All car dealers are subject to state and federal compliance laws and regulations. This includes any dealership which sells used cars. In addition to the standard regulations applying to all automotive dealers, used car dealerships must comply with additional regulations.
One critical regulation, which applies to all used car dealers, is the FTC’s Used Car Rule, which requires that dealers post a Buyer’s Guide for every used car offered for sale. The Buyer’s Guide is an important consumer information document, which provides customers with purchasing and warranty information about the vehicle.
A Buyer’s Guide must be posted prominently and conspicuously for all used cars. Acceptable places for the guide to be posted include hanging from the rear-view or side mirrors, or under the windshield wipers. The Buyer’s Guide should include information such as,
• The major mechanical and electrical systems on the car
• Some of the major problems that consumers should look out for
• Whether the vehicle is being sold "as is" or with a warranty
• What percentage of the repair costs a dealer will pay under warranty
• That oral promises are difficult to enforce and to get all promises in writing
• To ask to have the car inspected by an independent mechanic before they buy
• And more...
In addition to the Buyer’s Guide regulation, another important regulation impacting used car dealers is disclosure on open recalls impacting any vehicles offered for sale. The best practice is not to sell a used car with an open recall. If the dealer does still choose to sell a car with an open recall, the dealer must not claim that the car is safe or has been subjected to rigorous inspections.
These two critical regulations are just examples of the many critical laws and regulations that used car dealers must comply with to avoid fines and penalties. If you own or manage a used car dealership, you must be proactive in researching and implementing compliance procedures. Don’t wait until it’s too late - contact Total Dealer Compliance today to start your used car dealer compliance audit.
Total Dealer Compliance is also proud to offer our automotive compliance services to Buy Here Pay Here (BHPH) dealerships. In today’s challenging economic climate, BHPH dealers offer a valuable service to consumers who need a car but may be unable to pay cash or obtain traditional financing.
The Buy Here Pay Here model generally enables dealers to charge higher interest rates and other financial service fees, allowing for greater profit per sale than other types of dealerships. However, BHPH dealers also incur considerably greater risk than other dealerships in lending to customers who may have poor credit histories.
In addition to the overall challenge of running a profitable dealership, BHPH dealers must also navigate a landscape of complex compliance laws and aggressive regulators. Both state and federal agencies are proactive in investigating high-interest lenders like BHPH dealers. You must be sure to follow many critical regulations to avoid penalties. The fines incurred through regulatory violations are not just a “slap on the wrist” - they can range into the hundreds of thousands, and can bankrupt your dealership.
You must be especially cautious of Regulation Z, otherwise known as TILA or the Truth in Lending Act. You must disclose the exact terms of the credit you extend to your customers, including using standard terminology and clear expression of rates. Any attempt to conceal or obfuscate the terms of lending is a violation that can lead to major penalties.
You must also adhere to the ECOA, the Equal Credit Opportunity Act. You cannot decide which customers to lend to based on race, gender, sexuality, or other legally protected classes. You must also avoid the “appearance” of such judgements to avoid regulatory scrutiny. Only a careful understanding and implementation of compliance procedures can protect you from potential ECOA violations.
At TDC, we understand the compliance challenges that Buy Here Pay Here car dealers face. Contact us today for a free consultation and get started protecting your dealership.
