Internet advertising and the resulting rise in cross-border car and truck sales have become important issues for dealers across the country, including here in Washington. While the internet has made advertising and doing deals with customers in other states faster and easier, a simple sale can become complicated quickly. Dealers who advertise and sell outside the borders of their home state should keep many things in mind, including:
Pulling a Customer’s Credit Report
Under the Fair Credit Reporting Act (FCRA), a dealer must have a “permissible purpose” before they can obtain a prospective customer’s credit report. Meeting that standard can get murky in an online context, particularly for a dealer who is not careful about when and how they pull credit.
The easiest way to meet that “permissible purpose” standard is to get written consent from the customer any time you pull a credit report. A dealer could wait and not pull credit until the customer comes into the store, giving them an opportunity to identify the customer and get consent in writing. Alternatively, they could make sure the store (or a third party vendor) is appropriately disclosing and documenting and documenting consent on the dealer’s website before they pull credit. Regardless of the method you choose, be sure to keep clear, well-maintained records.
Safeguards and Identity Theft
It can also be a challenge for dealers to positively confirm the identity of customers and keep the customer’s personal private information secure when the transaction is done remotely. Some questions to consider:
- Do you have a plan to ensure that you can safeguard your customer’s information when it is being delivered and stored over the internet, email or other electronic means?
- Does your Red Flags/Identity Theft Prevention Program adequately address situations where the customer never visits the dealership? Has it been updated to reflect your current best procedures?
- Are you staying compliant with your OFAC (Office of Foreign Asset Control) compliance check and Form 8300 cash reporting obligations? Is there a question about the customer’s identity, or are they trying to avoid you reporting the transaction?
Delivering Required Notices
- The Privacy Notice: While the Privacy Rule provides a way for dealers to provide their privacy notice to customers electronically, there are several requirements you must take into account. These are outlined on page 9 of NADA’S “A Dealer Guide to the FTC Privacy Rule and the Model Privacy Notice.”
- The Risk Based Financing Exception Notice: Most dealers use the exception notice, which can be delivered electronically if the dealer complies with the consumer consent and other requirements of the federal E-SIGN act.
State Law Compliance
Dealers can run into trouble when they do work in states with unfamiliar laws, particularly since the dealer could potentially have submitted itself to being sued in that other state. For example, if your store agrees to do the title work in another state, what sort of challenges and liabilities could you face?
Additionally, when something goes wrong, where can you sue, and where are you subject to suit? Most states have laws extending the jurisdiction of that state’s courts to actions that arguably occurred elsewhere. Even if your store is located in Washington, these so-called “long arm statutes” can result in your being sued by a customer in a court in another state. Similarly, another state may find your activities inside their borders to be substantial enough to require licensing or compliance with that state’s advertising rules.
Finally, while you may be able to circumvent long arm statute problems with appropriate language in your contract with the customer, those provisions may not help you if you need to repossess a car. State repo laws differ drastically — understand what your rights in a foreign jurisdiction might be if you have a significant amount of sales to customers in that state. It could prove important.
This is by no means a complete look at the challenges dealers face in an ever-increasingly interstate business. Work through your deal process to understand the areas you may face risk or liability to help alleviate headaches down the line.
This is a partial republication of the Washington State Auto Dealer Association’s “Industry Bulletin” of November 15th, 2011 and was not written by Kurt Strovink but has been added for your convenience. If you are not a member of the WSADA we heartily recommend joining.
Frequent Contributions8300 Cash Reporting Rule Advertising Buy Here Pay Here Criminal Dealership Law F&I Finance and Insurance Gramm-Leach-Bliley Legal Compliance OFAC Penalties Privacy Rule Red Flags Rule Responsibility for Employees Risk-Based Pricing Safeguards Rule TILA Truth in Lending Act USA Patriot Act Used Car Rule Violations