LIADA Open Road

• CALIFORNIA’S BHPH ISSUE: A BLUEPRINT FOR LEGISLATIVE SUCCESS• CRAIGSLIST MANIA• COMPLIANCE OVERDRIVE

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DECEMBER 2012

Negative SEO?Page 4

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PAIDDALLAS, TEXASPermit No. 2079

L O U I S I A N A I N D E P E N D E N T A U T O M O B I L E D E A L E R S A S S O C I A T I O N

V i s i t u s a t w w w . l o u i s i a n a i a d a . c o m

OPEN ROAD

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DECEMBER 2012 T H E O P E N R O A D

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w w w . l o u i s i a n a i a d a . c o m

WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

04 Negative SEO?06 A Virtual F&I Manager08 Blueprint for Legislative Success12 Government Report16 Money Matters19 Craigslist Mania22 Compliance Overdrive

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected] Open Road is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of the Open Road or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute anendorsement of the products or services featured. Copyright © 2012 by NIADA Services, Inc. All rights reserved.

STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected] DIRECTOR Christy Haynes • [email protected] Nieman Printing

LIADA OFFICE

ADESA .................................................................9Ally ......................................................................5Auto Search Technologies ..................................14AutoTrader.com .....................................Back Cover Chase ...............................................................16Dealer Center ....................................................15Dodah.com ........................................................11First Consumers Financial ..................................19LA’s 1st Choice Auto Auction ..... Inside Front CoverManheim.com ....................................................13Manheim New Orleans .............. Inside Back CoverNIADA Certified ..................................................21Protective ............................................................7United Acceptance .............................................17Voisys ................................................................22

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LOUISIANA INDEPENDENT AUTO DEALERS ASSOCIATION15481 AIRLINE HIGHWAY BATON ROUGE, LA 70817TOLL FREE: 1-800-960-5423 LOCAL: 225-275-8088FAX: 225-275-6889

WEAR WHAT YOU WANT. WE CAN’T SEE YOU.

www.niada.tv

SALES • OPERATIONS • F&I • REMARKETING • COMPLIANCE • LEGAL/REGULATORY

• SPECIAL FEATURES • INDUSTRY EVENTS

AUTOMOTIVE INDUSTRY NEWS & SPECIAL MONTHLY PROGRAMS

I would like to thank all our members, associate members, vendors, the board of directors and everyone else who put forth the effort to make our 2012 Miss-Lou Convention one of the most successful and profitable we have had.

As always, your membership is very important and as an organization we are dedicated to serving and helping you in your business.

Sincerely,Clint BlakeyPresident, LIADACell: 318-469-6007

ADESA SHREVEPORT7666 Greenwood RoadShreveport, LA 71119318-938-4400 Phone318-938-7623 Faxwww.adesa.comSale Wednesday at 9 am

ALEXANDRIA AUTO AUCTION515 N 3rd StreetAlexandria, LA 71301318-484-9672 Phone318-484-9699 Faxwww.alexandriaauction.comSale Tuesday at 5:30 pm

GREATER SHREVEPORT -BOSSIER 1315 Grimmett DriveShreveport, LA 71107318-221-3362 Phone318-221-3372 Faxwww.gsbautoauction.comSale Wednesday at 1 pm

INSURANCE AUTO AUCTION29000 Frost RoadLivingston, LA 70754225-686-9197 Phone225-686-8197 Fax www.iaai.comSale Monday at 9 am

LOUISIANA’S 1ST CHOICE AUCTION18310 Woodscale RoadHammond, LA 70401985-345-3302 Phone985-343-5735 Faxwww.lafcaa.comSale Tuesday at 8:30 am

LONG BEACH AUTO AUCTION8494 County Farm RoadLong Beach, MS 39560228-452-2030 Phone228-452-9588 Faxwww.lbautoauction.comSale Wednesday at 1:30 pm

MANHEIM MISSISSIPPI7510 U S Highway 49Hattiesburg, MS 39402601-268-7550 Phone601-579-7202 Faxwww.manheim.comSale Thursday at 9 am

MANHEIM NEW ORLEANS61077 St. TammanySlidell, LA 70460985-643-2061 Phone985-643-2122 Faxwww.manheim.comSale Wednesday at 9 am

MID-SOUTH AUCTION1657 Old Whitfield RoadJackson/Pearl, MS 39208601-956-2700 Phone601-956-5603 Faxwww.midsouthaa.comSale Tuesday at 9 am

MIKE McTURNER DEALERS 136 Gregory DriveMonroe, LA 71202318-343-8200 Phone318-343-8259 FaxSale Tuesday at 10 am

MIKE PEDERSEN’S LAKECHARLES AUTO AUCTION2435 E Broad StreetLake Charles, LA 70601337-433-8664 Phone337-436-7197 [email protected] Wednesday at 5:30 pm

OAK VIEW AUTO AUCTION13451 Florida BlvdBaton Rouge, LA 70815225-272-5139 Phone225-272-5314 Faxwww.oakviewautoauction.comSale Friday at 10 am

LIADA Auction Members

PRESIDENTClint BlakeyBlakey Auto Plex, LLC3601 Benton RoadBossier City, LA 71111Clintblakey@blakeyautoplex suzuki.com318-469-6007 cell318-213-3131 phone318-550-0084 fax

VICE PRESIDENTPhilip CrainRide Time LLC319 North 3rd StreetMonroe, LA [email protected] phone318-410-9289 fax

PRESIDENT EMERITUSJ.L. RichardP.O. Box 481Carencro, LA [email protected] phone337-896-6278 fax

TREASURERDino TaylorCar Town of Monroe, Inc601 Trenton StreetWest Monroe, LA [email protected] phone318-340-9489 fax

SECRETARYKevin RembertSmart Tow3045 Rosenwald Road Baton Rouge, LA [email protected] Cell225-356-3002 Phone225-356-3222 Fax

BOARD OF DIRECTORS2012-2013 Junior GonzalezPan-Am LLC201 Chalet DriveLafayette, LA [email protected] phone

Jason HawthorneSam’s Used Trucks & Cars378 Front StreetWinnsboro, LA [email protected] phone

Scott LedetLedet’s Auto SalesP.O. Box 1505Gonzales, LA [email protected] phone225-644-5034 fax

Michael McCainMagic Motors7960 Florida BlvdBaton Rouge, LA [email protected] phone225-456-2134 fax

Danny MooreD Moore Auctioneers15481 Airline HwyBaton Rouge, LA [email protected] 225-752-8630 phone225-752-8907 fax

Matt PedersenMike Pedersen’s Lake Charles Auto Auction235 E. Broad StreetLake Charles, LA [email protected] phone337-436-7197 fax

Doug PerryDoug Perry Wholesale Cars734 Bayou Shores DriveMonroe, LA [email protected] phone318-343-8611 fax

John PoteetLouisiana 1st Choice Auto Auction18310 Woodscale RoadHammond, LA [email protected] phone985-343-5735 fax

Steve TaylorCar Town of Monroe, Inc319 North 3rd StreetMonroe, LA [email protected] phone318-324-1075 fax

Phillip WillisADESA Shreveport7666 Greenwood RoadShreveport, LA [email protected] Phone318-938-7623 Fax

Board of Directors

Thank You for Miss-Lou PRESIDENT’S MESSAGE

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T H E O P E N R O A D DECEMBER 2012

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Negative SEO?When you first hear the words

“Negative SEO” you probably think it sounds like an oxymoron. You know, like living dead, original copy, dark light or accidentally on purpose.

