Wishing you a happy and magical new year!
We hope 2016 will bring you joy and happiness. 

CAPSS and CIADA are happy to announce our newest on-line class:   Compliance - The Well Informed Dealer/Salesperson.  Because so many of you have been waiting for this class - we are offering a $10 discount for anyone who signs up for the class by January 15, 2016.  Use the promotion code:   2016, when paying for the class.  See more details below.

Any dealer that is a "creditor" must file and pay the UCCC Annual Notification Fee by January 31st.  A "creditor" is a person or business that sells or leases goods or services to consumers and either arranges financing from others or provides its own financing.  If your name appears on a retail installment contract or consumer lease as the creditor or lessor, even if you immediately sell or assign the contract to a finance company or bank, you are a creditor.  You are required by law to file the UCCC notification form if you make Colorado consumer credit sales or consumer leases.  If you are required to pay the fee, and fail to do so, consumers have no legal obligation to pay any of the finance charges due under the credit transactions. Retail Sales Notification Form

Do you offer warranties?  Do you know what is required under the Federal Trade Commission's Used Car Rule?  How do you fill out the FTC Buyer's Guide? Can you use the phrase "Balance of Factory Warranty"?   We review warranty regulations in this newsletter.

The Consumer Financial Protection Bureau just fined a Minnesota buy-here pay-here dealership, CarHop, (also known as Interstate Auto Group) $6.4 million.   Learn what put this company in the sites of the CFPB.

CAPSS and CIADA continue to improve and expand on-line classes for all Colorado dealerships. We have a Mastery Exam Seminar to help a sales applicant pass the state's Mastery Exam. Once the license is obtained, the dealer, salesperson or title clerk can learn the basic paperwork needed to complete a vehicle sale.  The class, Getting the Car Deal Rolling, not only explains how to fill out the paperwork, it also provides a manual that can be downloaded for your reference.    Our newest class, Compliance - The Well Informed Dealer/Salesperson, will start the dealer and his/her employees on the track for complying with state and federal laws.   We still offer in-person classes too!  Visit our new website to see the tools available to you. .

Are you a member of CIADA?  If not, we encourage you to join today!  Membership gives you benefits of both CAPSS and CIADA for a low yearly membership fee of $225. MEMBERSHIP APPLICATION

Thanks for letting us serve you!

Connie Hatch
Compliance - The Well Informed Dealer/Salesperson

Is it almost impossible to send your staff to training - and too expensive to bring in a trainer? Compliance - The Well Informed Dealer/Salesperson Seminar is a convenient and affordable solution that CAPSS and CIADA have partnered together to offer Colorado dealers and their staff.  Do you need to track employee training?  A personalized certificate is available for the student to print at the completion of the training.

 Are you complying with the Federal Truth-in-Mileage Act?  Do you know what damage disclosure is required to be furnished to your customer?  If you did not know the vehicle you sold was previously salvaged or a lemon buy-back, do you have to buy the vehicle back?  What charges can be added to an advertised price?  Are you up to date on advertising and dealer plate regulations?  Does your customer have a right to rescind a contract?  When do you need an Off-Premise Permit?  What required disclosures do you have to provide to a customer?  Do you need to do a safety inspection on the vehicles you sell?  What is a Tow-Away?

This seminar covers numerous items required for compliance of industry's rules and regulations, including OFAC, Safeguard, and Red Flags.  Dealers/salespersons taking this class will be prepared for a compliance inspection by the Colorado Auto Industry Division.

CAPSS is currently offering a $10 discount for everyone who registers for this class by January 15th.  You will have access to the class for 30 days from your registration date.  Use the Discount Code   2016.  Register for the class:   Compliance

The Federal Trade Commission's (FTC's) Used Car Rule requires all dealers who sell more than five used vehicles in a 12-month period to comply.  The Used Car Rules requires dealers to post a Buyers Guide on all used vehicles before they are offered for sale or before letting a customer inspect it for the purpose of buying it, even if the car is not fully prepared for delivery.  This requirement also applies to consignment vehicles or vehicles offered for sale at a public auction.  Exceptions to the rule are vehicles with a gross vehicle weight of over 8,500 pounds, motorcycles, a vehicle being sold for scrap or parts, and agricultural equipment.

