Top 10 Dealership Laws and Regulations
As we have already discussed, the automotive retail industry faces a complex challenge of complying with the stringent legislation as set by state and federal governments. Many dealerships have often fallen short of expertise, time, and workforce to uphold the mandatory requirements.
In part two of our article, we break down the regulatory language and jargon to help you understand what the federal and state is required of you.
- Disposal Rule- This is federal legislation requiring that if you collect consumer reports and data, you dispose of them in a secure manner that guarantees customer privacy. Proper disposal may include security-erasing digital records, shredding of papers, and more. You must ensure that consumer reports are not disorganized or unaccounted for.
- Used Car Rule- This law requires dealerships to post a Buyer's Guide before putting up a used vehicle for sale. The guide must provide key information such as the car's warranty, major electrical and mechanical systems in the car, and an advisory to have a mechanic inspect the car before purchase. You must also post the guide "prominently and conspicuously" on any used vehicle that you put up for sale.
- Gramm-Leach-Bliley Act (GLBA) - This law requires that you take real, tangible actions towards security, privacy, and confidentiality of your customer's data. The rule has three parts, which include financial privacy, safeguard rule, and pretexting provisions.
- Equal Credit Opportunity Act- Dealerships are regarded as lenders and thus subject to ECOA. As such, you must not discriminate based on factors like color, religion, nationality, marital status, age, etc., when offering loans to potential car buyers. The law also requires you to notify applicants of their loan status, report credit history, and retain a record of credit applications.
- Red Flags Rule- This legislation requires that you maintain a written Identity Theft Protection Plan (ITPP) to detect and prevent identity theft. It involves looking out for suspicious documents, unusual changes in the client's credit report, and account activity. Your dealership must be proactive in preventing identity fraud so as to comply with the Red Flags Rule.
- Form 8300 and Reporting Cash Payments of Over $10,000- Dealerships may occasionally deal with large cash transactions when selling vehicles. As such, you must comply with federal reporting requirements in such instances. Your business must file a Form 8300 whenever you receive a cash payment exceeding $10000. This form is by the IRS and the Financial Crimes Enforcement Network (FinCEN) to detect and fight money laundering.
- Regulation Z- This law is a part of the Truth in Lending Act. It requires all lenders, including dealerships, to disclose all lending terms in an elaborate and meaningful way. You are required to present your clients with clear and written information about the full terms and conditions of their loans.
- Office of Foreign Acts Control (OFAC)- The Office of Foreign Assets and Control enforces trade and economic sanctions against specific groups and countries, especially those involved in drug trafficking, terrorism, and poaching. Therefore, dealerships are required to counter check client names against the Specially Designated Customers' List- a list of persons and groups targeted by the OFAC.
- Federal Advertising Laws/ Truth-in-Advertising- This law requires that any advertising must be truthful and non-deceptive. In any campaign you run, you will need to provide evidence to back your claims. The burden of proof for ad claims lies on the dealer. Besides, you must not advertise unfairly.
- Fuel Economy Advertising for New Automobiles- This is a regulation for advertising new vehicles. If you are advertising the fuel economy for new motor vehicles, and the advert lists both highway and city fuel economies, you must properly label them as estimated highway mpg and estimated highway mpg.
If you only include the highway or city mileage in the ad, it must have the corresponding mileage estimate for the highway or city. This is to say that you can not label the highway mileage to be perceived as the city's mileage.
Besides, the fuel economy estimates you provide must match the specific vehicle model/make you advertise.
For more information and queries on Dealership Compliance, feel free to Contact Us today, and we will be more than willing to assist.