But two items that don’t seem to mesh are finally doing so.

During this election year, we have all seen the dirty tricks politicians have played on each other – negative smear campaigns and truth spinning. But don’t think those tactics are isolated to politics.

In the automotive industry, there are growing numbers of companies that like to play dirty as well, and if you are not aware of it yet, you need to continue reading.

With the constant uphill battle of your competition “flagging” your ads on Craigslist or leaving negative reviews on listing services such as Dealerrater .com, Google Places or even Merchant Circle, the war has just become a bit more complicated.

“Negative SEO” can mean any type of malicious harm intentionally caused to hurt the placement of a website’s search engine rankings. The thought process is, if you can’t become No. 1, then sabotage all of those ahead of you until you are No. 1.

Forcing one website to appear lower in the SERP (search engine rank placement) means other websites will climb higher in the SERP. That’s why negative SEO is considered a viable model by unethical website providers and online marketing companies.

The most common form of negative SEO is accomplished by linking a website to low-quality, unrelated businesses. Those are called “black-hat” links – they’re the bad guys.

Links are among the most important items when it comes to SEO (search engine optimization), but you want to make sure related industry businesses are linking into your website. Links can pass value to your website when done the right way. Links can harm your website when done the wrong way.

There are two types of linking that can be done with any website: internal linking and external linking. Internal linking is linking to resources inside your website/domain, while external linking links to web pages or other resources outside your website/domain.

A link on another website that points to your site can either have value to it and help your site or it can have a negative effect on your website and hurt you. External links that point to your site are a common way negative SEO is applied, and it is very hard to see because it all happens away from your site and is nearly invisible.

Related incoming business links: You might have heard the term “link swapping.” That’s when a business asks you to place a link to it on your website in exchange for a link from its website.

That can be beneficial if the business is in the same industry as you are. For example, if a used car dealership swaps links with an auto repair/service facility, a towing company or a tire sales business.

There is a reason for you to swap links because you are helping your customers navigate to a product or service that you might not offer that could be considered helpful. Value can be associated to both websites in that process.

Each of the links from the other website that points to your website counts as an “incoming/inbound link” to your site. Other related links that can qualify are from third-party paid listing services, social media outlets, online video channels and business directory listings.

If you are link swapping with other businesses, you always want to make sure the links you are pointing to are valid websites that are still in business. If you are linking to an off-line website, or “dead link,” as it is called, it can easily wipe out the value of hundreds of positive links.

Disassociated business links and unnatural links: Disassociated

links are considered an attempt to try to boost the ranking of your site for the sole purpose of increasing your position.

Some businesses think all links are good links. Right? Wrong! Make sure links pointing to your website are within your general industry – stay away from disassociated links, such as linking a used car dealership with, say, a flower shop, a hardware store or a movie theater.

In addition to disassociated links, there are companies referred to as “link farms” that advertise they’ll sell you hundreds or thousands of incoming/inbound links, which are referred to as “backlinks.” The companies will point those links to your website for a monthly fee.

Most of the time, the companies will claim the links they provide will be within the same industry as your business, but there is no real way to guarantee that. Google recently released an update called the Penguin that in part identifies websites in the link farm business that offer unnatural links. If you are found on the receiving end of those links, you could have some serious issues with your online placement.

Because there is nothing to keep a competitor from signing up your website’s URL with those kinds of companies, and the links do not appear on your website, that style of attack can easily go unnoticed.

Be aware of who is linking to you. Periodically looking into what links are being directed to your website can help detect negative SEO campaigns that have been launched against your business, as well as identify any links that are unrelated to your industry.

There are many free websites you can use to check for backlinks. A good free site to check is www.ranksignals.com, which allows you to identify the total number of backlinks as well as get a page rank of the links that are pointing to your website.

BY MICHAEL D. JACKSON CEO OF AUTO SEARCH TECHNOLOGIES, INC. HE CAN BE REACHED AT (949) 608-0809 OR [email protected].

Negative campaigning isn’t limited to politics – your competitors could be sabotaging your website

C OV E R S T O RY

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A DV E R T O R I A L

INDEPENDENT DEALERS NEED NEW ‘F&I MANAGER’

Having had the pleasure of serving automobile dealers for more than 50 years, we at Protective Asset Protection are committed to meeting the finance and insurance needs of our dealer customers.

Like many readers of this magazine, we place great importance on industry studies to ensure we are on top of the latest market trends – and in particular, your needs. However, we recognize selling cars is more than numbers and charts. It’s a people business.

We spend countless hours working to support dealers of all sizes and types. We’re in the car business and a lot of what we do still takes place with a meeting, a handshake, leadership and good in-store training.

More than five decades of experience and doing business the old-fashioned way has positioned Protective to exceed the expectations of our dealer customers.

In our goal to share proven dealer solutions, we turned to the largest audience – the growing group of independent auto dealers. We wanted to better understand what you really need to help further drive your F&I sales and profits.

We asked many of you from across the county questions about your operations, current selling processes and the importance of F&I to your businesses. Your feedback was informative and insightful, and aligned with many of the current successful approaches we use today.

Here is a snapshot of what we learned: When we inquired about the types of vehicles and service contracts being sold

today, we learned the average vehicle sold is 3-7 years old with 50,000-100,000 miles on it. We discovered more than 65 percent of you sell vehicle service contracts in your dealership.

When we inquired how Protective could better support you, we learned that ease of doing business is very important, followed by working with a company you can trust. On the technology front, 55 percent of you use or plan to use an electronic device such as an iPad® or a tablet device to educate your current and future consumers about F&I products.

We found that in general, consumers still rely on good, quality education from you to learn about the value of a service contract and most consumers don’t have preconceived ideas about what that value really offers them.

