Dealer Compliance: What Every Department Needs to Know

Digital retailing tools have helped dealers move forward through some of the most trying times the industry has ever seen. The benefits of this fast-tracked digital evolution for buyers have been clear: the ability to mitigate in-person risk; the chance to arm themselves with the knowledge they need to make an educated decision from the safety of their home; and even the opportunity to negotiate, complete paperwork, and take delivery without ever setting foot on a lot.

Dealers who have embraced digital retailing are seeing advantages as well: increased lead activity online, a fast-tracked sales process, and increased efficiency in the business office. These tools also help with the details, catching missed signatures, flagging state-specific forms, and assisting dealers in pinpointing areas where they may be at risk for costly non-compliance issues.

But while digital tools can help dealers avoid costly compliance mistakes, the software is only as good as the people behind it. It’s still important to make sure your staff is informed about the major regulations that could cost your dealership time and money, rather than relying on technology alone to manage your dealership’s compliance efforts.

Minimize risk by educating each department about the regulations they should be familiar with, to protect both your buyers and your dealership.

Sales & Customer Service

Americans with Disabilities Act

The ADA gives civil rights protections to individuals with disabilities. It prohibits discrimination against individuals with disabilities in all areas of public life, including employment, government services, public accommodations, and communications. This Act paved the way for modifications like accessible parking, curb ramps, and access for service animals, to name a few.

What some dealers may not realize is that the ADA can also apply online, since websites are now seen as direct extensions of brick and mortar businesses. There are several different ways to help make your site more accessible to everyone, like adding alternative text for images or using colors that are easy to read and distinguish. For more information about Web Content Accessibility Guidelines, click here.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act requires financial institutions, including dealerships, to explain how they share and protect their customers’ private information. It consists of 2 parts: the Privacy Rule and the Safeguards Rule. Fines for non-compliance can reach $10,000 for each violation and can include prison time.

• The GLB Privacy Rule requires dealers to inform customers about the information they’re collecting, how their sensitive data is shared, and about their right to opt-out if they prefer that their data not be shared.
• The GLB Safeguards Rule requires dealers to take action to secure customer data. This rule looks for a few things: a written information security plan, a comprehensive risk analysis, safeguards from affiliates, and ongoing plan implementation and monitoring.

California Consumer Privacy Act

California passed the CCPA to regulate the way businesses share personal information, and it went into effect on January 1, 2020. The goal of this Act is to give California residents greater control over the information that businesses collect about them. Most online and paper forms that customers fill out to test drive, buy, or lease a car contain sensitive information, and buyers are entering personal data on web forms more than ever. Dealers must have a firm hold on all of this data. Another essential component of the CCPA is the inclusion of opt-out instructions on your website, as well as an overview of your data collection policies and CCPA rights.

Used Car Rule (Buyer’s Guide)

The Used Car Rule has been a mandatory car dealership regulation since 1985 and was created to help consumers make an educated decision by providing essential purchasing and warranty information. Any dealer that sells more than five used vehicles a year must display the FTC Buyer’s Guide prominently, and give a copy to the buyer at the time of purchase.

Some of the items in the guide include:

1) Whether the vehicle is sold as-is or comes with a warranty, and what percentage of costs the dealer will cover under warranty

2) How to get a vehicle history report and check for recalls

3) Status of the vehicle’s major mechanical and electrical systems

4) How to contact the dealer

5) How to obtain a Spanish-language guide

The safest way to comply with the Buyers Guide Rule is to place a Guide Sticker in a vehicle as soon as you take possession. Every ten years, this regulation is revisited to make sure it’s still offering consumers an appropriate level of protection, so it’s important to monitor changes—non-compliance can mean a $40,000 fine.

F&I

Equal Credit Opportunity Act

Under the ECOA, dealers are prohibited from discriminating when providing credit. Lenders can’t ask about or make decisions based on race, color, religion, sex, age, marital status, or national origin when considering credit. They’re also required to inform customers of the final credit decision within 30 days and notify applicants when action is taken on their applications.

