership eas ily calculate all fees due at the time of registration and title, including the state’s portion of the inspection fee.

“Two Steps, One Sticker” has not changed the

emissions testing requirements for dealers of used vehicles.

The “Two Steps, One Sticker” program has not

changed the manner in which dealer plates are issued or renewed. TxDMV will not verify inspection of a vehicle displaying dealer plates, nor will an inspection fee be collected.

The dealer eTag system functions as it previously

did under “Two Steps, One Sticker.” However, dealers should ensure a vehicle with a buyer’s temp tag has a current, passing inspection before it leaves the dealership.

Vehicles displaying a dealer temp tag or temporary

converter tags remain exempt from inspection.

Specializing in Software for the “BHPH” Dealer!

Visit us at

www.wincarsdms.com or call

817-927-5994 28

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January 2016

ATTENTION STUDENTS!!!

$1,000 TIADA

Texas I n d epen d ent A utomob i l e D ea l ers A ssociation

SCHOLARSHIP

SCHOLARSHIP APPLICATION

DEADLINE

May 1, 2016 {Applications and/or any required documents received after May 1, 2016 will NOT be accepted.} Criteria and Guidelines 1. Each applicant must be entering or currently enrolled in an accredited college or a trade school. Proof of enrollment must be included with this application.

2. Each applicant must provide a letter from their TIADA member sponsor that includes the sponsor’s address and Saturday phone number.

3. Each applicant must complete the application form.

4. Applicant must be in the top 25% of class.

If applicant is currently enrolled, provide college transcripts with official university imprint. In addition, a copy of high school transcripts is required for applicants who are college freshmen.

5. Provide a detailed description of participation in any academic, honorary, civic or extracurricular activities in college. In addition, a detailed description of high school activities is required from college freshmen along with a college acceptance letter.

6. Compose an essay of no more than two typed, double-spaced 8 ½” x 11” pages. The essay should discuss the applicant’s relationship with their TIADA scholarship sponsor, current education goals and future aspirations as it relates to the applicant’s subject/training area.

7. Provide at least two (but no more than three) letters of recommendation, no older than one year, from college/high school faculty, employers or other appropriate sources (not related).

January 2016

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Date: Name:

DOB:

Address: Email: City:

State:

Zip:

State:

Zip:

Telephone Number: High School Last Attended: Address: City: Dates of Attendance: Date of Graduation: Other High Schools Attended (Names and Addresses):

College(s) you are attending or plan to attend for admission:

Parents Name(s): TIADA Member Name (Sponsor): TIADA Member Company Name: TIADA Member Address: City:

State:

Zip:

Sponsor Signature Should you have any questions, please contact TIADA at 800.442.5944. Please return the completed application with all required documents to: TIADA Attention: Scholarship Applications 9951 Anderson Mill Rd., Suite 101 / Austin, TX / 78750

29

feature

Think you know your way around a credit report?

Think again.

by Angelica Jeffreys

Vice President-Dealer Leader, Equifax Automotive Services

Understanding the details can help you drive more transparent, efficient and profitable deals

personal information, is the typical location of an Equifax product called Identity Scan. When Identity Scan is part of your solution, it displays a series of alerts that indicate certain discrepancies in consumer applicant information that may require further investigation. If there are any discrepancies here, you need to slow down and start asking questions to hopefully resolve them.

Also within this section, you could see what is known ou know how a newspaper headline conveys the as a Fraud Alert. gist of an article? Well, it’s easy to feel the same A Fraud Alert indicates if a consumer has requested about a credit score included in a credit report. that an initial (90-day) or extended (seven-year) fraud It’s the first place you look to quickly determine if you alert be placed on their credit file. Anytime you see it, should press forward with a sale or stop. you are required to utilize reasonable procedures in order But when you look past the score, credit reports can to form a good faith belief that you know the identity reveal a much deeper story about consumers, if you of your customer. A good credit score means nothing if know where to look and how to read it. With a better you’re dealing with a fraudster. understanding of consumers — and the potential risk Your next stop is the or opportunity associPublic Records section ated with them — you can of the report.

