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CATA Bulletin
December 23, 2013


BBB cautions about price in emails

December 20, 2013

The Better Business Bureau, which monitors all vehicle advertising by area dealers, reports that some salespeople, in quoting vehicle prices via email, are doing the math and deducting limited and general rebates. That’s a no-no.
The practice violates Rule 475.310 of the Motor Vehicle Advertising Regulations, which states "Purchasers shall be able to purchase all vehicles described by the advertisement at the advertised price." That means all advertised prices, without exception or any condition, must be available to every possible consumer. 
Patricia Kelly, senior counsel of the BBB of Chicago and northern Indiana, said salespeople likely don’t know what, if any, rebates for which a consumer is eligible, when an inquiry is made online. Nevertheless, she said, some replies deduct all available limited rebates from the quoted prices.
"This usually happens online," Kelly said, "after a consumer has inquired about a specific vehicle through the dealer website.  The return email from the dealer, in a standard form, quotes a price for the vehicle wherein limited rebates are deducted. The consumer relies on this price and, upon arriving at the dealer, learns that the price is not available to the consumer because he or she does not qualify for all the rebates.  
"In some cases, no consumer can qualify for all the rebates, so the price is not available to anyone at all."
To the extent that an email to a consumer is a general communication about prices available to most, if not all consumers, it is an "advertisement" rather than an individual conversation or negotiation, under the Illinois rules on vehicle advertising and must comply with the rules, which state a vehicle can’t be advertised with different prices in different ads. An individual conversation about price would take into account the available rebates for the specific consumer and the individually quoted price would include only those rebates for which the consumer qualifies.
Kelly said the BBB has written letters to offending dealerships and handled complaints on this issue and will continue to do so. The BBB-CATA Advertising Review Program, begun in 1996, can help dealers avoid a suit. The BBB reviews dealer ads and sends a dealer notice of a rule infraction. If a dealer fails to shore up the ad within 30 days, the BBB forwards the matter to the Illinois attorney general’s office.
The BBB efforts also strive to maintain a level playing field for dealers to advertise prices, and to help consumers understand price offers.

Fed, CFPB to increase TILA, Consumer Lending Act thresholds

December 20, 2013

The Federal Reserve Board and the Consumer Financial Protection Bureau announced that the dollar thresholds in Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) for exempt consumer credit and lease transactions increases Jan. 1 to $53,500.

CrossCheck selected as CATA's preferred provider for check-processing services

December 20, 2013

The sole function of the Chicago Automobile Trade Association’ s Member Benefits Committee is to review and recommend the programs of CATA allied members whose inherent quality and value will provide a direct benefit to members.
Recently, the CATA named CrossCheck, Inc., as the preferred provider for the check-processing needs of our members. CrossCheck provides check conversion, verification, guarantee and collection services to retail merchants and auto dealers throughout the United States. In both challenging and prosperous times, the CATA encourages its members to continually monitor the way they conduct business to improve process and increase revenue.
CrossCheck’s complete suite of check processing services is not only efficient but helps reduce risk and increase sales. This year marks CrossCheck’s 30th anniversary of doing BBB A+ rated business with auto dealers and auto aftermarket merchants in every state. CrossCheck is currently serving dozens of dealerships in the Chicagoland area.
CrossCheck’s C.A.R.S. check processing program will enhance your dealership with:
• More payment options for consumers • Check guarantee that increases sales and mitigates risk
• Electronic check processing and remote deposit capture that saves time and money
• Hold check option for accepting multiple check payments over an agreed upon period of time
• Check On Delivery (COD) for parts and service departments
• 24/7 online reporting, customer and technical support CrossCheck, Inc. is currently scheduling free consultations with
CATA members. Contact Rasha Ismail at or (877) 384-2038 ext. 5845 for a consultation. You also may view CrossCheck’s website at
You can find out more about the CATA’s Member Benefit program by visiting the association website, specifically:

Dealers dig in to defend auto financing system

December 20, 2013

 Dealers in 2014 are bracing for round two of a fight with a federal agency over how they’re compensated for arranging auto loans.
At issue is dealer reserve, the practice of dealers adding to the interest rate of a loan as compensation for acting as middlemen between car buyers and lenders.
The average add-on is less than 1 percent, and dealers say it is wrong to assume a car buyer would get a lesser loan rate with dealer reserve out of the picture because lenders offer wholesale, not retail, rates to dealers.
Critics say the reserve system, the centerpiece of dealer-assisted indirect financing, is a rip-off. Senator Elizabeth Warren, D-Mass., is one of its most vocal detractors, claiming consumers are "tricked out of billions of dollars every year on car loans."
But dealers say the indirect-financing system fosters competition and benefits consumer. Dealers aren’t reserved about defending the lending model.
It became a hot topic in 2013. The debate is expected to get more intense as dealer trader groups try to fend off a government agency’s opposition.
The National Automobile Dealers Association warns consumers will be ill-served by the Consumer Financial Protection Bureau’s efforts to prod lenders to end the interest-rate compensations.
The NADA contends the CFPB is seeking to change dealer-assisted financing in a way that will increase the cost of credit and make it less available to automotive consumers.
Instead of dealer reserve, the CFPB prefers a flat rate or something like it. The bureau indicates a flat fee might eliminate dealers potentially charging higher loan rates to so-called protected classes of borrowers, such as minorities, creating what the government calls a form of discrimination referred to a disparate impact.
In 2013, the CFPB warned some lenders about the possibility of such pattern of discrimination.
NADA President Peter Welch says the CFPB is withholding information relative to the methodology it is using to determine whether statistical discrimination exists in auto lending. Until it is released, there is no way to determine if the government analysis is reliable, he says.
For example, it’s not publicly known if the analysis accounts for variables such as credit score, the amount financed, term of the loan and special finance incentives.
"There is no place for discrimination in the car business or any other business," said Welch. But the CFPB’s solution hurts consumers more than it helps, he said.
"The financing model has worked for a century but now it is being threatened," NADA Chairman David Westcott said. Indirect lending accounts for the majority of car loans.
Technically, the CFPB has no business overseeing dealer business. After NADA lobbying, dealers won exemption from increased government regulation called for in the Dodd-Frank Financial Reform Act passed after the financial meltdown of 2008.
The consumer protection bureau directly oversees lending institutions that provide car loans with dealers acting as middlemen. By exerting pressure on lenders, the bureau has threated the dealer-reserve system.
On another battlefront, franchised-dealer organizations are fighting Tesla for selling its electric cars in a way that circumvents the traditional franchised dealership system. On a positive side, dealers in 2014 are expected to see an increase of sales per store, a measurement of profitability.
Meanwhile, some state dealer associations say Tesla is short-circuiting the conventional dealer system by selling its vehicles directly to customers.
Tesla has opened small showrooms here and there where shoppers can check out the single-product Model S, then order one online from the manufacturer.
Some consumers think that’s the way to go. They see dealers as needless middlemen, and praise Tesla founder Elon Musk for trying to revolutionize how cars are sold.
Dealer associations and Tesla battled legally and legislatively over the EV maker’s desire to sell cars directly to consumers. Dealers charge Tesla with circumventing dealer-franchise laws that exist in every state.
"What puzzles me is that he has never tried the franchise system, yet he insists it won’t work for him," Bill Wolters, president of the Texas Automobile Dealers Association, says of Musk.
Musk told the NADA he will embrace the dealer-franchise model that’s prevalent in the U.S. once sales of his cars reach critical mass, Westcott said. "(Musk) is an interesting individual, and the car is wonderful. The only thing we differ on is the distribution system."
Westcott said the dealer-franchise system creates competition among dealers, resulting in better prices for customers. He notes automakers such as Ford tried to sell vehicles directly to the public in the past and failed.
Franchised dealers enjoyed high sales and healthy profits throughout 2013. One reason for the brisk delivery rates was the increased availability of relatively low interest loans and a comeback of credit access for people with imperfect credit scores.
The return of subprime credit, which virtually disappeared during the height of the recession, was propping up car sales in the U.S., Westcott says. "Subprime is back to where it should be. It had to be, to sell cars. We need that part of the segment."
Average vehicle sales per U.S. dealership in 2013 were on track to set a record for the second year, said John Frith, vice president-retail solutions for consultancy Urban Science.
At the pace of auto sales for the year, the average sales per dealer, or throughput, would surpass 840 units.
A record was set in 2012 when sales per store averaged 812 vehicles, compared with 719 in 2011. Before that the all-time high was 784 eight years ago.
In the previous throughput high-water mark year of 2005, more than 21,600 U.S. dealers sold about 17 million vehicles.
The U.S. began 2013 with 17,851 dealerships. The number of stores dramatically fell by about 4,400 in 2008 and 2009. That was mostly because of General Motors and Chrysler consolidating their retail networks as part of bankruptcy reorganization.
"We have fewer vehicle sales, but also fewer dealers," Frith said. "They are selling vehicles more efficiently," by leveraging Internet leads, using better sales processes and completing customer transactions more quickly.
The low point for throughput was 513 units in 1991 when 24,200 dealers sold about 12.2 million vehicles.

