By Thomas B. Hudson and Nicole F. Munro

Here’s our monthly article on legal developments in the auto sales, finance and lease world. This month, we’re reporting on activities of the Consumer Financial Protection Bureau and the courts. As usual, this month’s article features our “Case of the Month.”

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.

This Month’s CARLAWYER©Compliance Tip

Advertising and selling cars online has become commonplace. It is also common that sometimes the buyers and dealers in these online transactions are located in different states. What is less common is that a dealer, before undertaking these sales, has had the advertising and sales process reviewed by counsel. The “Case of the Month,” below, involves a Tennessee dealer who was sued in Alabama, after an Alabama buyer bought a car from the Tennessee seller. The dealer had the Alabama lawsuit dismissed, but gave the buyers permission to transfer the case to the appropriate jurisdiction. The case illustrates the perils of online transactions. Have you had your online advertising and sales processes reviewed by counsel?

Federal Developments

Struggle for Control of the CFPB. On January 10, 2018, the U.S. District Court for the District of Columbia denied CFPB Deputy Director Leandra English’s request for a preliminary injunction to block President Trump’s appointment of Mick Mulvaney as acting CFPB director. The court ruled that English is not likely to succeed on the merits of her claim that, by operation of the Dodd-Frank Act, she is the rightful acting CFPB director. English was also unable to show that a denial of the injunction would cause her or the agency to suffer irreparable harm.

As background: On November 24, 2017, Richard Cordray appointed English, his chief of staff, as deputy director and then resigned. Pursuant to a section of the Dodd-Frank Act that says the deputy director serves as the acting director when the director is unavailable, English claimed the title of acting director upon Cordray’s resignation. A few hours later, President Trump – using his authority under the Federal Vacancies Act to fill vacant positions that require Senate confirmation with another appointee who has already been confirmed by the Senate for another position – appointed Mulvaney, the director of the Office of Management and Budget, as the CFPB’s acting director until a permanent director is confirmed by the Senate, setting up a conflict with Cordray’s appointee.

English sued Mulvaney and the president, asking the court to restrain Mulvaney from heading the CFPB until a permanent director can be nominated and confirmed. In late November, the judge denied English’s initial request for a temporary restraining order.

Kiss the Payday Rule Goodbye? On January 16, 2018, the CFPB issued the following statement on its Payday, Vehicle Title, and Certain High-Cost Installment Loans final rule (“Payday Rule”): “January 16, 2018, is the effective date of the [Payday Rule]. The Bureau intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule. Although most provisions of the Payday Rule do not require compliance until August 19, 2019, the effective date marks codification of the Payday Rule in the Code of Federal Regulations. [The] effective date also establishes April 16, 2018, as the deadline to submit an application for preliminary approval to become a registered information system (“RIS”) under the Payday Rule. However, the Bureau may waive this deadline pursuant to 12 C.F.R. 1041.11(c)(3)(iii). Recognizing that this preliminary application deadline might cause some entities to engage in work in preparing an application to become a RIS, the Bureau will entertain waiver requests from any potential applicant.”

A New Boss, With New Marching Orders. On January 23, 2018, the CFPB’s Acting Director Mulvaney wrote a memo to staff discussing how, under new leadership, the CFPB is shifting its governing philosophy in regard to carrying out its mandate under the Dodd-Frank Act. While Mulvaney affirmed the need to protect consumers and stated that the CFPB will enforce consumer financial protection laws vigorously, he noted that the CFPB will no longer “push the envelope” of the law in order to “send a message” to regulated entities. Mulvaney rejected his predecessor’s “good guy” versus “bad guy” language and promised to execute the CFPB’s mandate “with humility and prudence.”

Mulvaney indicated that the CFPB will be conducting a review of all activities in which it is engaged. More specifically, Mulvaney stated that the CFPB will be: (1) bringing enforcement actions where “quantifiable and unavoidable harm to the consumer” exists; (2) focusing on formal rulemaking instead of “regulation by enforcement;” and (3) prioritizing areas of focus based on consumer complaints (noting, specifically, that nearly a third of CY 2016 complaints related to debt collection, compared to 0.9% for prepaid cards and 2% for payday lending).