It can reveal better evaluate the risk of true “deal breakers,” such your customers. as an open bankruptcy, Here we explain key seca civil judgment or a tax tions of the credit report lien. All of these can be that every auto dealer — toxic to an auto deal, from franchise dealerships since they can present sigto buy-here-pay-here nificant risk to a lender’s lots — should read before collateral. considering a deal. It only Another important takes a few seconds, but it area of the report is the can make a big difference.

You’ve likely heard references to a hard inquiry or hard Inquiries section. It It’s important to note that “pull” versus a soft inquiry or soft pull of a credit report. shows you all “hard incredit reports are formatHere’s what that means. quiries” made on a conted differently depending sumer’s credit file for the A hard inquiry occurs when a prospective lender on the vendor. Therefore, past two years. Numerous pulls a credit report to make a lending decision based on a for the purposes of this arinquiries on a consumer’s consumer-initiated application or other request for extension ticle we are referencing an credit file during a car of credit. It can impact the consumer’s score by potentially Equifax Consumer Credit purchase are common. lowering it.

Report.

Dealers will very often A soft inquiry occurs for many different consumer report send a consumer credit When to stop, inquiries, including when consumer requests a copy of their application to multiple slow down and credit report, an employer requests a copy of a credit report lenders in order to find ask questions for employment purposes or for promotional offer of credit the best loan terms availNear the top of an (“prescreens”). Prescreen inquiries can occur without the able. Numerous inquiries Equifax credit report, past consumer’s expressed permission but do not impact their may also indicate that the the subject’s name and credit score. dealer or consumer has

Y

SOFT INQUIRY

HARD INQUIRY

January 2016

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been unsuccessful in securing financing for a car purchase. It is often considered a best practice when there are numerous inquiries for a dealer to slow down, ask questions and validate the information provided by the consumer in order to secure the best financing terms available to that consumer.

An Active Duty Military Alert is a detail that’s easily overlooked, yet it can be an immediate show stopper.

Consumers who are serving active military duty can place these alerts on their credit file while overseas, or elsewhere, to help protect against fraudulent activity while they’re absent. In addition to the alert, the military member can add their contact information to their credit file including cell phone numbers, etc., which you should use to help verify their identity.

For a deeper view, check tradelines

For added insight to help clarify questions about creditworthiness, check the Tradelines section where you’ll get an in-depth view of a consumer’s payment history. It also shows the type of credit and account status. While it may look overwhelming, some fields are self-explanatory, making it fairly easy to interpret. Each line details the name of the lender reporting the information, report and open dates for the account, credit limits, term

32

lengths or monthly repayment amounts, balances owed and past due amounts as of reporting date.

While there’s more information to explore in a credit report, this covers more than most people know while also highlighting key areas of potential risk. The point is, consumers are more than a credit score, and credit reports can tell you the story behind the number. By better understanding the details of these reports, you can more accurately evaluate consumer credit risk.

Likewise, you can recognize immediate deal breakers that might not be evident in a simple score. Ultimately, by better understanding credit reports, you can better understand your customers and drive more transparent, efficient and profitable deals.

Equifax has been a strong supporter of Independent Associations throughout the country, with several Automotive Industry veterans on their team committed to the success of independent dealers. Angelica Jeffreys brings more than 25 years of automotive experience to the Equifax auto leadership team.

She has dedicated her career to helping dealers find innovative ways to solve real world pain points, drive growth and improve business performance, while remaining a passionate advocate for the industry and a trusted resource for her clients. She can be contacted via email at: angelica.jeffreys@equifax.com.