The study reinforces what Protective Asset Protection already does well: helping dealers make money selling F&I products.

So what is the best way to help you be more productive, drive more revenue and increase customer retention within the F&I process?

We think the answer is obvious – hire an F&I manager. No one said it was a simple solution. But an experienced F&I manager brings the knowledge and skills to provide customers with the best options and the true value of making an F&I purchase decision.

Obviously, adding to your headcount is no small task, and we asked ourselves what we could do. So we decided to “fill” your F&I position for you.

Okay, we didn’t hire an F&I manager for each independent dealer. Instead, we created “the manager.” By combining your critical F&I needs with our 50 years of experience, we built Protective’s Protection Plus Solution, designed exclusively for you.

You might have guessed your new F&I manager is not actually a person but instead is an electronic sales presentation using an iPad, or a desktop/laptop-based solution.

While our new strategy might not replace an experienced F&I manager’s know-how and sales ability, it does provide you a tool to increase service contract sales. With our new F&I solution, you have the ability to offer a vehicle service contract customized to the specific needs of your customer, all with easy-to-use technology designed to overcome objections and help close the sale.

We want you to have the closest thing we could provide to an actual F&I manager. Protective’s Protection Plus vehicle service contract and supporting web/iPad app will provide you and your dealership with the next best thing.

Protective Asset Protection looks forward to expanding our nationwide reach and working with independent dealers to introduce them to their new F&I manager. You can learn more about the technology and our goal to bring you innovative new ideas and profit-growth strategies by visiting www.newfandimanager.com.

BY RICK KURTZSENIOR VICE PRESIDENT-DEALER SERVICES FOR PROTECTIVE ASSET PROTECTION HAS MORE THAN 23 YEARS OF INDUSTRY EXPERIENCE. PROTECTIVE ASSET PROTECTION PROVIDES F&I PRODUCTS FOCUSED ON ENHANCING PROFITABILITY AND CUSTOMER SATISFACTION. FOR MORE INFORMATION, CALL 800-950-6060, EXT. 5755, EMAIL [email protected] OR VISIT PROTECTIVEASSETPROTECTION.COM.

While the National Insurance Crime Bureau (NICB) warned of the potential for fraud regarding vehicles affected by Hurricane Sandy, The Associated Press reported the dire predictions of hundreds of thousands of flood-damaged vehicles was way off the mark.

According to insurance claim data reviewed by AP, about 38,000 claims have been received by five major insurance carriers in the area, far fewer than expected.

Early estimates predicted the storm that hit the densely populated Northeast to result in more damaged cars than the 600,000 affected by Hurricane Katrina, which hit the Gulf Coast in 2005. NADA senior analyst Larry Dixon said as many as 200,000 vehicles could end up scrapped because of the storm.

But that apparently is not the case, said Frank Scafidi, a spokesman for the National Insurance Crime Bureau, an insurance company group that monitors fraud and other trends. He said insurers watched by his group are logging far fewer claims than they did with Katrina.

“It doesn’t translate to there’s going to be 2, 3, 400,000 cars out of this thing just because this is such a huge geographic storm,” he told AP.

Even if there are fewer than expected, there are likely to be more flood-damaged vehicles on the market than normal, and many won’t be labeled as such when they are sold in the wholesale or retail markets.

“Unscrupulous salvage operators and dealers often try to conceal from potential buyers the fact that vehicles have been damaged by a natural disaster,” NICB president and CEO Joe Wehrle said.

After Katrina, NICB established VINCheck, a free service that allows individuals to check if a vehicle has ever been declared as salvage by one of NICB’s member insurance companies. VINCheck is available at www.nicb.org.

I N D U S T RY N E W S

Sandy Not as Hard on Vehicles as Expected

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A BLUEPRINT FOR SUCCESS

Since the passage of the Wall Street Reform and Consumer Protection Act in 2010, also known as the Dodd-Frank Act, federal and state regulators have been clamoring with interest in the financial arm of the automotive industry – specifically, the Buy Here-Pay Here (BHPH) segment.

The interest in BHPH hasn’t been limited to only regulators, but has also been fueled by state legislators, the media and some consumer advocate groups.

It’s been a year since the Los Angeles Times published a three-part series profiling a largely one-sided portrayal of BHPH. Within weeks, three bills were introduced in the California legislature that sought to impose a wide, sweeping choke-hold on BHPH operators in the state.

Until then, not many outside the industry had taken a real interest in following the operational complexities of BHPH. Suddenly, for the first time in a very public way, BHPH was under a microscope and the legislative die was cast.

Many were asking if it was really possible that those bills were written as a knee-jerk reaction to the series of overly sensational L.A. Times stories. The answer, unfortunately, is yes.

Welcome to the age of legislative recklessness, in which public policy can be conjured up by the media, hoping to unfairly influence business law in the name of consumer protection.

As automotive dealers, financiers and other industry stakeholders pulled up chairs to watch the drama unfold in California, many BHPH dealers began to wonder how they would tell the intensely customer-service BHPH story to state legislators, committee members and their

staffs. There was growing concern about how the BHPH industry would come together and fight the toxic provisions in California Senate Bill 956, Assembly Bill 1447 and Assembly Bill 1534 (see sidebar).

As the committee assignments in the California Senate and Assembly were being handed down, the Independent Automobile Dealers Association of California (IADAC), NIADA’s state affiliate, began to lay the groundwork for its approach to the legislative campaign. Generally, NIADA doesn’t engage in state legislative activities – that is normally directed by our state associations – but given the far-reaching and restrictive nature of the California bills, it was decided that NIADA would participate heavily.

With each passing committee hearing, it became more apparent the fate of the bills was being dictated by party-line votes, and our direct opposition to the premise of the bills was falling on deaf ears.

Much of the committee testimony we saw in support of the bills consisted of consumers telling customer service stories that would not have been solved by the bill’s provisions. One car buyer complained that a car she bought with four mismatched tires was unreliable. She took the vehicle back to the dealer and ultimately got her money back for the car. Problem solved.

Yet supporters of SB 956 claimed that capping interest rates and limiting asset recovery for BHPH dealers would have somehow given this customer additional recourse to solve her problem. A problem that was easily resolved by her dealer once he knew about it.

The bills raced through the Democratic-controlled Senate and

Assembly, and in April we realized the traditional lobbying efforts in which we were heavily engaged needed to be augmented by additional public relations support, and the fragmented BHPH voice needed to be unified.

