Chicago Automobile Trade Association
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CATA Bulletin
December 27, 2010


Privacy Notices

December 22, 2010

The issuance of a privacy notice has been required since 2001, under the FTC Privacy Rule. A revised Model Privacy Notice affords dealers safe harbor protection, but only if they use the new model notice.

As a result, there is little reason for dealers not to adopt the new Model Privacy Notice as the template for their privacy notices. The model might not adequately address every dealer's information-sharing practices, so the disclosures must be adjusted accordingly.

But a dealership would quickly lose its safe harbor protection if, in any redesign, the fonts are different or larger, any language or the tabular format is changed, or even if the amount of white space on the page-an aspect of readability-is changed.

There are three Model Privacy Notice forms. The first does not provide an opt-out. The second provides an opt-out by telephone and Internet, and the third provides an opt-out with a mail-in form. Instructions on when to use each is online at
Each Model Privacy Notice form consists of two pages and may be printed either on two separate sheets of paper or on both sides of a single sheet. The notice may extend to a third page if there is a long list of affiliates or additional information that must be disclosed and which exceeds the space available on Page 2.
There are five parts to the first page: (i) The title, (ii) an introductory section called the "key frame," which provides context, (iii) a disclosure table that describes the types of sharing used by dealers, which types of sharing the dealer actually does, and whether the consumer can limit or opt-out of any of the dealer's sharing, (iv) a box titled "To limit our sharing" (if the dealer offers an opt-out), and (v) the dealer's customer service contact information. The dealer will also identify on the first page, the last date the notice was revised. If an opt-out is offered, the opt-out form is included on the first page.
Page 2 consists of: (i) A heading, (ii) certain frequently asked questions (''Who are we?'' and ''What do we do?''), (iii) key definitions, and (iv) a section entitled "Other Important Information,'' where required state disclosures or an optional acknowledgment of receipt form can be provided.
The Model Privacy Notice must be printed in an easily readable type font and, except where specifically provided, must be in at least 10-point type. Dealers may include their logo on any of the pages so long as it does not interfere with the readability of the notice or the space constraints of each page.

Risk-Based Pricing

December 22, 2010

The new Risk-Based Pricing Rule is the latest duty mandated by the Fair and Accurate Credit Transactions Act of 2003. Dealers must give the notice to all consumers who apply for and receive credit on less favorable terms, putting their credit score in perspective and explaining how it negatively impacts the rate they are receiving. Consumers must get the notice if they recieve credit on terms that are materially less favorable than the terms received by a subtantial proportion of other credit customers.

The RBP Notice must be provided by any business that (a) obtains a credit report or (b) extends a credit report. Dealers who obtain a credit report and are the initial creditor in three-party financing transactions are engaged in Risk-Based Pricing.

This is meant to "complement" the Fair Credit Reporting Act's adverse action notice requirement, which requires creditors who deny a consumer's credit application based in whole or part on information in a credit report to provide information about credit reports to those consumers.
Because of the difficulty in determining which customers fit into this ill-defined category, the agencies adopted an Exception Notice that dealers and other creditors may issue in lieu of the RBPN.
The criteria for using the Exception Notice and other elements of the Risk-Based Pricing Rule and associated model forms are in the 202-page final rule, posted on the FTC Web site at

Red Flags Rule

December 22, 2010

After a number of false starts, the FTC vows that Jan. 1 will be the day compliance enforcement begins for the Red Flags Rule. Auditors will want to see every dealership's Identity Theft Prevention Program, which must be approved by the dealership's board or appropriate board committee. If the dealership does not have a board, a senior management employee must approve the ITPP.

It's all part of the Red Flags Rule, which is the Federal Trade Commission's next step following the 2003 "Safeguards Rule." The Safeguards Rule forces dealers to protect the sensitive information collected from customers, so that identity theft cannot be committed. The Red Flags Rule examines the other side of the coin: If a dealer encounters an ID thief, take steps to halt any transaction.

The new Rule forces "financial institutions" and "creditors" to comply with the Rule. Dealerships are swept up in the matter because the FTC defines dealers as creditors.

In summary, if a dealer can't form a reasonable belief under his ITPP that a credit report relates to the customer before him, the transaction must be aborted. Full details about the 256-page Rule are on the FTC's Web site,

All programs must have six distinct elements:
  • Policy A formal, written program that is signed by the officer of the corporation;
  • Training for employees-hands-on and continuous;
  • Detection and Prevention during transaction processing;
  • Mitigation measures to reduce fraud and minimize any impact on customers; and
  • Audit of the program at least annually.
A written program must include reasonable policies and procedures to identify and detect 26 Red Flags noted by the FTC, and respond appropriately when any Red Flags are detected.

Russ Radant of Automotive Compliance Consultants said one-third of all ID theft originates at dealerships. "Think about the number of people coming into your store every month," he said. "And not just on the sales side. What about repair orders?"

Radant outlined how camera phones can be used maliciously at service writer desks to record information about a customer and his vehicle from an RO. The thief then could call the customer, posing as an employee of the dealership.

