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Compliance Tips for the Used Car Rule and Buyers Guides

Emily Hartman /
In this episode of The F&I Minute, Emily and F&I District Manager, Aaron Hartshorn review the basics of the Used Car Rule and Buyers Guides and take a high-level approach to a topic that can have any number of compliance issues.
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[00:00:30]

Aaron, I’m hoping that you can kind of give us sort of the broad brush view of the Used Car Rule, and kind of give us some groundwork to work from.

Absolutely. There’s so much information on the Used Car Rule, and the Buyers Guides, and everything associated with it. So, I will be as high level as possible with the time that’s allowed to me today. But that being said, a little bit more about the Buyers Guides and the Used Car Rule is that the Used Car Rule was created in 1984.

The main goal for the Used Car Rule was to provide a format and Buyers Guide for proper disclosure of customer information of the warranty that comes with a vehicle or the product that’s being sold to the individual consumer. This was amended in 2016 November, but it wasn’t actually required to be adjusted to dealerships until January 2018. And at that time, large adjustments were made just to provide a bit more transparency on what the dealer’s requirements are, and what the dealer’s warranties were.

So, that’s a little bit high level of what the Buyers Guide and the Used Car Rule entails.

 

Awesome. So, what exactly do you need to have in a Buyers Guide?

So, if we look at the Buyers Guide form, there are required sections of the form, and I’ll go over them very quickly and briefly. The first requirement is the vehicle information. So, we would need to have, obviously, the year, make, and model, and full VIN of that information as well. The acquired information for a few boxes. [00:02:00]

Now, we have two different versions of the Buyers Guide. We have an implied warranties version, and as is warranties version. It’s important to understand that each state has different requirements so that you should speak with your dealer association for clarification of what will be required or allowed within your state.

But with that being said, if you check off as is, or if you check off dealer warranty within the Buyer’s Guide, there are sections within that that’s required. So, dealer warranty section being checked off, you would have to choose either full or limited, and also a percentage of what will be covered and what the cost and which are the payment of what the dealership are going to be covering, apologize…covering for the service, or for the dealer warranty section, and also the term or the duration of what’s going to be covered and also what will be covered. This could be engine transmission. Stay away from anything that says drivetrain or powertrain.

[00:03:00]

Also on the Buyers Guide, there’s a section for dealer information. An update that happened in 2018 was that some clarity on, you know, the name of the dealer, the address, the phone number, but actually a point of contact, and name and point of contact, not simply just a title for complaints. The goal is to be able to have the consumer contact, someone, by name to understand who can assist them with any type of issues they may have with a warranty of their vehicle. Going down on the form itself, there’s also an optional non-dealer warranty section. I’m not going to spend too much time on that at the moment, but it’s optional. A better business practice would be to fill that out with truthful and honest information. But that’s a whole other conversation to have in the future.

 

 

All right. Well, all that seems pretty straightforward. So, where do dealers tend to go wrong?

Oh, once again, a lot of information here. So, let’s just start with the posting of the Buyers [00:04:00] Guides. A lot of dealers seem to be having wrong information we’re putting on the dashboard, maybe in the glove box, behind other advertisements. That’s all incorrect. It must be conspicuously posted in a manner in which the consumer or prospective consumer can read the front and back of the Buyers Guide at all times when the vehicle is advertised for sale on the lot. So, that’s one of the main areas where dealers go wrong. Also proper disclosure of dealer warranty. I see a lot of, like I said before, powertrain or they check off the dealer warranty [00:04:30] and there’ll be a empty block of empty boxes without proper information.

In the manufacturers or the other dealer warranty sections, they’re checking off all three boxes incorrectly, or they’re checking boxes that aren’t accurate. So, a 2009 Honda Civic may not have a remaining factory warranty on the vehicle, but they’re checking it off incorrectly. Also, what we find a lot, and as more within the finalized deal jacket is supporting documents that would fall under the Magnuson-Moss Warranty Act, where if a dealer is supplying a warranty, they’re failing to provide a separate document to disclose or and to detail what that warranty fully entails. The Buyers Guide itself cannot be used as that warranty document. That’s just a couple of high-level ones. There’s so many other variations that I can get into later.

 

Okay, so it basically sounds like the location of [00:05:30] the Buyers Guide, where you place it, and then also disclosures really?

Proper formatting and proper filling out the Buyers Guides. Correct.

 

Okay. So, what can actually, like, do people get penalized for this? Are there repercussions for doing something wrong?

Absolutely. This in my mind would be the second most important form within the deal jacket. The FTC has direct oversight over this. Currently, the new citation amount will be $46,517 per violation. In April of 2018, they actually had a sting across the United States, which dealerships were complying with the updated amendment that happened, obviously, in 2016. But only 94 dealers…Sorry, 94 dealers were audited, and only 61 were in compliance.

So, it’s, obviously, something that is across the board nationwide, or as a requirement except for Maine and Wisconsin.

[00:06:30]

And it’s where the FTC is focusing heavily on it. I also want to state that certain state statutes would also have a requirement for disclosure of warranties. So, obviously, it’s dependent on which state and local DMV, or what motor vehicles will also have some oversight over the disclosure or proper posting, and information within the Buyers Guide itself. Keep in mind that misrepresenting or failing to fill out the Buyers Guide correctly, or failing to post a Buyers Guide could also follow up with a high amount of consumer private right of actions, where potentially rescission of contract would be the outcome for that complaint.

 

All right, and do you have… What’s some of, like, the advice that you give to KPA customers or other dealerships that you talk to when it comes to, like, Buyers Guide the best practices?

[00:07:30]

Once again, like best practices would be, make sure that you…whoever you appoint to fill out the Buyers Guide is knowledgeable to do so. Once again, this is the warranty of the vehicle. This is going to be something that the purchaser or the consumer is going to be referencing and using as one of their main reasons to purchase the vehicle. Also, if you’re working with a inventory management company, make sure that they’re posting it consistently that there’s no delays within vehicles being advertised in your lot without buyer’s guides being posted. And also, internally, make sure that your staff is properly trained to not have a vehicle in the lot, or open for advertisement without having one currently posted incorrect.

That being said, it all falls down to training. It all falls down to knowledge. It all falls down to management oversight. So, we highly suggest that dealers have an internal audit process where if it’s a cadence, a certain cadence of once a week or twice a week, your sales manager, your general manager goes out and verifies as a lot walk, which we know that most dealerships do and just to show they do inventory. But also it’s beneficial to have a third party, auditing company come out and then just make sure that your dealership or your dealership group is up to date with any adjustments to the Safeguards Rule, and can supply you with proper processes or procedures or even templates of how to fill out a Buyers Guide depend upon the type of vehicle that you’re selling.

[00:09:00]

Great. So basically, do your due diligence is what I’m hearing?

One hundred percent. Like I said, the second most important form in the deal. And it’s nationwide except for those two state exemptions I mentioned earlier. So, it’s very important. It can bite you in the butt if you don’t do it right.

 

All right. And with that, I think we’re going to close out today. Thank you all for joining, and hope you’ll listen in again next time.

Thank you.

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