During a meeting at the National Alliance of Buy Here-Pay Here Dealers (NABD) Conference that month, Ken Shilson asked that NIADA lead a discussion with the various BHPH industry stakeholders to determine ways we could all work together more collaboratively, since we were all interested in the same outcome.

During that meeting, representatives from NIADA, NABD, DriveTime, J.D. Byrider, CarHop, Hudson & Cook and a recently formed group of concerned independent BHPH dealers – most of whom are NIADA members – called the Community Auto Finance Association, all gathered and aired their feelings, concerns and desires to work together for a common cause. We realized we were stronger collectively than individually. And so a more unified voice was agreed on, and the final piece to winning the fight in California was in place. The coalition decided NIADA would take the lead position.

Not wasting any time, NIADA’s newly formed ad hoc BHPH “coalition” raised nearly $100,000 and enlisted the help of a public relations firm to tell the BHPH story and show that auto dealers were not the only business concerns in the state opposed to the bills.

IADAC’s lobbyist, Bill Dohring, and executive director, Larry Laskowski, continued to march the halls of the legislature and work with officials at the DMV and Department of Corporations.

YOUR VOICE HEARD: BY STEVE JORDAN

NIADA CHIEF OPERATING OFFICER

H OW CA L I FO R N I A’ S B U Y H E R E - PAY H E R E L E G I S L AT I O N G A LVA N I Z E D T H E I N D U S T RY

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Dealers were expected to be against the bills, but many local and county government officials, Chambers of Commerce and concerned consumers began to voice their opposition as well. We formed the “Coalition to Protect Our Freedom to Drive,” complete with a website and Facebook profile.

As our opposition support grew, we began to ask legislators to look more closely at how the passage of the bills would impact state sales tax revenues. We called for a fiscal impact study. Based on our internal industry data and preliminary research, NIADA determined that losses in revenue for California could range anywhere from $220 million to $330 million dollars annually.

That was corroborated by California’s Board of Equalization, which agreed that such revenue losses would have a devastating downstream effect for county and local governments that rely heavily on state funding for basic constituent services like police and fire protection.

Additionally, we voiced our concern that the passage of the bills would in fact be a violation of the equal protection clauses of the constitutions of California and the United States – asking one segment of the auto industry to play by operational guidelines that do not apply to the entire industry. That was an argument we were preparing to make in the courts, if necessary, in opposition to SB 956.

Concerned mostly with blocking the inherently overreaching restrictions on BHPH dealers proposed in SB 956, we focused less on AB 1447 and AB 1534. Though we fundamentally opposed all three bills, our BHPH coalition felt there were provisions in AB 1447 and AB 1534 that would make sense to protect consumers and would not unduly impede BHPH operations.

Ultimately, all three bills passed the legislature by the end of August and

were sent to Gov. Jerry Brown for final passage or veto. Our focus then shifted to lobbying the governor, his chief legislative counsel and the state agencies charged with providing regulatory oversight to the industry on passage.

On Saturday, Sept. 29, 2012, a day before his veto power was set to expire for this year’s legislative session, Gov. Brown vetoed SB 956 saying he was “not yet convinced the evidence merits the regulatory oversight of this bill.”

NIADA couldn’t agree more! With one stroke of the pen, SB 956 was dead. For now, we all breathed a collective sigh of relief.

As for the media and consumer advocates, they claimed victory for passing AB 1447 and 1534. NIADA is fine with that – we did not see those new laws unduly impeding BHPH operators.

After the veto, the L.A. Times reporter who wrote the original series of articles wrote, “BHPH dealers congratulated one another on Sunday, and credited a lobbying effort that had little impact on lawmakers but apparently caught the governor’s ear.”

Again, we couldn’t agree more. Clearly, our lobbying efforts were never given credence by California’s legislators because they were either unwilling or incapable of seeing what the governor saw. To provide common-sense consumer protection, you don’t have to do it at the expense of devastating small business.

In the end, Gov. Brown’s veto gave everyone what they wanted. The consumer advocates received additional protection that NIADA in fact believes BHPH dealers should be offering their customers, and the industry was shielded from excessive, business-ending rulemaking that would have ironically led to less access to affordable transportation for the very consumers the legislators and media were trying to protect.

Should similar issues arise next year, NIADA will be prepared to enter the fray to protect our members again. Most importantly, let’s not forget this would not have happened without the combined efforts of the industry’s stakeholders working together nationally and in California, marshaling our resources and making our collective voice heard on behalf of our dealers and their customers.

BY STEVE JORDANNIADA CHIEF OPERATING OFFICER

Here’s a look at the requirements of Senate Bill 956, Assembly Bill 1447 and Assembly Bill 1534:

SB 956Would have required BHPH dealers to:• Cap interest rates at 17 percent plus the fed rate

(currently one-fourth of 1 percent).• Obtain a license under the California Finance

Lenders Law and be regulated by the Department of Corporations.

• Allow an account to become 16 days past due before initiating recovery or repossession of their asset.

• Use a licensed repossession agency to physically repossess a vehicle.

• Limit repossession and recovery fees to $500 on past due accounts. Those fees could not be collected within 45 days.

AB 1447Requires BHPH dealers to:• Provide customer disclosure of the use of GPS or

starter-interrupt devices on vehicles sold.• Provide a 30-day/1000-mile limited warranty on

every vehicle sold.

AB 1534Requires BHPH dealers to:• Affix a label on any used vehicle being offered for

retail sale that states the reasonable market value of that vehicle.

Definition of BHPH DealerA “Buy Here-Pay Here” dealer is a dealer, as defined in Section 285, who is not otherwise expressly excluded by Section 241.1, and who does all of the following:(a) Enters into conditional sale contracts, within the meaning of subdivision (a) of Section 2981 of the Civil Code, and subject to the provisions of Chapter 2b (commencing with Section 2981) of Title 14 of Part 4 of Division 3 of the Civil Code, or lease contracts, within the meaning of Section 2985.7 of the Civil Code, and subject to the provisions of Chapter 2d (commencing with Section 2985.7) of Title 14 of Part 4 of Division 3 of the Civil Code.(b) Assigns less than 90 percent of all unrescinded conditional sale contracts and lease contracts to unaffiliated third-party finance or leasing sources within 45 days of the consummation of those contracts.(c) For purposes of this section, a conditional sale contract does not include a contract for the sale of a motor vehicle if all amounts owed under the contract are paid in full within 30 days.(d) The department may promulgate regulations as necessary to implement this section.The term “buy-here-pay-here” dealer does not include any of the following:(a) A lessor who primarily leases vehicles that are two model years old or newer.(b) A dealer that does both of the following:(1) Certifies 100 percent of used vehicle inventory offered for sale at retail price pursuant to Section 11713.18.(2) Maintains an onsite service and repair facility that is licensed by the Bureau of Automotive Repair and employs a minimum of five master automobile technicians that are certified by the National Institute for Automotive Service Excellence.