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feature Excerpts from The CARLAWYER

©

by Thomas B. Hudson and Nicole Frush Munro

Federal Developments

CFPB Makes “Stealth” Change in Reg. Z Disclosure Requirements

R

egulation Z Section 1026.18(k), requiring disclosure of prepayment penalties in closed-end transactions, was revised effective October 3, 2015. The section now states that in an obligation with a finance charge computed from time to time by applying a rate to the unpaid principal balance (e.g., a so-called “simple interest” retail installment sales contract), the prepayment penalty disclosure should indicate whether or not a charge may be imposed for partial or full prepayment (rather than just full, as previously required). This change was hidden in the new TILA/ RESPA Integrated Disclosure Rule for mortgage loans.

The change may require updates to the prepayment disclosure in the federal box on installment sales and loan forms entered into by covered persons. The CFPB has not revised the prepayment language for this disclosure in the model forms it publishes, and creditors will need to address the effect of this change on the TILA safe harbor provisions. Also, the Bureau’s change from the term “obligation” to “loan” calls into question the effect of the change with respect to credit sale transactions. In another odd twist, because the Federal Reserve has not yet changed its version of Regulation Z, this revision does not apply to dealers exempt from CFPB authority.

CFPB Targets Auto Finance Companies’ Collection Practices

On October 1, the CFPB announced a consent order with Westlake Services, LLC, an indirect auto finance company, and Wilshire Consumer Credit, LLC, a wholly-owned subsidiary of Westlake that offers and services auto title loans. The CFPB alleged that the companies used illegal debt collection tactics, changed due dates or extended the terms of title loans without the customers’ consent while misrepresenting to customers that the changes would be beneficial, and failed to clearly disclose the APRs of title loans in their advertisements. The CFPB also claimed that the companies provided false caller ID information, falsely threatened to refer customers for investigation or criminal prosecution, falsely implied that customers’ repossessed vehicles would be returned if the borrower made a partial payment, disclosed customers’ loan information to third parties,

34

and paid a third-party repossession company to make debt collection calls to customers when the defendants allegedly had no intention to repossess the customers’ vehicles. Under the consent order, the companies must pay $44.1 million to customers and $4.25 million as a civil penalty, and must end deceptive debt collection practices, protect customers’ private information, end unlawful advertisements, and give customers truthful information about their extensions of credit.

Goodbye, Arbitration Agreements

To no one’s surprise, on October 7th, the CFPB announced that it is considering proposing rules to ban consumer financial companies from using the sorts of arbitration agreements currently employed by creditors to reduce the risk of class action lawsuits. The DoddFrank Act required the CFPB to study the use of arbitration clauses in consumer financial markets and gave it the power to issue regulations to protect consumers consistent with the study’s findings. The CFPB claims that its study — released in March — shows that arbitration clauses restrict consumers’ relief in disputes with financial service providers by allowing companies to block class action lawsuits and that, in the consumer finance markets studied (notably not including vehicle lease and financing), very few consumers seek individual relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through group settlements. The proposals would not ban arbitration clauses altogether, but the clauses would have to say explicitly that they do not apply to cases filed as class actions unless and until class certification is denied by the court or the class claims are dismissed in court. The proposals would also require that companies choosing to use arbitration clauses for individual disputes submit to the CFPB the claims filed and awards issued. The Bureau is considering publishing claims and awards on its website so the public can monitor them.

FTC (Again) Targets Advertising

On October 20, the FTC approved final consent orders against two Las Vegas dealers that allegedly misrepresented the cost of cars in advertising. In June, TC Leadership LP, doing business as Planet Hyundai, and JS Autoworld Inc., d/b/a Planet Nissan, agreed to settle FTC charges that their ads included heavily discounted prices not T e x a s

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generally available to consumers. The consent orders prohibit the dealers from misrepresenting the cost of financing or leasing a vehicle, stating the amount due at signing without disclosing certain lease terms, and failing to comply with Regulation M and the Consumer Leasing Act, and Regulation Z and the Truth in Lending Act. They are also prohibited from stating the amount or percentage of any down payment without disclosing repayment terms and the annual percentage rate.