The Buyers Guide tells consumers:
  • whether the vehicle is being sold "as is" or with a warranty
  • what percentage of the repair costs a dealer will pay under warranty
  • that oral promises are difficult to enforce
  • to get all promises in writing
  • to keep the Buyers Guide for reference after the sale
  • the major mechanical and electrical systems on the car, as well as some of the major problems that consumers should look out for; and
  • to ask to have the car inspected by an independent mechanic before they buy
If you conduct the sale in a language other than English, you must provide a Buyers Guide in that language.

The FTC requires the Buyers Guide be posted prominently and conspicuously on or in a vehicle while it is available for sale.  Both sides must be visible - which means the Buyers Guide must be in plain view, such as on the rear-view mirror or attached to a side window.  A guide placed in the glove compartment or trunk is not conspicuous because it is not in plain site.

The Buyers Guide may be removed for a test drive, but must be replaced when the test drive is over.

Fill out the Buyers Guide completely by listing the full vehicle information (make, model, year and VIN).  On the back of the Buyers Guide is a place to fill in the name and address of the dealership.  Include the name and telephone number of a person the consumer should contact with complaints.  

The Buyers Guide may contain an optional signature line for your customer.  Above this line you may include a statement "I hereby acknowledge receipt of the Buyers Guide at the closing of this sale".  This language can be preprinted on the form.   Always keep a copy of the signed Buyers Guide in your file and provide the ORIGINAL to the buyer.

The Buyers Guide has two options:
  • As-Is No Warranty
  • Warranty
If you offer the vehicle with an express warranty, you must check the box next to the heading "warranty" and complete that section of the Guide.  

A warranty can be "full" or "limited".    For a warranty to be considered "full", the warranty service must be provided to anyone who owns the vehicle during the warranty period.  The service must be provided free of charge when necessary, even for services like removing and reinstalling a system covered by the warranty.  The consumer must be able to choose either a replacement or a refund if the vehicle can't be repaired after a reasonable number of tries.  And the consumer is not required to take any action to receive service, except to give notice that service is needed.  Service must be rendered after notice unless the warrantor can demonstrate that it is reasonable to require consumers to do more than give notice. 

Fill in the percentage of parts and labor costs covered by the warranty in the spaces provided.  If a deductible applies to repairs made under the warranty, put an asterisk next to the number and explain the deductible in the "systems covered/duration" section.  For example, "A $50 deductible applies to each repair visit."

There is one column to list the systems covered, and another to list the length of the warranty for each system.  In the left hand column, you must specify each system that's covered by the warranty.  The Rule prohibits the use of shorthand phrases such as "drive train" or "power train" because it's not always clear what specific components are included in the "drive train" or "power train".

In the right hand column, you must state the length of the warranty for each system.  If all systems are covered for the same length of time, you may state the duration once.

If the Manufacturer's warranty hasn't expired, you may disclose this fact by checking the "warranty" box and including this disclosure in the "systems covered/duration" section: "Manufacturer's Warranty Still Applies.  The manufacturer's original warranty has not expired on the vehicle.  Consult the manufacturer's warranty booklet for details as to warranty coverage, service location, etc.".  The disclosure must be stated in the exact language quoted above.  Using phrases such as "balance of factory warranty" are not sufficient!

If there are negotiated changes to the warranty, be sure to cross out any information that no longer applies, and write in the negotiated changes.

There is a box that can be checked if your dealership is offering Service Contracts.   The Buyers Guide is not sufficient to meet the requirements of the Warranty Disclosure Rule.  If you are offering a written warranty, you must provide both the warranty and the Buyers Guide.  

The FTC requires that you display written warranties in close proximity to the vehicle or to make them available to consumers upon request - BEFORE THEY BUY!.  