DETAILS OF THE CALIFORNIA BILLS

C O N T I N U E D F RO M PAG E 8

A BLUEPRINT FOR SUCCESSYOUR VOICE HEARD:

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L AT E S T G OV E R N M E N TA L I S S U E S

NIADA Legislative Team UpdateHere’s a rundown of some of the

latest governmental issues and activity affecting the used car industry from Sante Esposito of Federal Advocates and NIADA legislative/regulatory/compliance counsel Shaun Petersen.

Auction SalesWhile Congress has not officially said

anything on the issue in months, there is, as previously reported, still interest from Sen. Pryor and the House Energy and Commerce Committee in exploring the impact of the current auction sale process on consumers and law enforcement.

To that end, Steve Lehrman, legislative assistant to Sen. Pryor, visited ADESA’s Washington-area auction facility on Aug. 15 to view he auction process firsthand. At the end of the visit, Lehrman said the senator and other interested legislators “don’t have a problem with what goes on at the auction” but could have issues with “what happens with the auctioned cars.”

Lehrman asked if NIADA could provide some thoughts regarding how to address that situation, especially as it relates to law enforcement, but we prefer not to respond until we receive more clarification as to exactly what issue/problem legislators are trying to solve.

Regardless, legislation is not likely to be introduced this year.

Rental Cars (S.1445, S.3502 and H.R. 6094)

There have been reports that consumer advocates are nearing a deal with rental car companies on the issue of banning rentals of motor vehicles under safety recall until the defect or noncompliance is remedied. So far, there is nothing definitive, and it’s not clear whether the rumored deal would require legislation.

A bill covering the rental/recall issue (S. 1445) was introduced in 2011 by Sen. Chuck Schumer (D-NY) and cosponsored by Sens. Dianne Feinstein and Barbara Boxer, both California Democrats. It was modified this summer by H.R. 6094, introduced by Rep. Lois Capps (D-Calif.), and an updated Senate bill (S. 3502) introduced by Boxer and co-sponsored by Feinstein.

Boxer has sparred with rental

car companies this year, calling for Enterprise, Avis, Hertz and Dollar Thrifty to sign a pledge promising not to rent or sell cars under safety recall until the cars are fixed. Only Hertz signed the pledge. The others said while they support legislation to ensure rental car safety, companies address safety recalls in a timely manner and insist any legislation should also cover other businesses that transport passengers, like limousine and taxi companies.

S.1449, MAP-21In September, Sen. Boxer announced

she is already working on legislation to succeed the Moving Ahead for Progress in the 21st Century Act (MAP-21), the $105 billion federal transportation bill that was signed into law July 6.

MAP-21 expires in about 750 days. Congress is likely to be in legislative session for less than half that time and is likely to be preoccupied with a number of higher priority issues.

Boxer said her goal is “to find a dependable funding source and to work in a bipartisan way to find that funding source. I really believe that the Highway Trust Fund should be funded through user fees.”

Those fees might include indexing the gas tax to inflation, but probably would not include a vehicle miles-traveled fee, which Boxer said raises privacy concerns. Even a gas tax increase won’t be enough, she said, if vehicles keep getting more fuel-efficient.

“We’ve got to figure out other ways,” Boxer said. “For example, I drive a hybrid car and I get about 50 miles to the gallon, I’m not paying my fair share at all. If I get an electric car, I won’t pay anything.”

H.R.860 and S.110, Promoting Charitable Donations of Qualified Vehicles Act of 2011

While the Senate bill, introduced by Sen. John Ensign (R-Nev.), has no cosponsors, the identical House bill, introduced by Rep. John Larson (D-Conn.), now has 319 cosponsors – almost 75 percent of the House membership.

The bill amends the Internal Revenue Code to make it easier to take a charitable tax deduction for

contributions of qualified vehicles (motor vehicles, boats or airplanes). According to the IRS, as a result of Congress tightening the deductibility rules in 2005, the volume of used car donations fell by about 67 percent.

With such a large number of bill sponsors and obvious bipartisan support, one would expect the bill to move quickly and without controversy through the legislative process. That has not happened for several reasons – the somewhat problematic tax deduction history of motor vehicle donations, the fact that no revenue bills are moving in the House, the uncertainty of the bill’s revenue impact, the lack of Senate interest and support, the fact that the issue is not a priority for House leadership, and the limited amount of time remaining in the Congress to consider legislation.

S. 3468, the Independent Agency Regulatory Analysis Act of 2012

On Aug. 1, Sen. Portman (R-Ohio) introduced S.3468, the Independent Agency Regulatory Analysis Act of 2012. The bill was referred to the Senate Homeland Security Committee. Under the bill, the White House would receive explicit authority to influence the rulemaking process of regulatory agencies, including the Federal Trade Commission the Consumer Financial Protection Bureau.

The President, through an executive order, would be allowed to mandate at the minimum a 13-point test for rulemaking, including finding “available alternatives to direct regulation,” evaluating the “costs and the benefits,” and periodically reviewing existing rules to make agencies “more effective or less burdensome.”

For rules with an annual effect of $100 million or more on the economy, agencies would submit their proposals to the White House’s Office of Information and Regulatory Affairs. A negative review from the office would delay a rule for up to three months and force the agency to explain its approach.

If enacted, the bill would clearly impact various aspects of the regulatory process, the most obvious being timing.

C O N T I N U E D O N PAG E 1 4

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Buyers, sellers and consigners across the independent auto auction industry can now seamlessly use ShipCarsNow from Auction Edge Inc.’s auction management platform, allowing customers to ship multiple vehicles to multiple destinations and take advantage of built-in volume pricing.

ShipCarsNow is part of Union Pacific, which transports approximately one out of three new cars sold in the U.S. With more than 1,300 quality trucking companies under contract and strategic ties with major railroads, ShipCarsNow offers nationwide, door-to-door rail and direct truck service at competitive pricing. ShipCarsNow provides Auction Edge members with the capability to transport cars safely and securely, supported by 24/7 customer service.

“We want to make it as easy and as cost-efficient as possible for our Auction Edge customers to manage shipping and delivery of their sales and purchases,” Auction Edge senior vice president Scott Finkle said. “Dealers and consigners with AuctionACCESS IDs will be able to set up a ShipCarsNow account with a couple of clicks and start shipping vehicles immediately.”

For more information, visit www.shipcarsnow.com or call 866-207-3360.

