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How to Complete the New Buyers Guide
S. Allen Monello, D.P.A.
Automotive Industry Center for Excellence, LLC
You must begin using the new Buyers Guide no later than January 28, 2018. After that date it will be illegal to use the old version of the Buyers Guide.
Following are some guidelines on how to complete the new Buyers Guide:
1. As with the old Guide, if you are offering the unit AS IS, check the AS IS box.
2. If you are offering a dealer warranty, check the DEALER WARRANTY box, then check LIMITED WARRANTY and enter what percentage of labor and parts you will cover. Under SYSTEMS COVERED describe the system(s) you will cover. NOTE: It is unlawful to use the terms “Power Train” or Drive Train.” Under DURATION enter the number of days and the number of miles you will cover the listed systems. Be sure to make the distinction “WHICHEVER OCCURS FIRST (e.g., 90 days or 3,000 miles, WHICHEVER OCCURS FIRST). If you want to disclaim all warranties on other systems that aren’t covered, you may enter the following language below the systems you are covering:
Dealer Disclaims All Warranties, Express or Implied, on Other Systems or Parts of this Vehicle.
REMEMBER – you are required to have a separate warranty document. Another federal rule requires that you display a written warranty in close proximity to the vehicle or make it available to consumers, upon request, before they buy. You must also post prominent signs to let customers know that warranties can be examined upon request.The Warranty must be printed no smaller than 10-point type.
3. If the manufacturer’s warranty hasn’t expired, you may disclose this by checking the box MANUFACTURER’S WARRANTY STILL APPLIES. If you choose to disclose that a manufacturer’s warranty still applies, you need only check this box. No other language – as required under the previous rule – must be stated. You are not required to describe details about the warranty. You also are permitted to check the AS IS – NO DEALER WARRANTY box when checking the MANUFACTURER’S WARRANTY STILL APPLIES box. And you are permitted to write the following disclaimer in the SYSTEMS COVERED/DURATION section:
The dealership itself assumes no responsibility for any repairs, regardless of any oral statements about the vehicle. All warranty coverage comes from the unexpired manufacturer’s warranty (or from the manufacturer’s used car warranty, if applicable).
4. If there is a manufacturer’s used car warranty that applies, you may check the box MANUFACTURER’S USED VEHICLE WARRANTY APPLIES. An example of this coverage could be certified pre-owned types of coverage. You are not required to describe details about the warranty (see attached example).
5. If there is a third-party warranty that applies (for example, you provide a third-party warranty with the sale of the unit) check the box OTHER USED VEHICLE WARRANTY APPLIES. You are not required to describe details about the warranty. For this and the Manufacturer’s used vehicle warranty you may also check the AS-IS NO DEALER WARRANTY box and enter the disclosure shown in Item 3.
6. Since you sell service contracts, check the box SERVICE CONTRACT.
7. On the back of the form, you are required to enter your dealership name, address, telephone number and email address. You are also required to enter the name and telephone number of the person to contact for complaints. It is recommended that you also include the person’s job title (e.g., Customer Service Manager) so the customer will know who to contact for complaints in case the named individual leaves your dealership.
8. If you conduct the sale in Spanish, you must post a Spanish language Buyers Guide on the vehicle before you display or offer it for sale.
9. If you wish to add an optional signature line for the customer, include a disclosure near it that says: “I hereby acknowledge receipt of the Buyers Guide at the closing of this sale.” The signature line and disclosure must appear in the space provided for the name of the individual to be contacted in the event of complaints after the sale (see attached example).
To learn more about the requirements of the new Buyers Guide, go to https://www.ftc.gov/tips-advice/business-center/guidance/answering-dealers-questions-about-revised-used-car-rule.
Do you have employees who need compliance training on titles and registrations, IRS 8300 cash reporting, Safeguards and Red Flags Rules, OFAC, sales tax or other Florida state and federal regulatory topics? We will bring live training to your dealership! For more information contact Allen at Allen@TheAICE.com or (727) 623-9075
Dealers Must Comply with the Military Lending Act (MLA)
S. Allen Monello, D.P.A.
Automotive Industry Center for Excellence, LLC
You have probably read or heard about the Department of Defense’s new interpretation of the Military Lending Act (MLA) and how it affects dealers. To ensure that you are in compliance, I offer the following recap of the law and how it would affect your dealership. It is strongly recommended that you consult with counsel, if you haven’t already.
The Military Lending Act was enacted by Congress in 2006 and implemented by the Department of Defense in 2007. The purpose of the Act is to protect servicemembers and their dependents against predatory lending practices. Motor vehicle financing transactions were exempt from the requirements of this Act. However, through changes in the rule and through Department of Defense interpretations, certain types of dealer transactions were then included under the requirements of the Act. These changes took effect on October 3rd, 2016.
First, a summary of what the Act entails:
- A creditor may not impose on a borrower a “military annual percentage rate (MAPR)” that’s greater than 36 percent. The MAPR is defined differently than the APR we are familiar with. The MAPR “includes all cost elements associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, any ancillary products sold, and any other charge or premium with respect to any extension of credit to a servicemember or the servicemember’s dependent.”
- Mandatory written disclosures must be provided as well as oral disclosures (including the MAPR and Truth in Lending Act disclosures).
- Creditors are prohibited from requiring arbitration agreements and the exclusion of class action lawsuits.
With the amended rule and the newest interpretations issued by the Department of Defense in a “guiding document” on December 14, 2017, the changes that directly affect motor vehicle dealership lending transactions, requiring compliance with the MLA, include:
- When the borrower obtains a loan to purchase an automobile that exceeds the purchase price and keeps the additional money or uses it for something unrelated to the purchase of the motor vehicle.
- When dealerships finance credit-related products such as Guaranteed Auto Protection (GAP) insurance or credit life or credit disability insurance. (However, the purchase and financing of a service agreement or the upgrading of the vehicle, such as adding leather seats, would not fall under the requirements of the MLA.)
NOTE: This Department of Defense interpretation covers all financed sales after October 3rd, 2016.
Bottom line: if you offer GAP, credit life and/or credit disability insurance to a servicemember or the servicemember’s dependent, you must comply with the MLA. You could maintain safe harbor by checking the covered borrower’s status at the time the application is submitted (or up to 30 days prior to the application being submitted). To check the borrower status, you may go to https://scra-w.dmdc.osd.mil/scra/#/single-record and enter the borrower’s information. You will immediately receive a certification signed by an official showing the borrower’s military status.
Failing to comply with the MLA can result in civil liability for actual damages, punitive damages, equitable or declaratory relief, and attorney’s fees. For knowing violations, there is criminal liability including fines and imprisonment.
Military Lending Act Limitations on Terms of Consumer Credit Extended to Service Members and Dependents: A Rule by the Defense Department on 12/14/2017
NOTE: This article is not intended to provide legal or financial advice. It is for informational purposes only. Please consult your attorney if you have any questions requiring legal advice.
The Automotive Industry Center for Excellence, LLC (AICE) is DMV-approved to provide pre-licensing education to Florida motor vehicle, RV and mobile home dealers. AICE provides a user-friendly course packed with valuable information that dealers must have to remain in compliance with Florida and federal laws. With an AICE pre-licensing certificate, you will have taken the first step to being on your way to the auction!
To sign up for an online pre-licensing course, click here. You will be glad you did!
Allen can be reached at (727) 623-9075 or by email at Allen@TheAICE.com.
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