FAQ: What do I do?

Often, a dealer will be presented with the question that will require a quick decision. The right answer may mean the difference proper operation of the dealership or a lawsuit. Here are some questions this office gets from time to time. See how your reaction compares to the law.

Q: The Customer won’t sign the privacy notice. What do I do?

A:   The law requires delivery of the privacy notice. If the customer is in the dealership and won’t sign, note that on a copy and give the original to the customer. If the customer will not take the original, note that in the file. Spot check files to make sure privacy notices are being delivered. Most customers will sign a privacy notice and take it. If there are a large number of files with notations that the customer would not take it, you may have an employee who does not want to take the time to present it.

Q: The customer demands that we negotiate our privacy notice and make changes. What do I do?

A: The Company’s privacy notice must not to be negotiated. It is not an agreement with the customer. It is a notice to the customer of the company’s privacy policy. Hopefully, you are using the new, form notice that provides a safe harbor under the law. Negotiating privacy notices will leave a dealership with different policies for different customers, and revisions may eliminate the safe harbor protection.  If the customer won’t sign the privacy notice, see the previous question.

Q: We sold a car, and the customer wants to bring it back. We told him that we will not take it back. Now his lawyer is calling. What do I do?

A: You will want to investigate the claim of wrongdoing and the facts of the deal. But the very first thing that you want to do is to make sure that the caller is an attorney. It’s easy for a customer to get a buddy at the local bar to call you claiming to be his lawyer. Advise the caller that the company does not respond to attorneys without written verification of representation. Advise the caller to contact the dealership in writing on the attorney’s letterhead specifically stating that the attorney represents the client. This need not be a long process. The communication on letterhead can be sent through the mail, or by fax, or can be turned into a .pdf and sent by e-mail. It is important, however, that the attorney provide proof of who they are and whom they claim to represent.
Inquiries from attorneys should be directed to specific senior personnel at the dealership. Operators, salespeople and others who are likely to take calls should be trained that they are not to deal with attorneys. When they receive a call from anyone who implies or states that they are an attorney, the call should be forwarded to a responsible senior person trained to deal with such callers.
A dealer should consult with its own attorney whenever contacted by a customer’s attorney in the event there is any concern about how to proceed. Often, an attorney calls the dealership directly to get some free early discovery to see if it is a case the attorney wants to pursue. Or the attorney may want to ask some questions to see if the problem for which there may not be a legal claim can be turned into “the case that never was” – a lawsuit alleging wrongdoing that the attorney’s client never knew about but that the attorney came up with since he had a client who did business with the dealer. The dealership’s attorney can help dealership personnel through the process and can become involved if necessary. 
Q: When we sell a used car with our in-house warranty, we don’t give the customer a separate document since the information is on the FTC buyer’s guide. A customer is demanding a separate warranty document. What do I do?

A: Give the customer a separate warranty document. The FTC buyers guide is not a substitute for a written warranty document. The federal Magnusson Moss warranty law requires that a dealer provide a separate warranty document. That law requires that the warranty contain provisions that are not included on a buyers guide. If you provide the dealership’s warranty when you sell a used car, have a warranty form that complies with applicable law, and give your customer that form for each used car sold with a warranty.

Q: A finance company called and said that one of our customers defaulted on his finance contract. The company is demanding that we buy the contract back. What do I do?

A: From time to time, a finance source will demand that you repurchase a finance contract for a customer who is in default. When you ask why, the company will tell you that you breached a representation and warranty in the indirect finance master agreement. Remember, a demand for repurchase is based on the finance source’s interpretation of the indirect finance master agreement that you signed when you set up the relationship. Carefully review the demand for repurchase and the facts of the deal to determine your rights. If you do not believe that the demand for repurchase of the contract is appropriate, challenge it. Here are some common claims to support a buy back demand and what to do about them.
  • The deal contains a promissory note or a hold check for the down payment. What does the indirect finance agreement say? A hold check or a promissory note should not be a problem if the instrument was collected before you assigned the retail installment sale contract to the finance company depending on the wording of the master agreement.
  • The customer does not have insurance. What does the agreement say? If you were careful in negotiating the master agreement provision on insurance, you should only have been required to verify insurance at the time the retail installment sale contract was done.
  • The debtor’s signature or the cosigner’s signature on the RISC was forged. A finance company may even have an affidavit of forgery. Don’t blindly accept that. Customers unhappy with their obligations, especially cosigners, will often complain that they never signed the RISC. Check the details of the transaction carefully. If you believe you can prove that the RISC was appropriately signed, challenge the finance company as well as the customer claiming a forgery.
  • The customer went bankrupt and the lien was not perfected in time. Under federal bankruptcy law, a dealer has 30 days from the time the customer takes possession of the vehicle to perfect the lien and protect the creditor’s security in the event the customer declares bankruptcy. Under many state laws, perfection is achieved when the paperwork is processed or filed, not when DMV finally notes the lien. Carefully check the claim of the finance company. If you are in a state which deems a lien perfected when the paperwork is filed or processed and you filed the papers in time, you may have complied with your obligation.
Q: One of our salespeople just came to me because he has been negotiating with a buyer who wants to put down $7,500 in cash from a roll of bills that he has been hinting is from drug dealing. I don’t think that I have to report this deal since we will not get more than $10,000 in cash. What do I do?

A: Don’t deliver the vehicle! All employees should understand that there is a difference between the cash reporting obligations of the dealership and the obligations of everyone in the dealership to prevent money laundering. Under the Internal Revenue Code and the USA Patriot Act, a dealer must report the receipt of cash (currency, travelers checks, money orders, and cashiers checks with a face amount of $10,000 or less that are not the proceeds of a loan) when the total of cash or cash equivalents is in excess of $10,000. Under the United States Criminal Code, and under many state laws, dealership employees and the dealership are prohibited from engaging in a transaction that they know, or should know, involves use of funds that are the result of a criminal activity. The money laundering laws apply regardless of the amount of funds received or the form in which they are received. Money laundering is a serious felony no matter how much is involved. Don’t do a suspicious transaction. And report your suspicions to the authorities even when you do not do a deal.

Q: One of my employees just complained that I cannot tell him how to dress because it violates the civil rights laws. What do I do?

A: Your dealership is permitted by law to have, and your dealership should have, a policy setting employee dress and grooming standards. Policies about grooming and dress are generally viewed by courts as not subject to the same level of scrutiny as policies relating to gender, race, age, disability, and the like. A carefully written policy can provide for reasonable differences between men and women. A policy can also provide for differences depending upon the employees’ job classification – those with public contact can be treated differently from those who do not have such contact. Your employees project your image to those with whom they deal. You want that image to be a positive