Litigation

Car Buyers Who Relied on Oral Statements that Contradicted Written Documents Entitled to Proceed on Fraud Claims Consumers buying an SUV told the salesperson they could not afford payments greater than $300 per month.

The salesperson told them their payments would be about $300 per month for 36 months. The finance person also told them that their payments would be around $300 per month and then asked them to sign various documents while hiding the text of the documents except for the area requiring a signature or initial. When they got home, they reviewed the documents and noticed they were obligated to make 12 monthly payments of $882. They sued the dealership, alleging violations

of the federal Truth in Lending Act and the Maryland Consumer Protection Act, fraud, and negligent misrepresentation, among other claims. The dealership moved for summary judgment, and the court granted the motion in part and denied it in part. The buyers alleged that the dealership violated TILA’s requirement to provide certain disclosures before credit is extended by preventing them from reading the documents they were asked to sign. The court granted summary judgment to the dealership on this claim with respect to statutory damages, finding that statutory damages are not available for timing violation claims, but did not grant summary judgment with respect to the claim for actual damages. The buyers also alleged that the dealership committed fraud, made negligent misrepresentations, and violated the MCPA by orally representing that their payments would be significantly less than the documents provided. The dealership claimed that the buyers could not prove they reasonably relied on oral statements that were directly contradicted by documents. The court refused to grant summary judgment to the dealership on these claims, finding that it was reasonable for relatively unsophisticated buyers allegedly prevented from reading the documents to rely on the dealership’s oral representations about the monthly payments. See Price v. Berman’s Automotive, Inc., 2015

GARAGE LIABILITY WAYMER & ASSOCIATES

(Black & White with gray gradient) Texas I n d epen d ent A utomob i l e D ea l ers A ssociation

1-800-447-5152 January 2016

T e x a s

D e a l e r

Proud Member for over 20 years

35

CARLAWYER

©

Compliance Tip

Do your deal jackets look like rats’ nests?

Believe it or not, imposing order on the contents of your deal jackets will improve your compliance and reduce risks. If you have a checklist for each document you require for a deal jacket and every deal jacket has a specific place for each required document, you will be more likely to have complete files.

Also, if there is no specific place for a document that someone’s trying to put into a deal jacket, that will raise the issue of whether the document is one that actually needs to be retained in the jacket. The result will be tighter compliance all the way around.

36

U.S. Dist. LEXIS 129823 (D. Md. September 28, 2015).

Assignee of Retail Installment Sale Contract Not Liable under TILA for Inconsistencies Between Contract and Sales Invoice

In connection with a vehicle sale, the dealership provided the buyer with a retail installment sale contract reciting a total purchase price of $33,877.89. The RISC and related documents were assigned to a finance company. The sales invoice listed the car’s price as $25,629 and the total price as $31,038.25. With tax, the invoice listed the total price as $34,129.39. The buyer sued the dealership and the finance company for violations of the Truth in Lending Act, among other claims, for these inconsistencies. The finance company moved for summary judgment, and a magistrate judge recommended that the court grant the motion. The buyer argued that the finance company violated TILA because the RISC was “wildly inconsistent” with other transaction documents, especially with regard to the sales price. However, the judge explained that, under TILA, an assignee of a contract is liable only if the violation is apparent on the face of the disclosure statement.

In this case, the judge found that there were no violations apparent on the RISC, and, therefore, the finance company could not be liable for a TILA disclosure violation.

See Pierre v. Planet Automotive, Inc., 2015 U.S. Dist. LEXIS 134253 (E.D.N.Y. September 11, 2015).

Dealer Lacked Duty to Investigate Driving History or License Status of Co-Buyer Two individuals bought a car from a dealership. One of the buyers did not have a driver’s license, but produced a state ID as a form of identification. Eight days after the sale, that buyer hit another

individual with the car. The injured party sued the dealership for negligence and negligent entrustment.