Legislation to reduce dealership paperwork advances in House

December 20, 2013

 The House Energy and Commerce Committee on Dec. 11 approved by voice vote a bipartisan bill, H.R. 724, which would eliminate some red tape required by the Environmental Protection Agency when buying a new car or truck. 
The bill would repeal a 1977 mandate that requires dealers to certify that a vehicle complies with the Clean Air Act. (This form is required to be presented by the dealer to the purchaser of a new vehicle even though all vehicles must comply with the Clean Air Act before being sold in the United States. Additionally, a Clean Air Act certification sticker can be found under the hood of most vehicles, or in the owner’s manual, making an additional certification by the dealer redundant.) 
The legislation now goes to the floor of the House for consideration. The bill attracted wide bipartisan support and has no known opposition.
"Federal and state laws already require a myriad of forms that must be reviewed and signed by the customer to close a deal on a new car or truck," said Dave Westcott, chairman of the National Automobile Dealers Association, and a dealer from North Carolina. 
"This bill will eliminate a form that serves no purpose, and should make buying a new vehicle a little easier."
"America’s franchised auto dealers commend the leadership of Reps. Bob Latta, R-Ohio, and Gary Peters, D-Mich., for their bipartisan efforts to repeal this unnecessary government form," Westcott said. 

Most popular car-theft holiday approaches

December 20, 2013

The holiday season is in full swing, but remember that vehicle thieves rarely take a holiday. Indeed, one study ranks New Year’s Day as the most vehicle-theft-prone holiday over the past several years.
For the 11 holidays reviewed in 2012 by the Des Plaines-based National Insurance Crime Bureau, a total of 21,325 vehicles were stolen compared to a total of 20,800 reported stolen on those same holidays in 2011 — a 2.5 percent increase.
New Year’s Day topped the 2012 list, with 2,228 vehicles reported stolen across the country. Meanwhile, Christmas Day repeated as the holiday with the dual distinction of having the lowest theft figure for a holiday and as the lowest reported vehicle thefts of any day in 2012, with 1,432.
Although New Year’s Day was the holiday with the most reported thefts, there were 64 other dates in 2012 that recorded more theft activity. June 1, July 23 and Aug. 1 were the most active dates overall with thefts of 2,579; 2,525 and 2,457, respectively. 
The holidays ranked by number of thefts reported to the NCIC in 2012 were: 
1. New Year’s Day (2,228) 
2. Labor Day (2,158) 
3. New Year’s Eve (2,152) 
4. Memorial Day (2,078) 
5. Halloween (2,053) 
6. Christmas Eve (2,034) 
7. Independence Day (1,955) 
8. President’s Day (1,925) 
9. Thanksgiving (1,656) 
10. Valentine’s Day (1,654) 
11. Christmas Day (1,432)
"While Americans are enjoying the holidays and most have time off from work, we need to remember that holidays are just another day at the shop for vehicle thieves," the NICB stressed in a news release.
"The NICB reminds drivers to be alert during the busy holiday season. That includes parking in well-lit areas, keeping packages in the trunk or out of sight and making sure your vehicle is locked while it’s parked," the bureau stated. 
The NCIB is a not-for-profit organization dedicated to preventing, detecting and defeating insurance fraud and vehicle theft through data analytics, investigations, training, legislative advocacy and public awareness.

2014 Illinois DOC fee max is $166.27

December 19, 2013