By Nicole F. Munro and Thomas B. Hudson

After last month’s next-to-nothing report, things in and around the nation’s capital perked up a bit this month. Here’s our monthly article on selected legal developments we think might interest the auto sales, finance, and leasing world. This month, the action involves the Federal Trade Commission, the Consumer Financial Protection Bureau, the National Highway Traffic Safety Administration and the Department of Justice. As usual, our article features the “Case of the Month” and our “Compliance Tip”.

Note that this column does not offer legal advice. Always check with your lawyer to learn how what we report might apply to you, or if you have questions.

Federal Developments

CFPB Releases Report on Trends in Consumer Bankruptcy. On September 25, the CFPB released its quarterly consumer credit trends report on consumer bankruptcy. The report describes how the volume and types of consumer bankruptcy filings have changed from 2001 to 2018 and the impact of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, and the 2007 recession.

CFPB and FTC to Host Workshop on Accuracy in Consumer Reporting. The CFPB and the FTC will host a public workshop on December 10 to discuss issues affecting the accuracy of both traditional consumer credit reports and employment and tenant background screening reports.

CFPB to Continue Publication of Consumer Complaint Database and Make Enhancements. On September 18, the CFPB announced that it will continue the publication of consumer complaints, data fields, and consumers’ narrative descriptions of their complaints through its Consumer Complaint Database, while also making several enhancements to the database.

FTC Comments on CFPB’s Proposed Debt Collection Rules. On September 18, the FTC submitted comments on the CFPB’s proposed debt collection rules. The FTC’s comments address the agency’s legal authority in the debt collection marketplace, describe its law enforcement, policy, and education efforts to protect consumers from unlawful debt collection practices, and address several topics covered by the proposed rule, including improvements to required validation notices; restrictions related to time-barred debts; passive debt collection; prohibitions on the sale, transfer, or placement of certain debts; collection of debts involving people who are deceased; restrictions on the times and places at which debt collectors may communicate with consumers; restrictions on the types of mediums (e.g., phone number, email, text messaging) through which debt collectors may communicate with consumers; restrictions on the disclosure of information about debts to third parties; and telephone call frequency limits. Required reading for buy-here, pay-here dealers.

NHTSA Establishes Standards for Electronic Odometer Disclosures. On September 17, NHTSA issued a final rule establishing standards under which states may allow electronic disclosures of vehicle odometer readings. Among other changes, the final rule will also require odometer disclosures until vehicles are 20 years old, beginning with the 2010 model year. Previously, sellers of vehicles 10 model years old or older at the time of sale were exempt from the odometer disclosure requirement.

CFPB Releases Latest Supervisory Highlights. On September 13, the CFPB released its Supervisory Highlights, covering examinations (generally completed between December 2018 and March 2019) of activities related to the sale of guaranteed asset protection products, credit card origination and account servicing, consumer debt collection, furnishing of consumer information to consumer reporting agencies, and mortgage origination. Among other findings, examiners found one or more instances of creditors selling guaranteed asset protection products to consumers who would not benefit from the products because the loan-to-value ratio associated with the consumers’ vehicle financings was low. Examiners also found that one or more debt collectors sought interest not authorized by the underlying contracts between the debt collectors and the creditors. In addition, examiners found deficiencies in furnisher compliance with the Fair Credit Reporting Act, including failing to timely complete dispute investigations, failing to provide results of dispute investigations to consumer reporting agencies, failing to timely correct and update previously furnished information, failing to provide timely notice to consumer reporting agencies that information is disputed by a consumer, and failing to implement reasonable written policies and procedures regarding the accuracy and integrity of account information furnished to consumer reporting agencies.

