American car dealerships face a huge variety of laws and regulations. While failing to follow some of them may lead to losing money and clients, breaking certain rules could result in bankruptcy and imprisonment.
Let's go over the most important regulations to follow to ensure dealership compliance and smooth work of your company.
- Ensuring Client Privacy Protection
A dealership must protect customers' privacy and the security of their personal data. You should be careful about collecting, storing, and especially sharing sensitive information. Clients must have a clear understanding of the way you handle their data to ensure utter privacy.
Penalty: Up to $16,000 per day + state law remedies
- Displaying Buyer's Guide
You need to display a Buyer's Guide sticker on the window of a used car to show terms and conditions of dealer-provided warranty (if any), suggestions for pre-purchase inspections, warning not to rely on spoken promises, and a list of defects in the vehicle's major systems.
Reference: Used Car Rule
Penalty: Up to $16,000
- Being an Equal Opportunity Lender
When extending credit, dealerships shouldn't discriminate against clients based on their race, religion, sex, marital, status, color or age. According to the law, the company should also notify all loan applicants about actions taken in regard to their application.
Reference: Equal Credit Opportunity Act
Penalty: up to $10,000
- Sharing Credit Terms Clearly
As lenders, dealerships have to disclose all credit terms clearly to ensure understanding by the client. The auto dealer has to use standard language and terminology to express the rates. All clients should have access to information related to the loan terms.
Reference: Truth in Lending (Regulation Z)
Penalty: up to $5,000, one-year imprisonment or both.
- Reporting Large Cash Payments
Each person or company that receives a cash payment of over $10,000 as part of a business deal should fill out Form 8300 by the 15th day after the transaction occurs. IRS and Financial Crimes Enforcement Network require this form to fight money laundering.
Reference: Form 8300
Penalty: up to $100,000 (for deliberate failure to file the form)
Ensuring dealership compliance with the above regulations is just a start. It's important to monitor changes in requirements and law updates regularly to avoid unexpected penalties. For more information about compliance, please contact our experts.