The dealership moved for summary judgment, arguing that it owed the injured party no duty to investigate the co-buyer’s driving record and did not know or have reason to know that the buyer was likely to use the car in a risky manner. The trial court granted summary judgment for the dealership, and the injured party appealed. The Court of Appeals of Colorado affirmed, finding that the dealership did not owe a duty to the injured party to investigate the co-buyer’s license or driving history. As a result, the injured party had no negligence claim. Next, the court decided that the dealership did not know or have reason to know that the co-buyer was likely to use the car in a way that would cause an unreasonable risk of physical harm to others simply because he did not produce a driver’s license when he bought the car. As a result, the dealership did not have a duty to prevent the sale.

See Beasley v. Best Car Buys, Ltd., 2015 Colo. App. LEXIS 1535 (Colo.

App. October 8, 2015).

So there’s this month’s roundup!

Stay legal, and we’ll see you next month.

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. (11/15). HC# 4813-2078-0842.

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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?

Sponsored by: Collateral Protection Insurance www.cpiai.com

• 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, February 8, 2016 Houston, Texas

Seminar will be held from 9:00am - 4:00pm Sheraton Houston Brookhollow Hotel 3000 North Loop West Frwy • Houston, TX 77092 • 713.613.0675

discount pricing for multiple attendees! www.passtimeusa.com

MEMBERS – First registrant $149, each additional $99 (Must be from same dealership)

NON-MEMBERS – $299 Register online at w w w . t x i a d a . c o m or by phone at 800.442.5944. www.autozone.com

Texas Independent Automobile Dealers Association

Want to avoid having your title transfer paperwork rejected at the tax off ice?

An Introduction to

Transferring Titles This self-guided online course, available 24/7, is designed to walk you through the process of a successful title transfer.

Just $49!

*

*Pricing for non-members of TIADA is $99.

Texas I n d epen d ent A utomob i l e D ea l ers A ssociation

To register, visit www.txiada.com/dealertrainingcenter

This course has been reviewed by the Tax Assessor-Collectors Association for accuracy. Don’t waste any more time having to resubmit your title transfer paperwork. Take this online course TODAY!

regulation matters Who’s On Your Team?

A

s you are reading this column, the NFL playoffs are either about to commence, or already underway. But as I write these words here in very early December, it is unclear if my beloved Steelers will sneak in. The hapless and Romo-less Cowboys, however, appear to already be out of the picture, much to the satisfaction of Steeler Nation. Against this backdrop, I started thinking about teamwork, and what sort of value your TIADA membership brings to your team, especially in the area of compliance.

It would be both unfair and misleading to suggest that the regulatory agencies are on the “other” team.

They are charged with maintaining an even playing field for our industry — and that means checking up on their licensees to make sure you are compliant, and bringing enforcement actions when you are not. Their teams are staffed and funded, in part, for this purpose.

It is their job.

So who is on your team? Can you handle the burdens of regulatory compliance without TIADA? If so, my hat’s off to you. But even in my hatless state, I will admit to having serious doubts about the veracity of that claim. After all, your main line of business isn’t compliance monitoring, it’s auto sales. And if we’ve got our hands full here at TIADA keeping track of all the legal and regulatory changes, with a goal of zero cars to sell every month, how on earth can your dealership do it alone while chasing that magic monthly sales number on the wall, acquiring inventory, managing staff, etc…?

Consider this: While the Cowboys’ investment in Tony Romo runs about $18 million annually, your TIADA membership requires only a measly $425 a year.

And keep in mind that while TIADA is admittedly over 70 years old, our collarbones are in good health. So there is that.

This analogy is getting away from me. Let’s turn to some real-life examples of membership value instead.

After all, the value of TIADA membership is not notional; it is concrete.