CFPB Settles with Debt Collector. On August 28, the CFPB announced a settlement with Asset Recovery Associates, Inc., a debt collection company. The settlement resolves allegations that ARA violated the Fair Debt Collection Practices Act and the Consumer Financial Protection Act of 2010 by threatening to sue or arrest consumers even though it did not intend to take such action, falsely representing to consumers that company employees were attorneys, threatening to garnish consumers’ wages or place liens on their homes even though it did not intend to do so, and representing that consumers’ credit reports would be negatively affected if they did not pay, even though ARA does not report consumer debts to credit reporting agencies. Under the settlement terms, ARA will pay at least $36,800 in restitution to affected consumers and a $200,000 civil money penalty to the Bureau. The consent order also prohibits ARA from continuing to engage in this conduct and requires ARA to record calls with consumers to help ensure collectors do not make false statements in the future.

FTC Settles with School Operator over Use of Lead Generators. On August 27, the FTC announced a settlement with the operator of several post-secondary and vocational schools for using lead generators that employed false and deceptive tactics. The FTC alleged that the lead generators falsely represented to consumers that the schools were affiliated with or recommended by the military, used deceptive tactics to induce consumers to submit their personal information, falsely told consumers their information would not be shared, and called consumers registered on the National Do Not Call Registry, in violation of the Telemarketing Sales Rule. In addition to prohibiting misrepresentations about the defendant’s products or services, the settlement requires the operator to pay $30 million in consumer redress, review all materials that lead generators use to market its schools, investigate complaints about lead generators, and not use or purchase leads obtained deceptively or in violation of the TSR.

Case of the Month

Usually our Case of the Month involves a reported opinion in a civil lawsuit by or against a dealer. Sometimes, though, we report on enforcement actions by federal or state authorities. This month, it’s one of the latter, and the enforcement action is by a federal regulator we don’t often see in the car sale and financing arena.

This time, the Fair Housing Testing Program conducted by the Department of Justice led to a lawsuit against a Maryland independent dealer. The suit alleged that defendant Guaranteed Auto Sales along with its owner and manager, defendants Kelly Ann West and Robert Chesgreen, respectively, violated the federal Equal Credit Opportunity Act by offering different credit terms based on race to those seeking to buy and finance used vehicles in Glen Burnie, Md.

DoJ said the suit is based on the results of testing the department’s Fair Housing Testing Program, in which individuals pose as prospective car buyers to gather information about possible discriminatory practices.

The complaint, filed in federal court in Maryland, alleges that the defendants engaged in a pattern or practice of discrimination by offering less favorable auto-finance terms to African American testers than white testers. Most significantly, officials said the complaint alleges that employees of Guaranteed Auto Sales told African American testers that they needed larger down payments than white testers for the same used cars, and told African American testers that they were required to fund their down payments in one lump sum, while they gave white testers an option of paying in two installments.

“Using race as a factor in determining credit terms, including the amount of down payment that a customer must pay, is despicable and illegal,” said Assistant Attorney General Eric Dreiband for the Civil Rights Division.

Keep in mind that these charges by the DoJ are just that – charges – and that the allegations still must be proven.

A couple of points: We’ve heard of regulators employing mystery shoppers to make discrimination cases, but so far had seen little evidence of the practice. If, however, anything remotely like these activities is going on at your dealership, you need to consider whether that next “up” might well be a DoJ staffer (or, maybe worse, an Action News reporter with a hidden camera and mic).

This Month’s CARLAWYER©Compliance Tip

Every time your dealership sells a vehicle using a retail installment contract, it is entering into a transaction governed by the Uniform Commercial Code. Parts of the UCC apply to sales (Article 2 of the UCC) and secured transactions (Article 9). These UCC provisions apply even when they are not expressly set forth in the agreement between your dealership and your vehicle buyer. Most UCC provisions can be varied by agreement between the parties, but others cannot. Do you know the basics of how the UCC affects your transactions and the rights of your dealership and your buyers? A brief outline memo to your Compliance Officer from your lawyer explaining the UCC’s role in car sales and financing would be money well spent. We don’t recommend do-it-yourself legal work, but if you are allergic to spending money on legal fees, check with Mr. Google – there are several “The UCC for Dummies”-type books available.

