,,..] WASHINGT()N STATE INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION PO BOX 1837* AUBURN WA * FAX

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1 ,,..]. I WASHINGT()N STATE INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION PO BOX 1837* AUBURN WA * FAX MOTOR VEWCLE DEALER CORRESPONDENCE COURSE ENROLLMENT FORM The Washington State independent Automobile Dealers Association must receive full payment of $50.00 with this enrollment fom1 if you choose to participate in the Reading & Response program. The W asbington State independent Automobile Dealers Association will electronically notify the Department of Licensing once we had received your completed education credits. We will mail a Certificate of Completion to you for you to keep as a business record. Please complete the below information as it appears on your Dealers License. The dealership name & dealers license renewal date MUST match the Department of Licensing'-s records. Dealership Owner/Manager:,_ Dealership Name: Physical. Address: --:- City: ;;Zip: Mailing Address., City: ;;Zip:~---- Telephone Number:. :Fax Number: DEALER NID.1BBR: ::DEALER LICENSE EXPIRATION DATE: NOTE: If you choose to submit your Reading & Response Forms via facsimile, then you must also include credit card infom1ation along with the enrollment fom1. Payment enclosed: Check:. Visa ~M~ercard Name as it appears on card:...:exp DATE Card Number: ~ Credit Card Billing address zip code: ;Security Code: Signature:...:Date:

2 WHAT IS A DEALER BOND AND WHY AM I REQUIRED TO HAVE ONE? A motor vehicle dealer bond is a type of surety bond. It guarantees that an automotive dealer will operate within the terms of the state including consumer protection laws and payment of tax. These three parties are called the Principal, the oblige, and the Surety. The principal is the primary party, in this case the automotive dealer. The oblige is the one who receives a service (DOL). The surety ensures that the Principal delivers on their obligations to the oblige. For the dealer bond, the surety makes sure that the automotive dealer works under state and local laws in the sale of a vehicle. Unlike insurance the amount paid out must be payed back by the 'Principal'. This is why credit history makes a big difference in the cost of bond. WSIADA has worked with a surety representative to arrange dealer bonds for qualifying dealers for as low as $200. Contact WSIADA toll free for a simple one page application.

3 GARAGE LIABILITY vs GARAGEKEEPERS Dealer insurance (aka Garage insurance) can be confusing as it is made up of several very important parts. One important and often misunderstood part is called Garage keepers liability. Garage Keepers liability is coverage afforded when the insured has another person's vehicle in his care, custody, and control. Most commonly this is the kind of coverage we would see with a retail service shop; however, auto dealers also have this very same exposure even if they do not perform any retail service. An example might be when a dealer or staff member is doing an appraisal on a potential trade-in and the vehicle becomes damaged as a result if an accident caused by dealer. Have Garage Keepers coverage would allow for collision coverage to fix the customers vehicle. Another example would be if a dealer is taking a test drive at the auction prior to bidding on an auto. Since that auto is owned by another party, if that vehicle is damaged the repair cost would be sought under Garage Keepers. There are two ways Garage Keepers can be written: Legal Liability and Primary Garage keepers Legal Liability would react only in the event the dealer was actually negligent in causing the damage or loss. An example would be if the dealer left the keys in the car and it was stolen.

4 BUYER'S GUIDE You must post a Buyer's Guide before you offer a used vehicle for sale. It's offered for sale if you let a customer inspect it even if it isn't fully prepared for delivery. This also applies to used vehicles for sale on your lot through consignment, power of attorney, or other agreements. At public auctions, dealers and the auction company must comply. The rule does not apply to auctions that are closed to customers. Exceptions are new vehicles with a gross weight or more than 8500 pounds a curb weight of more than 6000 pounds or a frontal area of more than 64 square inches. Motorcycles, agricultural equipment, and vehicles sold for scrap if the dealer submits title documents to the appropriate state authority and obtains a salvage certificate. The Buyer's Guide must be posted prominently and conspicuously on or in the vehicle when car is available for sale so both sides can be read. You can post in a window or hang it from the rear view mirror, or under a windshield wiper. You may remove it for a test drive, but replace it when the test drive is over. Violations may be subject to penalties of up to $11000 per violation in Federal Trade Commission enforcement actions. That includes displaying a Buyer's Guide that is not filled out correctly. If you conduct the transaction in Spanish you must post a Spanish language Buyer's Guide. The exact language, spacing, format, size, type size, and color are dictated by the FTC. It is your responsibility to be sure that the guide you choose to use meets the FTC requirements. If there is a signature line on the Buyer's Guide it must be accompanied by specific language and that is where the customer must sign. They should not sign anywhere else. If a car is offered as is there should be no further writing on the face of the Buyer's Guide. If it is offered with warranted an explanation should be printed. Be sure to fill in the back side with the dealer information including "see for complaints." This can be a person's name or a position, i.e. used car manager, warranty clerk.

