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Keeping On Top of Regulatory Compliance

July 12, 2019

Complying with federal rules and regulations is a responsibility of any business. Some of the key regulations that specifically affect auto dealerships are aimed at protecting consumers.

Safeguards against ID theft

With the recent proliferation of identity theft, it’s become imperative that your dealership protect all “personally identifiable information” you possess about your customers. The Gramm-Leach-Bliley (GLB) Act is intended to protect your customers’ personal financial data.

Dealers should be mindful of the following provisions of the GLB Act:

The Financial Privacy rule. This sets standards for privacy notices, opt-out notices, and the use and disclosure of nonpublic personal information.

The Safeguards rule. A written security plan is required to protect the confidentiality and integrity of customer and employee data. This includes Social Security numbers and information from bank and credit card accounts.

The Disposal rule. You must properly dispose of information contained in consumer reports and records to guard against unauthorized use of or access to the data.

Additionally, the Red Flags provision requires you to draft a written identity theft protection program. It should be designed to detect, prevent and mitigate identity theft.

Regs Z and M

Providing credit to finance the purchase of vehicles is one of the primary services offered by dealerships. Perhaps the most important law governing consumer credit is the Truth in Lending Act, which is implemented by Regulation Z.

Reg Z is intended to help customers make comparisons between lenders’ credit terms and rates. It requires you to present certain disclosures to your customers clearly in writing, in a format they can keep for future reference. These disclosures include the amount financed, the finance charge, the annual percentage rate and the payment total.

Regulation M implements the consumer leasing provisions of the Truth in Lending Act. It’s intended to ensure that lessees receive meaningful disclosures enabling them to compare lease terms between lessors and with credit transactions. Reg M also aims to limit the amount of balloon payments in consumer leases.

Protections against misleading advertisements

Most dealerships rely heavily on advertising to help drive customer traffic and boost sales. Dealership advertising is governed by the federal truth in advertising laws, a collection of advertising rules administered and enforced by the Federal Trade Commission. There are three primary rules in this law.

First, advertisements must be truthful and nondeceptive. They must tell the whole truth, not a half-truth or slighted version of the truth intended to make a vehicle look more appealing. You must possess evidence to back up any express or implied claims made in your advertisements.

Second, advertising can’t be unfair. An “unfair” ad is defined as one that substantially injures consumers, violates established public policy, or is unethical or unscrupulous.

Finally, dealerships are subject to fuel economy advertising rules for sales of new vehicles. According to these rules, if your ad lists fuel economies for both city and highway driving, they must be labeled “estimated city mpg” and “estimated highway mpg.” In addition, fuel economy estimates must match the exact make and model of the advertised vehicle.

Compliance training

Consider hiring an outside firm to perform employee compliance training to help you comply with these and other consumer protection rules. In fact, compliance training is required for some federal regulations, including the Safeguards rule and the Red Flags provision. Contact your dealer’s association or Dealer 20 Group to learn more about compliance training options in your area.

© 2019