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Chairman's Column: Compliance

November 3, 2017
An update from CATA Chairman Ray Scarpelli Jr.
Compliance. The veritable 800-pound gorilla that dealerships face in every facet of their operations. We like to say that we dealers are in the business of selling and servicing vehicles, but abiding by the thicket of federal laws, rules and regulations can be a full-time endeavor. And the potential per-violation penalties for many of them can be steep.
Consider these 20 federal laws, rules and regulations with which dealerships must comply — a list that is NOT all-encompassing:
The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999, includes provisions to protect consumers’ personal financial information held by financial institutions. There are three principal parts to the privacy requirements: the Financial Privacy Rule, Safeguards Rule, and pretexting provisions.
The Financial Privacy Rule applies to car dealers who (a) extend credit to someone in connection with the purchase of a car for personal, family or household use; (b) arrange for someone to finance or lease said car; or (c) provide financial advice or counseling to individuals.
The Safeguards Rule requires dealers to have a written security plan to protect sensitive information. It is illegal under Pretexting Provisions to use false statements to obtain consumers’ personal financial information.
The Red Flags Rule requires dealers and other creditors to have a written Identity Theft Prevention Program designed to detect, prevent, and mitigate identity theft.
The FTC’s Truth-in-Advertising rule requires ads to be truthful and not deceptive or unfair. Advertisers must have evidence to back up their claims. The Telemarketing Sales Rule prohibits telemarketers from calling consumers on the National Do Not Call Registry, among other limits.
Fuel Economy Advertising for New Vehicles stipulates, among other restrictions, that any mileage estimates must match the exact make/model advertised. For example, the estimates for a Toyota Camry Hybrid cannot be advertised for a Toyota Camry.
The Magnuson-Moss Warranty Act requires manufacturers and sellers of consumer products to provide consumers with detailed information about warranty coverage. The related Used-Car Rule requires clear disclosure through a window sticker, called the Buyers Guide, of any warranty coverage and the terms and conditions of any dealer-offered warranty.
Regulation M implements the consumer leasing provisions of the Truth in Lending Act. Regulation Z ensures that credit terms are disclosed in a meaningful way so that consumers can compare credit terms more readily and more knowledgably.
The Fair Credit Reporting Act is designed to protect the privacy of credit report information and guarantee that information is as accurate as possible.
The Equal Credit Opportunity Act promotes the availability of credit to all creditworthy applicants without regard to race, color, religion, and other characteristics. Adverse Action Notices are defined in the ECOA as "a refusal to grant credit in substantially the amount or on substantially the terms requested." Adverse action includes more than just a simple denial of credit.
Form 8300 is used to report cash payments of more than $10,000 from one buyer as a result of a single transaction or two or more related transactions.
The Office of Foreign Assets Control requires retailers to check all customers’ names against the Specially Designated Nationals List. Failure to comply with OFAC requirements are harsh: up to 30 years in prison, fines of up to $10 million against corporations and $5 million against individuals, and civil penalties of up to $1 million per incident.
The Americans with Disabilities Act requires businesses that serve the public to remove physical barriers, based on the "size and resources of the business," meaning larger businesses with more resources are expected to take a more active role in removing barriers than small businesses.
The CAN-SPAM Act (Controlling the Assault of non-Solicited Pornography and Marketing) covers all commercial email messages and gives the recipients the right to tell a business to stop contacting them.
The Disposal Rule requires the proper disposal of information in consumer reports and records.
That’s a sampling of federal directives; don’t get me started on state regulations.
Yet somehow along the way, we manage to sell and service a few vehicles!