Finally, Mulvaney stated that the CFPB will engage in quantitative analysis to “consider the potential costs and benefits to consumers and covered persons” when determining whether to intervene in given situations.

Information, Please. On January 24, 2018, the CFPB issued a “Request for Information,” seeking feedback on all aspects of the CFPB’s civil investigative demand process to determine if any changes are necessary. The CFPB issues CIDs to entities and persons whom the CFPB has reason to believe have information relevant to a violation of the laws the CFPB enforces.

Recipients of a CID are required to produce the requested information to the Bureau, which uses that information to further its investigations of potential violations of federal consumer financial laws. Through the RFI, the CFPB is seeking information on how processes related to CIDs may be updated, streamlined, or revised to better achieve the CFPB’s statutory and regulatory objectives, while minimizing burdens on recipients, and how to align the CFPB’s CID processes with those of other agencies.

The CFPB believes that entities that have received one or more CID, lawyers who represent these entities, and members of the public are likely to have useful information and perspectives that will help inform the CFPB’s review of its CID processes. Comments are due by March 27, 2018.

The RFI on CIDs comes on the heels of the CFPB’s January 17, 2018, announcement that it is issuing a call for evidence to ensure the CFPB is fulfilling its proper and appropriate functions to best protect consumers. The CFPB will be publishing in the Federal Register a series of similar RFIs, seeking comment on enforcement, supervision, rulemaking, market monitoring, and education activities. These RFIs will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.

Case of the Month

This month’s case involves a dealer’s Internet advertising and sales activities. Here’s what happened.

Ashley and Derek Hand sued Wholesale Auto Shop, LLC, a Tennessee corporation with its principal place of business in Tennessee, for selling them a Jeep Wrangler with an odometer reading of 66,692 but with actual mileage of 252,603 miles. The Hands claimed that Wholesale Auto violated, among other laws, the Motor Vehicle Information and Cost Savings Act and the Alabama Deceptive Trade Practices Act.

After Wholesale Auto failed to answer the complaint, the Hands moved for a default judgment. The federal trial court asked the Hands to submit a supplemental brief addressing the issue of whether the court had personal jurisdiction over Wholesale Auto. After the Hands submitted the brief, the court denied the Hands’ motion for lack of personal jurisdiction, but granted them leave to move to transfer the case to an appropriate jurisdiction.

Alabama’s long-arm statute permits the exercise of personal jurisdiction if constitutionally permissible, and the U.S. Constitution requires a defendant to have sufficient minimum contacts with the forum state in order to satisfy due process. The court found that Wholesale Auto lacked sufficient minimum contacts with the state of Alabama. The Hands viewed Wholesale Auto’s advertisement for the Jeep on, the parties communicated by phone between Alabama and Tennessee after the Hands contacted Wholesale Auto about the Jeep, and the Hands traveled to Tennessee to buy the vehicle.

The court concluded that the fact that Wholesale Auto called the Hands twice in Alabama and allegedly made fraudulent statements during those calls was insufficient to establish personal jurisdiction over Wholesale Auto because the Hands initiated the contact, consummated the transaction in Tennessee, and were only injured in Alabama by bringing the car to that state.

Hand v. Wholesale Auto Shop, LLC, 2018 U.S. Dist. LEXIS 2138 (N.D. Ala. January 5, 2018)

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

Tom (thudson) is Of Counsel and Nikki (nmunro) is a Partner in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is the CEO of, LLC and the Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery®. For information, visit © 2018, all rights reserved. Single publication rights only, to the Association. (2/18). HC/4816-3298-5692v1.


Just a reminder, the NC General Assembly passed a law last year changing the maximum late fee in NC to $15.00. The text of the new law follows. Unfortunately, any Retail Installment Sales contracts that you have used in the past that still state the maximum late fee is “$6.00 or 5% of the past due payment, whichever is less” must be honored, so you cannot charge those customers more than the contractual late fee. Make sure your software has been updated to show the new maximum late fee of $15.00, and if you buy contracts it is time to buy the updated version!