Auction Edge, a national remarketing platform that powers more than 130 independent auto auctions in North America, also introduced a new function that allows key auction employees to view credit lines and available credit for dealers with Automotive Finance Corporation (AFC) floorplans, enabling auction personnel to help the dealer complete purchases and quickly floorplan their vehicles through AFC.

FOR MORE INFORMATION, VISIT WWW.AUCTIONEDGE.COM.

I N D U S T RY N E W S

Auction Edge Integrates with ShipCarsNow, AFC

Department of LaborLast year, the Department of Labor

finalized a rule to eliminate the overtime exempt status for service writers and service advisors. But as part of the department’s 2012 appropriation legislation, Congress prohibited the department from using any funds to enforce that rule.

That appropriation legislation expires in March, and the prohibition will also expire unless it is extended by new legislation.

Internal Revenue ServiceThe Financial Crimes Enforcement

Network (FinCEN) announced that a variety of businesses, including auto dealers, are now able to electronically file Form 8300, Reports of Cash Payments Over $10,000 Received in a Trade or Business, using the Bank Secrecy Act electronic filing system at http://bsaefiling.fincen.treas.gov/main.html.

E-Filing is a free system that allows businesses to submit their FinCEN reports through a secure network. Paper filings of Form 8300 will continue to be accepted for now, but businesses are encouraged to begin E-Filing.

Federal Trade CommissionThe FTC has published a guide called

Marketing Your Mobile App: Get it Right from the Start, to help mobile app developers and users comply with truth-in-lending and privacy laws.

The guide highlights that all required disclosures must be made clearly and conspicuously and suggests apps only collect necessary information and providers be transparent about data collection and sharing practices. This information is important for dealers who advertise on mobile sites or who have their own smart phone app.

The FTC released a statement on Sept. 13, reaffirming its focus on enforcing the Fair Credit Reporting Act. That suggests more enforcement action on illegal sharing of personal information and illegal use of credit scores. Dealers should have their counsel review all contracts that allow vendors access to their DMS, and any vendor that provides list of customers based on their credit profile.

C O N T I N U E D F RO M PAG E 1 2

NIADA LEGISLATIVE TEAM UPDATE

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Congress enacted the federal Bankruptcy Code in 1978, and it has been amended several times since. The procedural aspects are governed by bankruptcy rules and the local rules of each bankruptcy (BK) court. There are 90 BK courts – one in every federal judicial district in the country.

The court official with the decision-making power in each district is a United States bankruptcy judge. Much of BK process is administrative and conducted away from the courthouse. In Chapter 7 and 13 cases, the ones that affect dealers and lien holders, the process is carried out by a trustee.

What’s the Difference?The consumer bankruptcies that affect you

most will be filed as Chapter 7 or Chapter 13.Chapter 7 – liquidation: A chapter

7 case does not involve the filing of a plan

of repayment, as in chapter 13. Instead, the trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.

Chapter 13 – wage earner plan: Chapter 13 offers individuals a number of advantages over Chapter 7 liquidation, including an opportunity to save their homes from foreclosure.

By filing under Chapter 13, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time, though they must still make all mortgage payments that come due during the Chapter 13 plan on time.

Chapter 13 allows individuals to reschedule secured debts, other than a mortgage for their primary residence, and

extend them over the life of the plan. That could lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts,” a provision than can protect co-signers.

Chapter 13 acts like a consolidation loan under which the individual makes payments to a trustee, who then distributes payments to creditors.

Any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as the individual’s unsecured debts are less than $360,475 and secured debts are less than $1,081. A corporation or partnership cannot be a Chapter 13 debtor.

How Chapter 13 Works A Chapter 13 case begins by filing

a petition with the bankruptcy court

Understanding Your Customer’s Chapter 13 BankruptcyT H E F I R S T O F A T H R E E - PA R T S E R I E S O N T H E B A S I C S O F B A N K R U P T C Y P RO C E D U R E S A N D W H AT I T M E A N S T O D E A L E R S / L I E N H O L D E R S . “MONEY

MATTERS

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serving the area where the debtor has a residence. Unless the court orders otherwise, the debtor must also file schedules of assets and liabilities, a schedule of current income and expenditures, a schedule of contracts and unexpired leases, and a statement of financial affairs.

When an individual files a Chapter 13 petition, an impartial trustee is appointed to evaluate the case and serve as a disbursing agent, collecting payments from the debtor and making distributions to creditors. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 21 and 50 days after the debtor files the petition, the trustee will hold a meeting of creditors. The debtor, the trustee and those creditors who wish to attend will then come to court for a hearing on the repayment plan.

The debtor must file a repayment plan

with the petition or within 14 days after the petition is filed. The plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which can offer creditors less than full payment on their claims.

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral – such as a car loan – and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral.

If the court confirms the plan, the trustee will distribute funds received under the plan “as soon as is practicable.”

Making the Plan WorkOnce the court confirms the plan,

the debtor must make the plan succeed by making regular payments to the trustee either directly or through payroll deduction, which requires living on a fixed budget for a prolonged period. While confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor cannot incur new debt without consulting the trustee.

Next: The basics of Chapter 7 filings.

Note: The information presented should not be cited or relied upon as “legal authority” and should not be used as a substitute for reference to the U.S. Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

BY ROD HEASLEY ROD HEASLEY IS EXECUTIVE VICE PRESIDENT OF PERITUS PORTFOLIO SERVICES , A SOUTHLAKE, TEXAS-BASED SPECIALTY FINANCE COMPANY THAT SPECIALIZES IN THE PURCHASING OF OPEN BANKRUPTCY ACCOUNTS.

“When an individual files a Chapter 13 petition, an impartial trustee is appointed to evaluate the case and serve as a disbursing agent, collecting payments from the debtor and making distributions to creditors.

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CRAIGSLIST MANIAWhat is Craigslist? Why should I put

my inventory on it?Craigslist is to the Internet what

the classified section used to be to newspapers. It’s a classified ad placement service where people can place and browse classified ads on the Internet.

And it is all free (in most states).According to the current Internet

rankings by the web information service Alexa, Craigslist gets an amazing 20 billion page views each month – enough to crack the top 40 among websites worldwide and the top 10 in the United States.

Its only source of income comes from people placing ads for jobs for money, from $10 to $75 depending on which Craigslist site gets the ad. Even with that limited source of income, Craigslist still makes tens to hundreds of millions of dollars per year.

One of the biggest reasons many sellers these days are interested in Craigslist is the potential for making money on the website.