If you offer a 50/50 warranty or another type of split-cost warranty (those under which the dealer pays less than 100% of the cost for a warranty repair), you should include the following disclosures in your warranty document:
  • the percentage of the total repair cost you will pay
  • the percentage of the total repair cost the buyer must pay
  • how the total cost of the repair will be determined (for example, your warranty might state: "the total cost of a warranty repair will be the retail price ABC Motors charges for the same job".  Or: the total cost of a warranty repair will be determined by adding the dealer's cost for parts to the labor cost.  Labor will be billed at a rate of _____ per hour for the actual time required to complete the repair".
If your warranty requires buyers to pay a deductible, your warranty document should disclose the deductible amount and the details as to when and under what circumstances the deductible must be paid.  

Dealers offering split cost warranties can require that buyers return to the dealer for warranty repairs.  If your warranty includes this restriction, however, you should provide an estimate of the total repair cost before work is started.  This will allow the buyer to decide whether to approve the repair or have the work done elsewhere.

Dealers who violate the Used Car Rule may be subject to penalties up to $16,000 per violation.  

Selling a motor vehicle as-is does not eliminate the compliance with Colorado Safety Standards!
Colorado State Statute states:  It is unlawful for any person to drive or move, or for the owner to cause or knowingly permit to be driven or moved on any highway, any vehicle which is in such unsafe condition as to endanger any person, and is not at all times equipped with such lamps and other equipment in proper condition and adjustment. 

The statute specifically requires the following equipment meet safety standards pursuant to 42-4-202 through 42-4-239 C.R.S.:
  • Lights, lamps and reflectors
  • Signal lights
  • Head lights
  • Brakes
  • Tires
  • Suspension system
  • Horn
  • Muffler
  • Windows
  • Mirrors
  • Safety items - air bags, seat belts  (if these were original equipment for that vehicle)
A motor vehicle dealer's license may be revoked or suspended for selling to a retail customer a motor vehicle which is not equipped or in proper condition and adjustment as required by the statutes mentioned above.
The above information on the FTC Buyers Guide can be found in "A Dealer's Guide to the Used Car Rule" published  by the Federal Trade Commission and the National Independent Automobile Dealer's Association.  A copy of the complete guide is available at:  Dealer's Guide

CFPB Orders CarHop to pay $6.4 Million Penalty for Jeopardizing Consumer's Credit

On December 17, 2015, the Consumer Financial Protection Bureau (CFPB) took action against CarHop, one of the biggest buy-here pay-here auto dealers, and its affiliated financing company, Universal Acceptance Corporation, for providing damaging, inaccurate consumer information to credit reporting companies.  According to the CFPB, CarHop and its affiliate also failed to provide accurate, positive credit information that it promised consumers it would supply to the credit reporting companies.  The CFPB's investigation found that the companies inaccurately reported information for more than 84,000 accounts on a widespread and systemic basis.  The CFPB is ordering the companies to cease their illegal activities and pay a civil penalty of $6,465,000.

CarHop, also known as Interstate Auto Group, based in Minnesota, has approximately 50 retail locations in 15 states.  CarHop primarily sells vehicles to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit.  CarHop markets that they are a way for these consumers to rebuild or build-up good credit by saying it will provide positive payment histories to the credit reporting companies.  

Universal Acceptance Corporation, on behalf of CarHop, furnishes consumer account information to all three major consumer reporting companies on a monthly basis.  The CFPB investigation found the company reported information it knew or had reasonable cause to believe was inaccurate.  

CFPB found the companies:
  • Deceived consumers into believing they could build up good credit with CarHop
  • Provided inaccurate repossession information
  • Incorrectly reported previous customers as still owing money
  • Failed to have written policies and procedures to ensure the accuracy of consumer's credit information
The terms of the orders by the CFPB require the companies to:
  • Cease misrepresenting that they will report "good credit"
  • Correct credit reporting information
  • Provide credit reports to harmed consumers
  • Implement an audit program to ensure laws are followed
  • Pay a $6,465,000 civil penalty
If you are advertising or promoting that you will help your customers rebuild or build-up good credit, you could be next in line for an in-depth investigation by the CFPB.  We recommend you review your advertising as well as examine your "written" policies to ensure the accuracy of information reported to credit reporting companies.

The above information was provided by the CFPB.  The consent order can be found at: Consent Order
Partners with CIADA to better serve Colorado Dealers!

Contact us if we can serve you.  Thanks again for your continued support.

                                                                                                      Connie J. Hatch