The General Assembly of North Carolina enacts:

SECTION 1. G.S. 25A‑29 reads as rewritten:
“§ 25A‑29. Default charges.
(a) If any installment is past due for 10 days or more according to the original terms of the consumer credit installment sale contract, a default charge may be made in an amount not to exceed five percent (5%) of the installment past due or six dollars ($6.00), whichever is the lesser. of fifteen dollars ($15.00). A default charge may be imposed only one time for each default.
(b) If a default charge is deducted from a payment made on the contract and such the deduction results in a subsequent default on a subsequent payment, no default charge may be imposed for such the default.
(c) If a default charge has been once imposed with respect to a particular default in payment, no default charge shall be imposed with respect to any future payments which would not have been in default except for the previous default.
(d) A default charge for any particular default shall be deemed to have been waived by the seller unless, within 45 days following the default, (i) the charge is collected or (ii) written notice of the charge is sent to the buyer.”

SECTION 2. This act is effective when it becomes law and applies to charges imposed on or after that date.
In the General Assembly read three times and ratified this the 12th day of June, 2017.

s/ Philip E. Berger
President Pro Tempore of the Senate

s/ Tim Moore
Speaker of the House of Representatives

This bill having been presented to the Governor for signature on the 13th day of June, 2017 and the Governor having failed to approve it within the time prescribed by law, the same is hereby declared to have become a law. This 26th day of June, 2017.

s/ Karen Jenkins
Enrolling Clerk


Fees for DMV Hearings Begin; State-Mandated Charges Now Required

The North Carolina Division of Motor Vehicles has started collecting the state-mandated fees for administrative hearings as of Jan. 1.
This legislation affects 19 administrative hearing types that review the revocation or suspension of vehicle license plates and licenses for drivers, inspection stations, automotive dealers and mechanics. There are no fees for medical hearings.
NCDMV will notify eligible customers by mail on how to request a hearing, applicable fees and deadlines for submitting a request. Most hearings will be scheduled when the request is submitted in writing and the fees are paid in full. A waiver of fees is available for applicants who meet certain household income criteria.
For more information on the administrative hearings process and a list of fees, visit the DMV website at


By Thomas B. Hudson and Nicole F. Munro


In November, President Trump left a brand-new pro-industry Consumer Financial Protection Bureau Director under the auto finance and lease industry’s Christmas tree.  This should make for an interesting 2018 for all of us.  This month, we also report on activities of the House and Senate, the Federal Reserve Board, the Federal Trade Commission, the Government Accountability Office, the Department of Defense and the Consumer Financial Protection Bureau.  As usual, this month’s article features our “Case of the Month.”

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.


This Month’s CARLAWYER© Compliance Tip


Check out the Department of Defense item below.  If you sell and finance cars to military personnel, including military dependents, you need to get some quick schooling on what the DOD says is permitted and not permitted in connection with those transactions.  You’ll likely need your lawyer’s help on this one. Also, you should contact your consumer reporting agency about how to obtain MLA covered borrower status or get to know the Department of Defense’s website at


Federal Developments


CFPB Leadership Shakeup.  On November 24, Richard Cordray resigned as CFPB Director and appointed his chief of staff, Leandra English, to become deputy director. A few hours later, President Trump appointed Mick Mulvaney, the director of the Office of Management and Budget, as acting director of the Bureau until the Senate confirms a permanent director, setting up a conflict with Cordray’s appointee. English then sued Mulvaney and the president in federal court, asking the court to restrain Mulvaney from heading the Bureau until a permanent director can be nominated and confirmed. Two days later, the judge denied English’s request for a temporary restraining order, and has not yet issued a decision on the merits of English’s claim that she has the authority to serve as acting CFPB director. Stay tuned.


Blocking Another CFPB Rule?  On December 1, a group of House Democrats and Republicans introduced a bill to block the CFPB’s so-called “small dollar rule” (regulating payday and title loans, among others) from going into effect. The proposed legislation exercises authority under the Congressional Review Act to prevent the rule from becoming effective on January 16. The CRA provides a procedure by which Congress can disapprove of rules issued by federal agencies within 60 legislative days of such rules being submitted to Congress for review. If both the House and the Senate vote to disapprove a rule, the agency may not issue any rule in substantially the same form in the future. Earlier this year, Congress used its CRA authority to block the CFPB’s arbitration rule. Remember the late-night tiebreaker vote by Vice President Pence?