The Internet is really the ultimate free market in many ways, with people trading goods and services for different values designated between two people. There is very little government interference over what goes on in places like Craigslist, and that certainly suits many people just fine.

When you take a look at Craigslist, you will see there is such a high volume of ads posted that you really need to post things frequently in order to compete. For that reason, more of a hybrid strategy has been developed by many of those who use Craigslist as part of a much broader and a much larger web 2.0 marketing campaign.

When Craigslist is used in that fashion, it actually has the ability to help people drive traffic to their websites. That’s especially good if you have a content-based website you think people will like, because Craigslist tends to attract ultra-responsive Internet types who will bookmark your site and visit it frequently if it has good content that is regularly updated.

For car dealers, Craigslist has become the ultimate auto mall, where thousands of dealerships compete for the top listing. That has turned into all-out war as dealers try to keep their ads fresh and on the top of the other daily ads, and because all the listings are free, the return on investment is a huge home run.

The problem with posting inventory is trying to remain compliant with Craigslist’s terms of use.

The rules change weekly to keep car dealers from overposting and duplicating ads. Those rules can be confusing to dealers and the ads can become very time-consuming if you have more than 20 cars on your lot. Spending two hours posting inventory, only to notice none of your ads appeared, would be very alarming.

A posting tool for car dealers is imperative to showcase all inventory, drive more traffic back to the website, save time and make sure all the ads appear and remain live for classified shoppers to reach and call back the dealership.

There are several types of posting tools a dealer can use to get inventory on Craigslist.

One is a manual posting tool with a dashboard that shows your ads and keeps you informed on ghosting (ads that disappeared), flagging (ads marked as inappropriate or reported as spam by competitors) and/or deleted postings . It should also include a comprehensive way

to see how many people looked at your ads and how many clicked or called.

The other type of posting tool used by many car dealers is a hands-free posting tool, where the software posts for the dealer and all the dealership personnel has to do is to answer the phone calls and emails.

It is important to always check to see if the software is Craigslist compliant to avoid getting your dealership fined or blacklisted.

No matter what system you choose, it is very important to get inventory on Craigslist and keep it there. There is a high volume of ads posted daily, so dealers must post things frequently in order to compete.

With more than 20 billion visitors per month, Craigslist is a huge marketplace for buyers, not just shoppers. And the shoppers at this ultimate auto mall are going to choose the best ads to call for more information.

BY DANI LUNSFORD NATIONAL SALES AND MARKETING EXECUTIVE WITH SHOWCASE PUBLICATIONS, INC. SHE HAS BEEN IN THE RETAIL AUTOMOTIVE INDUSTRY FOR 14 YEARS, WORKING IN SALES, SERVICE, E-COMMERCE MANAGEMENT AND AS A CONSULTANT TO IT COMPANIES AND DEALER GROUPS. SHE CAN BE REACHED AT [email protected].

C R A I G S L I S T H A S B E C O M E T H E U LT I M AT E AU T O M A L L , W H E R E T H O U SA N D S O F D E A L E R S H I P S C O M P E T E FO R T H E T O P L I S T I N G

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T H E S E C O N D O F A T H R E E - PA R T S E R I E S O N T H E B A S I C S O F B A N K R U P T C Y P RO C E D U R E S A N D W H AT I T M E A N S T O D E A L E R S / L I E N H O L D E R S .

The Ins and Outs of Chapter 7A chapter 7 bankruptcy case does not

involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor can be an individual, a partnership, or a corporation or other business entity. Subject to the means test for individual debtors, relief is available under chapter 7 regardless of the amount of the debtor’s debts or whether the debtor is solvent.

The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to corporations or other business entities. While an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged.

How Chapter 7 WorksA chapter 7 case begins with the debtor

filing a petition with the bankruptcy court serving the area where the individual lives. The debtor must also file schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and a schedule of contracts and unexpired leases.

The debtor must also provide:• A list of all creditors and the amount

and nature of their claims. • The source, amount and frequency of

the debtor’s income.• A list of all of the debtor’s property.• A detailed list of the debtor’s

monthly living expenses – food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Filing a petition under chapter 7 automatically “stays” (stops) most

collection actions against the debtor or the debtor’s property. In some situations, the stay is effective only for a short time. The stay requires no judicial action. As long as the stay is in effect, creditors generally cannot initiate or continue lawsuits, wage garnishments or even telephone calls demanding payments.

Between 21 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property.

Role of Trustee in Chapter 7 When a chapter 7 petition is filed, the

U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets.

In the typical no-asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the bankruptcy court will provide notice to creditors and will allow additional time to file proofs of claim.

The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor’s nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors. The trustee accomplishes this by selling the debtor’s property if it is free and clear of liens.

Chapter 7 DischargeA discharge releases individual debtors

from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge.

Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases.

If a debtor wishes to keep certain secured property, such as an automobile, he or she may decide to “reaffirm” the debt. That’s an agreement that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises not to repossess the automobile or other property so long as the debtor continues to pay the debt.

The debtor must reaffirm a debt before the discharge is entered, and must sign a written reaffirmation agreement and file it with the court.

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may not initiate or continue any legal or other action against the debtor to collect a discharged debt.

Your customer has three options in a chapter 7 filing: surrender the vehicle, redemption or reaffirm the note.

We recommend that when you as the lien holder receive a chapter 7 notice of filing, you call the customer’s attorney and ask the customer’s intention. That conversation will dictate your next move prior to discharge.

Next: Your options when a customer files bankruptcy.Note: The information presented should not be cited or relied upon as “legal authority” and should not be used as a substitute for reference to the U.S. Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

BY ROD HEASLEY ROD HEASLEY IS EXECUTIVE VICE PRESIDENT OF PERITUS PORTFOLIO SERVICES , A SOUTHLAKE, TEXAS-BASED SPECIALTY FINANCE COMPANY THAT SPECIALIZES IN THE PURCHASING OF OPEN BANKRUPTCY ACCOUNTS.

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DSC Joins as Platinum PartnerDealer Services Corporation has joined NIADA as a Platinum-level

National Corporate Partner.DSC is a full-service inventory finance provider that aligns many

products and services for partners within the automotive industry. DSC’s core customers are independent dealer operators with pre-owned inventory as the basis for their portfolios. DSC operates 100 markets throughout North America, providing flexible, low-cost inventory finance solutions for dealership operations in the areas of retail, wholesale, rental, and salvage.

With a DSC floorplan line of credit, customers can acquire more inventory and create more sales opportunities. DSC’s additional products like Collateral Protection and Lender Access create a deeper and more consistent profit margin when integrated into dealership operations.