September 9, 2015: A member calls us up to ask about

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by Danny

Langfield

TIADA DEPUTY DIRECTOR

if we’ve got our hands full here at TIADA keeping track of all the legal and regulatory changes, with a goal of zero cars to sell every month, how on earth can your dealership do it alone while chasing that magic monthly sales number on the wall, acquiring inventory, managing staff, etc…? insurance providers. Seems he was concerned he may be overpaying for his various coverages, and wanted to know if we had any resources. We chatted with him about the various TIADA associate members in that line of 39

IN CONTROL.

“

We’ve been working with PassTime for over 10 years and they continue to exceed my expectations in service, quality and reliability.

Eddie Hale, Neighborhood Autos, TX

”

1-800-828-1564 passtimeusa.com

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business, their different levels of involvement with the association, etc…We then referred him to the online Associate Member Directory at www.txiada.com and encouraged him to have a look at those providers.

We got a call from him just last week thanking us for the assistance. Seems the $58,000 annually he had been paying was going to come down to $24,000 with his new provider — for the same coverages. Doing some quick math here, it would appear that his $425 membership investment is performing rather well.

April 22, 2015: A member contacted us to seek assistance with a consumer complaint. Seems a disgruntled customer had filed a complaint with the OCCC alleging wrongful repossession. We visited at some length with the member, discussing the conditions of default that had occurred, and how best to explain that in his response letter to the OCCC. He called us back about a month later with the good news: the OCCC investigator had called to tell him they had received his letter, his position was clear and justifiable, and he could consider the matter closed.

The stories above are not the exception; we help our members like this all the time. I hope you’ll renew your membership and take advantage of all the value your TIADA membership offers — after all, we’re on your team.

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feature I Just Want to Go to Auction!

by Wayne Herring

Do your employees frustrate you? Do you wish they would think like you?

Would you prefer to be at Auction?

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ast week I conducted a class at our local Chamber of Commerce titled, “How do I get my people to think more like me?”

The business owners and leaders who attended the class shared their frustrations… That people do not take ownership; that they feel like they have to keep repeating themselves; that employees are disengaged;

L

stand working with employees, that retail customers frustrate them. Dealers have been so happy when they found the “savior” who could run the lot and let them just check out and do the wheeling and dealing and trading part of the business that they love. Many times those dealers put too much faith in that GM and then were hurt when the GM decided to leave. Worse yet, I have seen dealerships destroyed by a dishonest manager who damaged customer relations and the dealer’s reputation, or even worse, ran the dealership into the ground financially, sometimes through outright theft.

that they feel like they have to be watching all of the time; that employees do not cooperate; that employees do just the bare minimum; that employees are resistant to change; that they are sick and tired of excuses; that employees do not see the big picture; that employees say “that’s not my job”; and that people bring their problems from home with them to work.

Do any of these frustrations resonate with you? Would you truly rather be at auction than back at the dealership?

Many dealers have told me over the years that they can’t

People are tough. How do you get them to think like you? You can’t. They won’t. They are different than you.

People have different behavior styles. Some are extroverted and others are introverted. Some can stick with a mundane task for hours and others are distracted by a speck of dust floating through the air that catches the sunlight. Some people are able to talk to strangers and will instantly bond with them and others are terrified of people. Some people are very likable and yet they cannot get any of your customers to make a decision T e x a s

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and they live with a long list of “think it overs” and “be backs”.

People are the most frustrating part of most businesses and yet people can be one of the last competitive advantages when you harness their potential. How do you do that? By exercising good leadership/management, you can harness their potential. This requires you to do the following with people: recruit/interview/select them; create clarity; train them; motivate them; coach them; hold them accountable and give them feedback.

People are MUCH more complicated than automobiles, or iPads, or auctions, or local and state codes and regulation — and yet, how much time did you spend with your people in the last week?

How much time did you spend studying people, understanding people, communicating with people?

How much time did you spend coaching people and providing feedback?