So, there’s this month’s article. See you next month!

Nikki (nmunro) is a Partner in the law firm of Hudson Cook, LLP., Editor in Chief of thudson) is Of Counsel to the firm, has written several books and is a frequent writer for Spot Delivery®. He is the Senior Editor of CARLAW®.For information, visit © 2019, all rights reserved. Single publication rights only, to the Association.



By Nicole F. Munro and Thomas B. Hudson

Here’s our monthly article on selected legal developments in the auto sales, finance, and leasing world.  This month, the action involves the Federal Trade Commission and the Consumer Financial Protection Bureau.  As usual, our article features the “Case of the Month” and our “Compliance Tip”.

Note that this column does not offer legal advice.  Always check with your lawyer to learn how what we report might apply to you, or if you have questions.

Federal Developments

FTC Hosts PrivacyCon. On June 27, the FTC hosted PrivacyCon, which focused on the latest research and trends in consumer privacy and data security. The event involved four sessions of presentations and discussions on research submitted for the event. The first focused on research related to privacy policies, disclosures, and permissions and featured presentations on research examining such topics as the European Union General Data Protection Regulation’s impact on web privacy. The second explored research on consumer preferences, expectations, and behaviors, including a presentation on historical data on consumers’ understanding and attitudes about digital privacy and online tracking. The third focused on tracking and online advertising research, including a presentation examining paid and free apps. The last session focused on research related to vulnerabilities, leaks, and breach notifications. A webcast of the event is available on the FTC’s website.

CFPB Holds First Symposium Addressing Dodd-Frank’s Prohibition on Abusive Acts and Practices. On June 25, the CFPB held its first symposium addressing the Dodd-Frank Act’s prohibition on abusive acts and practices. The Dodd-Frank Act authorizes the Bureau to take enforcement, supervision, and rulemaking actions concerning unfair, deceptive, or abusive acts and practices. The Bureau notes that the meaning of “abusive” is less developed than the meaning of “unfair” and “deceptive,” which have been well defined by the FTC Act. The symposium provided a public forum for the CFPB and the public to hear various perspectives on the meaning of abusiveness. This first symposium had two panels of UDAAP experts. The first panel included a discussion with leading consumer protection academic experts on various policy issues relating to the abusive standard under Dodd-Frank. The second panel examined how the abusive standard has been used in practice and included leading legal experts in the field. The symposium also included remarks by Bureau Director Kathleen L. Kraninger and Deputy Director Brian Johnson.

CFPB Delays Compliance Date for Mandatory Underwriting Provisions of Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule. On June 17, the CFPB issued a final rule to delay the August 19, 2019, compliance date for the mandatory underwriting provisions of the CFPB’s 2017 rule governing Payday, Vehicle Title, and Certain High-Cost Installment Loans. Compliance with these provisions of the rule is delayed by 15 months, to November 19, 2020. The CFPB also made certain conforming changes and corrections to address several clerical and non-substantive errors it identified in the rule.

FTC Settles with Provider of DMS Software and Data Processing Services to Dealers. On June 12, the FTC announced a settlement with LightYear Dealer Technologies, LLC, d/b/a DealerBuilt, for violating the Gramm-Leach-Bliley Act’s Safeguards Rule and the FTC Act’s prohibition against unfair practices for failing to maintain adequate data security practices that led to a security breach of millions of consumers’ personal information.

FTC Updates CFPB on 2018 Enforcement Activities Related to Regs. Z, M, and E. On June 6, the FTC provided its annual letter to the CFPB concerning its 2018 enforcement activities related to compliance with Regulation Z (Truth in Lending Act), Regulation M (Consumer Leasing Act), and Regulation E (Electronic Fund Transfer Act). The letter highlights, among other things, enforcement actions, rulemaking, and policy development related to vehicle financing and leasing, payday lending, and consumer electronics financing, as well as consumer protection issues related to servicemembers. With regard to vehicle financing and leasing, the letter highlighted the FTC’s continued efforts to combat deceptive dealer practices, as well as its continued work on a qualitative study of consumers’ experiences in buying and financing vehicles at dealerships.