When making credit decisions, it’s crucial to base your judgment on the customer’s creditworthiness on paper and keep applicants informed.

Fair Credit Reporting Act

The Fair Credit Reporting Act governs how your dealership handles consumer credit information. Part of the Fair Credit Reporting Act provides clear clarification for auto dealerships regarding when they can and cannot obtain a consumer report:

“When the consumer expresses an interest in buying a car on credit, there would be a permissible ‘credit’ purpose under section 604(a)(3)(A). If the dealer gets the consumer’s written consent, there is clearly a permissible purpose under section 604(a)(2).”

In other words, you can run a credit report when customers tell you that they want to pay for a vehicle using a personal check or if they ask you about credit options to finance their purchase.

You cannot run a credit report when a customer is browsing, asking general questions about finance, or test driving a vehicle. You should not pull a customer’s credit until they express intent to purchase or lease a vehicle, or sign a disclosure permitting you to check their credit.

Truth in Lending Act

TILA requires that all lenders explain the terms of loans in a format that consumers can easily understand, so they can compare them to other offers they may receive. Before the Truth in Lending Act, it was hard for consumers to know how different credit offers compared to each other because every institution cited different terms and different rates. Now, lenders must provide a TIL disclosure statement that explains the size of the loan, the APR (annual percentage rate), all finance charges, a payment schedule, and the total amount to be paid through the lifetime of the loan, amongst other details.

If your dealership extends credit to customers—and almost all do—you must ensure that the details of your credit offer comply with TILA requirements. Your written disclosures must summarize all finance charges, including application fees, service fees, late fees, and prepayment charges. F&I managers without experience in TILA compliance may be tempted to offer attractive promotions that cover up hidden fees. Violations like this can result in aggressive penalties, including up to $5,000 fines per violation and prison time.

Magnuson-Moss Warranty Act

This Act exists to ensure that your customers get complete information about warranty terms and conditions so that they can compare coverage before buying. But once the warranty is purchased and your customer drives off the lot, you’re still governed by Magnuson-Moss. Your team needs to understand what is and isn’t covered under the customer’s warranty. If a buyer feels their warranty claim was unfairly denied, they can file a complaint with the state Attorney General, the local consumer protection office, or the Federal Trade Commission.

It’s also important to be clear that under the Magnuson Moss Act, customers with warranties don’t have to come back to your service department for repairs or parts. Claims cannot be denied even if the consumer went to an independent mechanic, a chain shop, or performed repairs or routine maintenance on their own.

Service

Occupational Safety and Health Administration

Several OSHA regulations impact your employees, particularly in your service department and body shop. These can involve providing instructions for wearing protective equipment, logging workplace incidents, and informing employees of any hazardous chemicals that they may be exposed to while at work (and how to protect themselves). Employers must comply with OSHA standards, so it’s important to regularly review your business practices to make sure your employees are protected from hazards.

The Clean Air Act

The Clean Air Act works to reduce pollution by regulating emissions. Under the Act, dealerships are forbidden from messing with devices, such as EGR and PCV valves, catalytic converters, air pumps, and charcoal canisters that limit emissions. States are required to adopt plans to achieve and maintain air quality that meets standards set by the Environmental Protection Agency, so it’s essential to stay up to date on both federal and state changes.

Legal compliance is complicated, and auto dealers are some of the most regulated businesses in the United States. Understanding your legal obligations and the government regulations that impact your dealership can save you thousands of dollars, not to mention severe legal penalties. Creating a culture of compliance, data security, transparency, and honesty is critical to protecting your dealership. With EasyCare’s online compliance training you’re able to certifiably train and track performance for individuals, which can prove invaluable if you’re ever under audit. An investment in compliance training will always deliver the best return, protecting you from unnecessary penalties and fines.

EasyCare offers a variety of compliance offerings from industry experts to aid in your compliance with state and federal regulations.  Reach out to an EasyCare representative to learn about our compliance offering.  EasyCare is not providing legal advice and recommend you seek the counsel of your legal team when instituting policies that help you comply with your state and local regulations.