"Mrs. Jones," Radant offered, "this is the dealership calling. I see that you were overcharged for service today on your Plymouth Valiant by $24.95. We can handle the overcharge three ways: I can credit your next service visit by that amount; I can arrange for a check for you-but that will take 30 to 40 days; or I can apply the credit to your charge card immediately, if you give me the account number." Choosing the third option yields to ID theft.

Examples of Red Flags that dealerships are likely to encounter include:
  • A consumer's credit report has notice of a credit freeze
  • The customer's address on the credit report does not match his other paperwork
  • Recent and significant increases in the volume of credit inquiries
  • Accounts that have been closed for cause or identified for abuse of account privileges
  • The Social Security number is listed on the death master file
  • Discrepancy between customer's date of birth and the correlating Social Security number range
  •  Locally, two or three Wisconsin addresses have been attributed to more than 500 immigrants applying for driver's licenses.
Dealers who intend to treat the Rule internally must be prepared to create, implement, manage and audit a formal program. The NADA published a comprehensive guide on the Rule, and many CATA allied members provide the service.

2011 Illinois DOC fee maximum is $156.08

December 22, 2010

The maximum amount that Illinois dealers can charge in 2011 for documentary preparation fees is $156.08, the Illinois attorney general's office announced Dec. 15.

The $1.70 increase over the 2010 maximum fee reflects a 1.1 percent rise in the federal Consumer Price Index for the 12-month period ending Nov. 30. The index is tracked by the U.S. Department of Labor. As always, the DOC fee is taxable and must be substantiated upon request by the attorney general's office.

The CATA is developing a poster about the DOC fee that dealer members can display. On the poster, the DOC fee amount is left black for dealers to fill in; any amount up to the maximum allowed may be charged, but all customers should be charged the same amount. Systematically charging one group but not another-all males but no females, for instance-could bring charges of profiling.

Two copies of the poster will be mailed to member dealers this month. IMPORTANT: The new maximum fee cannot be charged before Jan. 1.


Jan. 11 seminar will examine legal issues

December 22, 2010

Don't miss a free presentation Jan. 11 at the CATA on two topics by attorneys from Barnes & Thornburg LLP, a CATA allied member. The topics are "Protection from theft of customer lists, leads, business information" and "Indemnification in warranty litigation."

Dealers can learn practical steps to protect their business's customer lists, Internet leads and other valuable information while facing a highly mobile employee workforce, and how to create the best chance to recover such information after it has been stolen.

Barnes & Thornburg also will review practical tips for preserving indemnification and defeating claims in breach of warranty cases, such as drawing the line between responsibility for defective parts and "bad" repairs; and helpful disclaimers in purchase order forms of the implied warranty of merchantability and consequential damanges.

To attend, complete the registration form on the CATA Web site,, or call the association at (630) 495-2282.


Dealers in their Communities

December 22, 2010

Martin Bredemann, a partner in the Bredemann Lexus, Ford, Chevrolet and Toyota dealerships in Glenview and Park Ridge, was named the 2010 recipient of the Compassion in Action Award, bestowed by Catholic Charities of the Archdiocese of Chicago.

Bredemann has served on the organization's board of advisors since 2004 and has helped oversee its participation in First Look for Charity since the group joined the Chicago Auto Show's benevolent event in 2005. He also supports other facets of the archdiocese such as the Lumen Cordium Society and the Respect Life Office.

"Martin generously shares his time, talent and treasure in works of compassion for the people who are served by Catholic Charities of the Archdiocese of Chicago," the organization said in a statement.

Editor's note: This new, recurring component of the newsletter highlights the many activities dealers and their employees engage in to better their communities. Submissions welcome to the Editor at


Mileage measurements sure to puzzle electric-car shoppers

December 22, 2010

According to the government, the car with the highest mileage per gallon on the market doesn't use a single drop of gasoline.

The 2011 Nissan Leaf, which was delivered to its first owners this month, runs entirely on battery. But the Environmental Protection Agency says it can travel 99 miles on the equivalent of a single gallon of fuel.

The mileage-equivalent ratings, meant to help potential buyers compare electric cars with others in their class, are befuddling some consumers who see them as an automotive example of comparing apples and oranges.

The EPA isn't the only entity comparing the clean-fuel cars with autos that have traditional internal combustion engines. Their ratings, which will be posted on car windows, may end up sharing space with stickers from the Federal Trade Commission and the automakers themselves.

"It's a whole new world that needs to be rated," Nissan spokeswoman Jeannine Ginivan said. "It is, for sure, complicated, since there is really no gallon. For now, the consumer is going to have to decipher everything and see how to make it work for them."

The Leaf will be sold with a sticker saying that it can reach up to 106 mpg in the city. The previous record-holder, the Toyota Prius hybrid, was rated at 51 mpg in urban settings.
The Leaf score is straightforward compared with the one given to the 2011 Chevrolet Volt, a hybrid plug-in that switches to gasoline when its electricity supply runs out. The Volt doesn't just have an overall rating.
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