CFPB Bulletin Deemed to be a “Rule,” and Invalid.  On December 5, the Government Accountability Office opined that the CFPB’s March 2013 bulletin on auto finance and compliance with the Equal Credit Opportunity Act constitutes a “rule” subject to the Congressional Review Act.  Because the CFPB did not submit the bulletin for review, the 60-day review period never began to run and the bulletin is considered not yet effective. The controversial bulletin provided detailed expectations about steps indirect auto creditors must take to monitor differences in average retail and wholesale interest rates (so-called “markups”) between protected groups and non-protected groups under the ECOA. The bulletin also detailed the Bureau’s expectations for corrective action when a creditor identifies disparities for individual dealers or within its portfolio as a whole.


How Can the CFPB’s Ombudsman Help You?  On December 6, the CFPB’s Ombudsman’s Office released its annual report. The report describes how the Office can assist consumers, financial institutions, and others with a question, concern, or complaint regarding a CFPB process.


Federal Reserve Board Does Some Rule Housekeeping.  On December 18, the FRB proposed a rule that would revise its Reg. M, issued to implement the Consumer Leasing Act. Before the enactment of the Dodd-Frank Act, the CLA was implemented solely by the Board’s Reg. M, which applied to all types of lessors. The DFA transferred rulemaking authority for the CLA to the CFPB; however, the FRB retains authority under the CLA to issue rules applicable to dealers exempt from CFPB rulemaking jurisdiction.  The FRB is proposing to revise its Reg. M and its accompanying Official Staff Commentary to reflect this change. Comments on the proposed rule are due within 60 days after publication in the Federal Register.


Atten-Hut!  On December 11, the Department of Defense released an interpretive rule for the Military Lending Act to provide additional guidance to industry regarding compliance with its July 2015 final rule amending the MLA’s implementing regulation. The July 2015 rule amended the regulation to extend MLA protections to a broader range of closed-end and open-end credit products. In August 2016, the DOD issued a Q&A interpretive rule to help industry comply with the July 2015 rule. The current amendments to the interpretive rule provide new Q&As in an effort to provide additional guidance concerning compliance with the July 2015 rule, but raise serious questions regarding the sale and financing of ancillary products.


Case of the Month


In what actually is not a case, but an important enforcement action, Cowboy AG, LLC, a Texas buy-here, pay-here dealer doing business as Cowboy Toyota and Cowboy Scion, recently agreed to settle FTC charges that it used deceptive ads in a regional Spanish-language newspaper. On December 8, the FTC published a description of the proposed settlement agreement in the Federal Register for public comment. The FTC will decide whether to accept the proposed agreement or take other action after it reviews the comments.


The FTC alleged that Cowboy’s ads buried fine print English-language disclaimers that contradicted the ads’ more prominent Spanish-language claims. As part of the proposed settlement, Cowboy has agreed that when it must make any information “clear and conspicuous” under the Truth in Lending Act and the Consumer Leasing Act, it will ensure that the information is easily noticeable and easily understandable by ordinary consumers, including a requirement that its disclosures “must appear in each language in which the representation that requires the disclosure appears.” This means that Cowboy must provide Spanish-language disclosures in its Spanish-language ads.


Although the FTC has consistently included this foreign language requirement in the definition of “clear and conspicuous” in Section 5(a) FTC Act settlements, this proposed settlement represents an expansion of the foreign language requirement into a settlement that includes TILA and CLA claims. Moreover, it appears that the FTC has announced this broadened “clear and conspicuous” standard through this proposed settlement, instead of through the proper course of notice and comment rulemaking. Because the FTC does not have rulemaking authority under TILA (that authority rests with the CFPB), the FTC appears to be doing by enforcement what it cannot do by rulemaking.


The proposed settlement is against one Texas dealer, but it could create a potentially wide-ranging TILA/CLA reinterpretation of the “clear and conspicuous” standard in ads. If you advertise credit terms in a language other than English, see your lawyer, because the Cowboy settlement reflects the FTC’s apparent position that it may be unlawful to provide related TILA-required information in English.


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


Tom ( is Of Counsel and Nikki ( is a Partner in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is the CEO of, LLC and the Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery®. For information, visit © 2018, all rights reserved. Single publication rights only, to the Association. (1/18).  HC/4839-3027-8746v1.