Case of the Month

Two buyers bought cars from a dealership and signed conditional sales contracts. The dealership agreed to find financing for the buyers. The contracts provided that if the dealership could not obtain financing, it could cancel the contracts and retake the cars, but it must then return the down payments.

After the dealership was unable to obtain financing, it repossessed the cars, refused to return the buyers’ down payments, and challenged the buyers to sue. The buyers complained to the California Department of Motor Vehicles, which investigated the dealership and interviewed its owner. The investigator told the owner that he must return the down payments, but the owner refused.

The DMV held a disciplinary hearing to consider revocation of the dealership’s license for its refusal to return the down payments. The administrative law judge proposed an order by which the dealership must return the down payments to the buyers and have a probationary license for two years. The DMV adopted the proposed order.

The dealership petitioned the California Superior Court for a writ of administrative mandate to void the DMV’s order. The court declined the petition.

The California Court of Appeal affirmed the trial court’s decision to deny the dealership’s petition. The appellate court found substantial evidence that the dealership violated Section 2982.5(d) of the California Civil Code when it refused to return the down payments.

The appellate court explained that because the dealership agreed to arrange financing, the transactions were either bona fide credit sales or seller-assisted loans. The dealership argued that Section 2982.5(d) applied to seller-assisted loans, not credit sales, and that the transactions at issue were credit sales. The appellate court explained that in a bona fide credit sale, the seller intends to sell property on credit if the buyer obtains financing but to rescind the transaction if the buyer does not obtain financing. However, the dealership intended to abide by the terms of the sale contracts only if the buyers obtained financing; otherwise, it intended to keep the down payments despite the contracts’ terms.

The appellate court inferred the dealership’s intent for purposes of determining whether the transactions were seller-assisted loans from the dealership owner’s behavior, including his 14 years of experience in auto finance, his knowledge that the buyers were unlikely to sue, and his pattern of preying on vulnerable consumers. Because the appellate court found that the dealership intended to keep the down payments even if it could not obtain financing for the buyers, the court decided that the transactions were seller-assisted loans, not bona fide credit sales, and Section 2982.5(d) required the dealership to return the down payments.

Much of the court’s opinion in this case deals with the peculiarities of California law, but the takeaway here for dealers in other states is clear – just look at the Compliance Tip below.

Front Line Motor Cars v. Webb, 2019 Cal. App. LEXIS 430 (Cal. App. May 13, 2019).

This Month’s CARLAWYER© Compliance Tip

Unwinding a deal?  Re-contracting?  Both involve matters of state and federal law, and both are fraught with risk if not done properly.  Dealerships should have written procedures addressing these actions and should have those procedures reviewed and periodically updated by knowledgeable dealership compliance counsel.

So, there’s this month’s roundup!  Stay legal, and we’ll see you next month.

Nikki ( is a Partner in the law firm of Hudson Cook, LLP., Editor in Chief of’s CARLAW®, a contributing author to the F&I Legal Desk Book and a frequent writer for Spot Delivery,® a monthly legal newsletter for auto dealers  Tom ( is Of Counsel to the firm, has written several books and is a frequent writer for Spot Delivery®.  He is the Senior Editor of CARLAW®.   For information, visit © 2019, all rights reserved. Single publication rights only, to the Association.



SC DMV now has the Titling Class for Auto Dealers available online. This class is required in order to apply for your EVR account. You will have to have an EVR account in order to issue the new traceable temp tags. The new temp tag system goes into effect May 15. You have the option of issuing the current paper temp tags until November 10, but make sure you sign up well in advance of November 10 since it may take you several weeks to get an account. The vendor we recommend is CVR.
This link will take you to the online class:

Kat Messenger
Carolina Dealer Training

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