On September 27, 2017 a new law goes into effect in the City of New York which will require sellers of used vehicles to make certain disclosures concerning open recalls. This is on the heels of the recent New York Attorney General's (AG) recall disclosure investigation which resulted in penalties being issued against 104 dealerships. With new legislation likely on the state level later this year it is imperative that every dealer establish a new procedure for the processing and sale of used vehicles.
The New York City Department of Consumer Affairs will begin to enforce the new City law in just a few weeks. Dealers in NYC who sell a used vehicle with an open recall will be required to do the following prior to executing a contract with a customer.
Provide the customer with a copy of the recall information obtained from NHTSA's website; www.nhtsa.gov/recalls.
Have the customer sign or initial the recall disclosure.
Maintain a copy of the signed disclosure, in either electronic or paper form, for no less than five (5) years.
The Assurances of Discontinuance (AOD) prepared by the AG included much more stringent requirements for the disclosure of open recalls by the dealers involved in the investigation. The AOD requires that those dealers comply with the following process.
Advertisements of used vehicles on the Internet must include information that enables consumers to check the recall status of advertised vehicles (which can be done by providing a link to information provided at NHTSA's website; www.nhtsa.gov/recalls.)
Print advertisements must include a disclosure if the vehicle is subject to an open safety recall.
Dealers must place a sticker in a window of each used car that includes information for the consumer to check the recall status of the vehicle and list NHTSA's website; www.nhtsa.gov/recalls. Alternatively a dealer may place a copy of the recall report on the vehicle which is visible to the consumers.
Dealers must check the recall status of a used vehicle no more than two (2) days prior to any sale and provide the customer with a copy of the NHTSA recall status report if the vehicle has an unrepaired safety recall. The dealer must have the customer sign a form acknowledging receipt of the recall status.
While these rules are currently only applicable to the dealers who signed the AOD it is likely that some or all of these requirements will be incorporated into a statewide law.
Clearly local and state regulators are hot on the topic of open recalls. Therefore, it is extremely important for dealers to check how they currently process and sell used vehicles and make immediate changes to avoid possible fines, violations and litigation. Dealers should educate all employees on the importance routinely reviewing its used car inventory for open recalls. Every effort must be made to repair open recalls which have available parts. Best practice would be not to sell vehicles with open recalls. However, this is not always an option. If you must sell a vehicle with an open recall make sure that you provide the customer with a copy of the recall notice from NHTSA, have the customer acknowledge receipt of the recall notice, and assist the customer after delivery in having the recall repaired. The Greater New York Automobile Dealers Association will soon have available for sale stickers that you can affix to the vehicle of each used vehicle to comply with the AG requirement. The sticker, along with the actual recall notice and a separate recall disclosure notice, should protect the dealer from most claims.
If you have questions on how to comply with the recall disclosure rules or need more information or forms related to the disclosure contact the LaBonte Law Group at 516-280-8580 or at slabonte@labontelawgroup.com.
FTC INVESTIGATES DEALER ADVERTISING
Several auto dealer attorneys from across the United States are reporting that the Federal Trade Commission is investigating the advertising practices of several auto dealerships. These cases involve allegations of violations of the FTC Act, Truth in Lending and the Consumer Leasing Act. The FTC is seeking to have these dealer execute consent orders to settle the alleged advertising violations.
As dealer advertising is again on the radar of federal agencies action by the New York State Attorney General or the New York City Department of Consumer Affairs cannot be too far behind. Therefore, now is the time to verify that your advertisements are in full compliance with federal, state and local laws and regulations.
The following is a list of commonly cited violations in dealer advertisements.
1.
Rebates: Implying that a rebate is available to all customers while using a disclaimer in a footnote to indicate limited availability. (Some examples include: college graduate and owner loyalty rebates). If all customers are not eligible to receive the rebate then the disclaimer explaining the limitation(s) must be conspicuously noted next to the discounted price.
2. "Free" offers: Offering free merchandise in connection with the purchase of a vehicle.
3. Credit Sales: Failure to provide the appropriate Truth-In-Lending or Consumer Leasing Act disclosures to obtain the offered finance or lease deal (As an example offering a low interest rate without disclosing the essential terms and conditions necessary to obtain the low interest rate).
4. Footnotes: Use of a footnote to disclose additional charges such as delivery fees or equipment. The price listed in the advertisement must include everything other than tax, title and tags.
5. Trade-In: Offering a set trade-in value (regardless of condition) and then increasing the sale price to compensate for the over-allowance.
6. License Numbers: Failure to include your DMV and Consumer Affairs (if applicable) license number(s) in the advertisement.
If you are unsure if an advertisement meets the FTC, NY AG or NYCDCA advertising Guidelines, or if you think that an advertisement pitched by your advertising agency is too good to be true the LaBonte Law Group can review your advertisement for lawful compliance. Members of the firm's monthly retainer program can have their advertisements reviewed complimentary as part of the plan's many benefits. For more information contact Stevan LaBonte at 516-280-8580.
Should you have any questions or need advice on anything related to dealership operations please do not hesitate to give me a call at 516-280-8580 or send me an e-mail to slabonte@labontelawgroup.com. Your questions will be answered promptly.