DSC shows its commitment to its customers by combining local sales and account executives with a state-of-the-art customer service center. In addition, the myDSC virtual office and DSC Smartphone App, DSC Unplugged™ Mobile, keeps business moving, whenever or wherever customers need it.

FOR MORE INFORMATION, VISIT WWW.DISCOVERDSC.COM, CALL 1-888-969-3721 OR EMAIL [email protected].

PLATINUMNATIONAL CORPORATE PARTNER

I N T E R AC T I V E M A R K E T I N G

DealerTrack Acquires ClickMotive

DealerTrack has announced the acquisition of ClickMotive LP, a provider of interactive marketing solutions for the automotive retailing industry, for $48.9 million in cash and additional consideration of up to $7.65 million in 2014 if ClickMotive reaches its 2013 performance targets.

Plano, Texas-based ClickMotive, established in 2005, is the creator of a digital marketing platform, used by more than 3,000 U.S. dealerships, that combines Internet, mobile, search, social, video, inventory, call-tracking, tag and dashboard tools to generate qualified leads and increase sales for automotive groups and individual franchised dealers.

“With this acquisition, we are able to significantly expand the website and interactive marketing capability we acquired with eCarList,” DealerTrack chairman and CEO Mark O’Neil said. “Additionally, we believe this acquisition will enhance the competitive positioning of our inventory solution and expand our relationship with a number of key OEMs.”

FOR MORE INFORMATION ON DEALERTRACK, VISIT WWW.DEALERTRACK.COM.

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BY CHIP ZYVOLOSKICHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

The year’s end is a time of reflection.When it comes to auto finance and

compliance challenges, the story can sound similar from year to year. There are usually a handful of new regulations facing dealers and lenders that have made a big impact on the industry over the previous 12 months.

But this year doesn’t really fit the mold. That’s because 2012 arguably hasn’t been as much about new regulation as about the additional scrutiny of regulators enforcing laws that have been in place for some time.

That has been particularly evident in the areas of state-specific forms, model language and loan documentation.

Some recent examples suggest a trend that state regulators are taking a closer look at existing motor vehicle retail sales financing authority and transaction documentation:

New Mexico: Since 2009, a New Mexico attorney general’s regulation has required creditors to provide a summary or a translation of English-language transaction documents in consumer sales negotiated in a language other than English. Its coverage is very broad and somewhat difficult to understand.

This year, the New Mexico attorney general proposed additional changes to the regulation. After receiving comments, the

AG acknowledged issues with the proposed changes and with the existing regulation itself. As a result, it pulled back the changes and repealed the existing regulation to allow for further study.

Michigan: Years ago, the Michigan Department of Licensing and Regulatory Affairs, Office of Financial and Insurance Regulation (OFIR) said bad check charges are not allowed in motor vehicle retail contracts in spite of statutory authority that seems to allow it.

This year, the OFIR published a letter saying bad check charges cannot be collected on retail motor vehicle sales contracts unless the contract contains a bad check charge provision, indirectly reversing its prior position. The OFIR now holds that bad check charges are allowed as long as they are specifically authorized in the retail contract.

Montana: The Montana late charge authority is a bit ambiguous and has been that way for many years. Because of the ambiguity, there were vastly different interpretations in the marketplace. In response to a request, the Montana Division of Banking and Financial Institutions recently published a letter clarifying its interpretation of the state statute.

The apparently heightened state scrutiny might be just a coincidence. It could also be that states are demonstrating their diligence and control to the public and to the new federal Consumer Financial Protection Bureau (CFPB).

The CFPB regulates dealers who don’t routinely assign their financing contracts to unaffiliated third parties. For the most part, that means the CFPB regulates Buy Here-Pay Here dealers. The Federal Trade Commission (FTC) continues to regulate the rest of the auto sales and finance industry.

The net result is there are two federal regulators in the auto finance marketplace. It’s possible states are more actively clarifying and enforcing their existing laws and regulations in an effort to maintain a level of control over the auto finance industry – hoping to minimize federal oversight.

In addition to reflecting on the year that has been, it’s also time to think about what might lie ahead. What will the new regulatory environment look like in 2013?

Many thought the CFPB would have done a lot of regulatory change in auto financing by now, but that hasn’t been the case. One reason is it has been focused on real estate financing practices and disclosures. The CFPB also seems to be carefully studying the consumer finance marketplace – and even consumers – to lay a solid foundation for its regulatory oversight.

The CFPB’s strategic plan for 2013-18 notes one of its strategies is to “develop and maintain an efficient fact-based approach to developing, evaluating, revising and finalizing regulations.”

“Fact-based” is a key term. We have seen the CFPB asking good questions and conducting extensive research on areas it is

tasked with overseeing. For example, the CFPB tested draft real estate disclosure documents with consumers in shopping malls.

The Dodd Frank Act requires the CFPB to research and provide policy guidance on whether arbitration provisions should be allowed in consumer credit (non-real estate) transactions. To start that process, the CFPB published a request for suggestions, data sources and strategies to study the issue.

It’s also clear the CFPB is not afraid to take a fresh approach to presenting transaction information to consumers. For example, the CFPB published a proposed rule in July regarding integrated mortgage disclosures under RESPA and the Truth in Lending Act. Leading up to the proposed rule, it published a number of drafts trying various new disclosure formats and designs.

That was one of the first significant proposed rules from the CFPB, and the planning process involved extensive research and solicitation of industry and consumer feedback. As a result, the proposed rule and explanatory materials are more than 1,000 pages.

The upside is the CFPB is trying practical, consumer-tested ways to present information so average consumers can understand key transaction terms. The downside is the volume of information in the proposal is overwhelming.

It’s hard to know when the CFPB will complete its foundation-building and begin proposing new regulations or revising existing ones that affect the consumer auto finance industry. It’s likely big changes will come to the market. It’s just unclear when.

While we’re in this waiting period, dealers might feel there are a lot of variables out of their control, but the focus needs to be on the areas you can control.

Since a number of states seem to be focused on clarifying and enforcing existing requirements, dealers should review and button down compliance documentation and processes to make sure they are satisfying those requirements.

Additionally, reviewing and tightening transaction standards and communication within the dealership is key. Make sure your sales and finance teams are describing financing terms and options, vehicle features, and add-on products and services in a correct and consistent manner. Educate your buyers and be direct and honest about each element of a transaction and the risks each party is assuming.

Investing in those areas can go a long way toward maintaining compliance now and preparing for what lies ahead.

C O M P L I A N C E OV E R D R I V E

OUT WITH THE OLD AND IN WITH THE NEW?

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Documents

LIADA Open Road