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Compliance

12 Hot-Button Issues for 2009

April 2009, F&I and Showroom - Cover Story

by Terrence O'Loughlin and Justina Ly

Already heavily regulated, the automobile industry can expect increased scrutiny from what promises to be an activist-driven Congress. But this scrutiny won’t come from regulators alone. Lenders, tired of losing money on bad deals, will also be vigilant when it comes to a dealership’s F&I processes.

Driving this regulatory environment are the activities that led to the current credit crisis. Dealers can also expect consumer groups to advance a number of issues. The following are 12 examples of how broadly dealership behavior is being scrutinized.

1. Regulators Keeping an Eye On Advertising

Knowing customers are hard to come by these days, expect regulators to be on high alert when it comes to advertising. One rule dealers need to be aware of is the Telephone Consumer Protection Act (TCPA), which restricts telemarketing activities and the use of automatic telephone dialing systems. It also restricts the use of artificial or prerecorded voice messages.

In 2003, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) revised the TCPA to establish the national Do-Not-Call registry for residential or personal wireless phones. Under the revisions, dealers who have an established business relationship with their customers may call them for up to 18 months after the consumer’s last purchase, last delivery, or last payment. However, the rule says a dealer must stop calling the customer if he or she requests not to be called. Violating this rule could lead to a fine of up to $11,000.

Additionally, a dealership can call a customer for three months if he or she makes an inquiry or submits an application to the dealership. However, a dealer must cease communication if a customer requests not to be called. The rule also prohibits dealers from contacting consumers on their cell phones without permission.

Internet advertising generally has the same requirements as traditional advertising, although the federal law governing such practices is called the CAN-SPAM Act. The law bans false or misleading header information, prohibits deceptive subject lines, and requires commercial email to be identified as an advertisement. It also requires the sender to include a valid physical postal address.

Dealers need to scrutinize firm offers by mail and seek legal counsel prior to sending them. Letters which appear to be related to or from a government agency, can be considered a deceptive advertising practice.

2. Opt-Out Rule In Effect

The Affiliate Marketing Rule provides consumers with an opportunity to “opt out” before a person or company uses information provided by an affiliated company to market its products and services to the consumer. The regulation applies to information obtained from consumer transactions or account relationships with an affiliate, the consumer’s application, credit reports and other third-party sources. The regulation, which became effective in January 2008, implements a provision of the Fair and Accurate Credit Transactions Act (FACTA) of 2003.

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