Did you provide the time and space to really hear from your people?

If people frustrate you, then you need to spend time understanding them — in a general sense and on an individual basis. You CAN get people pulling in the same direction. You can harness the power of human creativity and teamwork. BUT — you need to work on it.

I challenge you to spend some time this month really focusing on your people. Investing time and paying attention is the first step.

In the coming months I hope to share with you some insights into what makes people tick and what makes people different and how you can tap into their potential.

People-Process-Technology — these are the three legs of the stool of success in business, when combined with a good strategy. Of the three legs, people are probably the most frustrating and difficult to manage... but, if you can figure out how to get the most from people — then you will be in an elite class of business owners and leaders!

Wayne Herring built a promising career as a civil engineer before joining a family business as national sales manager for an automotive aftermarket warranty company, leading a team of 40. Now, as CEO of his own consulting firm, he uses his diverse experience in the worlds of engineering, business and sales management, to help other companies grow their sales teams, sales numbers and sales revenues. The Herring Group is a sales performance and organizational growth advisory firm that guides executives and their teams to realize their potential. Contact Wayne at 570-573-9255 or wayne.herring@theherringgroup.com.

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www.teiinsurance.com January 2016

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TIADA Membership Application

2016

Business Name: ____________________________________________ Select one:

Dealer Member

Associate Member

Contact Person: ____________________________________________ Address: __________________________________________________ City: _________________________________________

2016 TIADA Membership Dues:

State: _______

Zip: __________________ County: _____________________________

$425 (Dues include NIADA membership)

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

PLEASE INDICATE PAYMENT METHOD: Check or Money Order payable to TIADA Check # __________ Credit Card Card Number: __________________________________________________ Sec.Code: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Expiration Date: ____________ Monthly Payments - $100 initial payment & $29.50 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.com

512.244.6060

800.442.5944

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.

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Please Welcome Our Newest TIADA Members DEALER MEMBERS A Team Auto Sales LLC Abigail Clohessy 11626 E Northwest Hwy Dallas, TX 75218 Across Texas Auto Sales Kim Paschal PO Box 136515 Fort Worth, TX 76136 Align Motorcar Group, LLC Wesley Mason 8551 Boat Club Rd Fort Worth, TX 76179 Blackland Star Motors Carter Womack P.O. 549 Bonham, TX 75418

Five Star Autoplex Harmit Chattha 6301 E. Lancaster Ave Fort Worth, TX 76112

Piquin’s Auto Sales Barbi Romo 15741 Tamaron Pass San Antonio, TX 78253

Garcia Brothers Auto Henry Garcia 5531 Hayden San Antonio, TX 78242

Santoscoy Automobiles Chris Flores 3820 Santa Ursula Ave Laredo, TX 78041

Hertz Car Sales Luis Esparza 16825 Katy Freeway Houston, TX 77094

Shalom Automotive Jocelyn Whisnant 4000 FM 971 Georgetown, TX 78626

MCMC Lot 10 Mark Jones 100 East Pointe Drive Weatherford, TX 76086

ASSOCIATE MEMBERS

Mendez Auto Sales LLC Pedro Mendez 2022 E Gentry Parkway Tyler, TX 75702

Diamond Automotive Group Inc. Jesse Roel 2507 SW Loop 410 San Antonio, TX 78227

Auto One Acceptance, LLC Jesse Hernandez 2351 W. Northwest Hwy Suite 1315 Dallas, TX 75220

Mitchell Family Motor Trikes Keri Mitchell 4101 S State Hwy 36 Gatesville, TX 76528

resource guide The TIADA Website:

www.txiada.com Members can log in with their username/password and access our Dealer Member Directory, Legislative Action Center, Legal Consultation Service and much more. Register for all upcoming TIADA events online at the Calendar of Events; access our online membership application; find contact information for all our Local Chapters, and find many additional resources at our Links page.

