Federal Laws Impacting Auto Dealers

Dealerships are among the most highly regulated industries in the country.  Sometimes there is no substitute for reading the actual text of the law.  For those times, or when you need some light bed time reading I’ve compiled this selection of the most important federal laws impacting auto dealerships.

1. Truth in Lending Act (TILA) – Enacted in 1968, the Truth in Lending Act imposes a burden on creditors to make certain disclosures prior to consummation of the agreement in a form the consumer buyer can keep.  Also requires certain disclosures when “triggering terms” appear in advertisements.
   • Regulation Z –  The Federal Reserve Board’s rules implementing the Truth in Lending Act.
     • Commentary to Regulation Z – The Federal Reserve Board’s explanation of what Reg. Z and TILA require.
2. Consumer Leasing Act (CLA) – Essentially TILA for leases.
   • Regulation M and Commentary – The Federal Reserve Board’s rules implementing the Consumer Leasing Act and their explanation of what Reg. M requires.
3. Equal Credit Opportunity Act (ECOA) – The purpose of the ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant’s income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The regulation prohibits creditor practices that discriminate on the basis of any of these factors. The regulation also requires creditors to notify applicants of action taken on their applications; to report credit history in the names of both spouses on an account; to retain records of credit applications; to collect information about the applicant’s race and other personal characteristics in applications for certain dwelling-related loans; and to provide applicants with copies of appraisal reports used in connection with credit transactions.
   • Regulation B and Commentary – The Federal Reserve Board’s rules implementing the Equal Credit Opportunity act and their explanation of what Reg B. requires.
4. Fair Credit Reporting Act (FCRA) –  The purpose of the FCRA is to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.
5. “Holder” Rule – Prevents consumers from losing rights under the retail installment contract and state law if the creditor (dealer in this case) assigns the contract. Allows a consumer plaintiff to assert the same claims valid against the dealer against the assignee bank.
6. Credit Practices Rule – Prohibits creditors from including certain provisions in consumer credit contracts and requires creditors to provide a written notice to consumers before they cosign obligations for others.  Also prohibits “pyramiding” late fees.
7. Used Car Rule – Requires dealers to prepare and display a window sticker called the “Buyers Guide” before offering a used vehicle for sale to a consumer.
8. Federal Odometer Act (FOA) – Intended to protect consumers buying used vehicles from odometer fraud.
   • Regulations Implementing the Federal Odometer Act
9. Magnuson-Moss Warranty Act (MMWA) – Enacted by Congress in response to the widespread misuse by merchants of express warranties and disclaimers. The legislative history indicates that the purpose of the Act is to make warranties on consumer products more readily understood and enforceable and to provide the FTC with means to better protect consumers.
10. Federal Advertising Rules
    • Federal Trade Commission Act – Prohibits unfair or deceptive trade practices.
    • Do-Not-Email Rule (CAN-SPAM Act) – Sets the rules for commercial e-mail, establishes requirements for commercial messages, gives recipients the right to have you stop e-mailing them, and spells out tough penalties for violations.
    • Do-Not-Fax Rule – The federal Telephone Consumer Protection Act prohibited junk fax advertising, and created a private cause of action for the recipients of junk faxes against the businesses that sent them.
11. Federal Privacy Initiatives
    • Gramm-Leach-Bliley Act (GLB Act)
      • Financial Privacy Rule – Requires financial institutions to give their customers privacy notices that explain the financial institution’s information collection and sharing practices. In turn, customers have the right to limit some sharing of their information. Also, financial institutions and other companies that receive personal financial information from a financial institution may be limited in their ability to use that information.
      • Safeguards Rule – Requires “financial institutions” (defined to include auto dealers) to have a security plan to protect the confidentiality and integrity of personal consumer information.
12. USA Patriot Act & OFAC
    • OFAC SDN List – List of persons with whom you are prohibited from doing business.
    • OFAC FAQ – The Department of Treasury answers the most frequently asked questions regarding OFAC.
13. Risk Based Pricing – The risk-based pricing notice requirement is designed primarily to improve the accuracy of consumer reports by alerting consumers to the existence of negative information on their consumer reports so that consumers can, if they choose, check their consumer reports for accuracy and correct any inaccurate information. It is meant to complement the existing adverse action notice provisions of the FCRA. The requirement was motivated by a concern that, because consumers are entitled to “adverse action” notices under the FCRA only when they are denied credit (or do not accept a counteroffer for credit), consumers are not adequately apprised of the effect of credit reports on the pricing of credit – hence the name “Risk-Based Pricing Rule.”