Texas Department of Motor Vehicles 888.368.4689 www.txdmv.gov Office of Consumer Credit Commissioner 800.538.1579 www.occc.state.tx.us January 2016

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Texas Comptroller 800.252.1382 www.window.state.tx.us NIADA 800.682.3837 www.niada.com

REPOSSESSIONS

American Recovery Association 972.755.4755 www.repo.org or contact TIADA state office

FORMS

Burrell Printing 800.252.9154 www.burrellprinting.com

Local Chapters VICTORIA Dennis Schroller Victoria Autos Direct 361.578.0530 Dennis@victoriaautosdirect.com Meeting – 1st Monday (Monthly) FORT WORTH Mark Jones MCMC 817.703.7973 mjones@mcmcauto.com Meeting- 4th Thursday of December, February, April, June, August and October DALLAS COUNTY Kevin Mims VP Auto Sales 972.864.1300 kevinm@vpautosales.com Meetings as needed/TBD HOUSTON Michael Zak Dixon Motors 281.931.1300 houiada@houiada.com Meeting – 2nd Tuesday (Monthly) SAN ANTONIO Robert Beck Stop N’ Drive Motors 210.432.1101 stopdrive@texas.net Meetings quarterly (dates announced at www.txiada.com) EL PASO Ricardo Gardea Cars Plus 915.778.8285 cars_plus@att.net Meeting – 3rd Friday (Monthly) 45

behind the wheel

Martin

Hope Is Not A Plan

W

hat would happen at your dealership tomorrow morning if you unexpectedly didn’t show up to work? What if you didn’t come in, or couldn’t come in for a week, two weeks or as long as three months? Could your dealership survive your unplanned absence?

At our last meeting the TIADA Board of Directors reviewed the TIADA emergency succession plan for contingencies due to disability, death or departure of the Executive Director. As the Executive Director, I can tell you it is a frightening project to work on but one I support whole-heartedly. We currently have a six page road map that documents; key functions, authority, oversight, compensation and a communication plan. It also includes a comprehensive inventory of all our key contacts, information and passwords. This plan not only establishes a clear direction that will create a calm in what might seem an uncertain and disorderly time, it will also create stability and confidence among employees, members, advertisers and sponsors so that the association can move forward and is not in an indefinite holding pattern.

After the board meeting, a number of board members asked if they could have a copy of the plan to use as a template for their own dealership. Large and small dealers alike started talking about “what if.”

What if you were out for two months due to some unforeseen accident? Who would go the auction and purchase cars? Who would service your accounts? Who would have conversations with the bank? Who would pay the bills? Who would meet with the sales team?

Who would set the goals for the dealership? Write down

by Jeff

TIADA EXECUTIVE DIRECTOR

six to eight of your primary functions and ask yourself who would do each in your absence. Now, the most important question — could your dealership survive?

To be blunt, you are nuts if your business doesn’t have some written emergency succession plan. More importantly, do you really want to put your business and your livelihood in such peril if something were to happen to you or another key employee?

If you are a two person operation you may think you don’t need a plan. It’s pretty easy to guess who will be picking up the slack if you’re not around. But do you know where to get the passwords or contact information if you can’t walk down the hallway and ask your spouse or partner? An emergency succession plan will force you to discuss compensation too. There may be no change in compensation but, that conversation is better to have now when there is a lot less emotion.

There are a number of templates you can find online or feel free to call the state office and we will be happy to provide you an electronic copy of our plan that will get you started. In less than four hours you can have a complete plan in place. After you have your plan in place, don’t file it away never to be seen again. You must communicate the plan to others so they can put it in action if needed. From time to time you will also need to make changes or updates to your plan. At TIADA we review our plan every September during our new board member orientation or whenever we have a key employee move.

Don’t start 2016 without a succession plan. Don’t let a brief absence slow down your momentum or worse yet, kill your business.

To be blunt, you are nuts if your business doesn t have some written emergency succession plan.

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