5 Every vehicle sold in Washington by a dealer has an 11 1m plied Warranty" that the vehicle will be fit for ordinary driving purposes. This means that the vehicle must be free of major defects, reasonably safe and the average quality of similar vehicles for sale in that price range. The duration and extent of coverage is conditioned on the age, mileage, and price of the vehicle as well as the nature and timing of the problem. Nothing in the law requires a consumer to sign a waiver of implied warranty rights under any circumstances. In addition a dealer may not waive the safety requirements that a dealer must meet in order to sell the vehicle. It must be legally safe to operate. You may negotiate an agreement with the customer to waive the implied warranty only if: There is an explicit discussion of warranty terms; The customer is accurately informed of the consequences of Purchasing the vehicle as is; the waiver lists the quality and characteristics not being covered; the customer does not purchase and extended service contract; the customer knowingly and voluntarily assumes all risk of costs of repairs due to defects in the vehicle. The implied warranty negotiation form should be signed by the customer. It is important for the dealer to understand. That if the dealer gives limited written warranty or if the customer purchases and extended service contract within 90 days of purchases then the implied warranty cannot be waived. If the dealer provides a limited warranty or a service contract is purchased then the customer will have both the protection of the service contract and/or limited warranty and the implied warranty of merchantability. The burden is upon the dealer to show effective disclaimer/waiver of warranty. Courts have a consistently held that written disclaimer without explicit negotiation and particular disclosure of the qualities and characteristics which are not being warranted is insufficient.

6 CONTINUING EDUCATION SUMMER CREDIT These are True/False questions 1. Monies paid out on a dealer bond must be paid back by the dealer. 2. Dealer bonds are optional depending on the size of the dealership. 3. You have 30 days to notify DOL of a location change. 4. Buyer's Guides must be posted so that both sides can be read. 5. If there is a signature line on the back of the Buyer's Guide the customer may sign on the front of the guide under No Warranty if that is how the car is being sold. 6. A vehicle sold outside of warranty should have the implied warranty procedure followed, verbally and in writing. 7. If you sell a vehicle contract, (extended warranty) you still should do the implied warranty. 8. Vehicles 10 years old or older do not need to have Buyer's Guide in them. 9. The burden is on the dealer to show effective disclaimer/waiver of warranty. 10. If you have a written disclaimer but have not done explicit negotiation that is insufficient. Name: Title Dealership Name: Dealer# Mailing Address: Telephone: Zip Fax Dealer License Ex pi ration Date: Signature: Fax to: or send to: WSIADA PO BOX 1837 Auburn, Wa 98071

7 WASHINGTON STATE INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION MOTOR VEHICLE DEALER CORRESPONDENCE COURSE WINTER 2012

8 BUSINESS HOURS/SIGNAGE You must have a commercial building with attached utilities located in the state of Washington and comply with local zoning and other land use ordinances. This means you need a land line phone and business listing in the local yellow pages. The required books and records must be kept at the place of business. The dealer must provide evidence of leasehold, rental of ownership of the property where the business will be located. If more than one dealer is at the location all records, office facilities, inventory and signs must be separate. The building must be easily accessible and open to the public and representatives of the department at reasonable times. There must be a sign containing the name and nature of the business, (such as Auto Sales), permanently attached to the land or building which is clearly visible from the major avenue of traffic. The purchase documents should be signed at your licensed location. The dealer must maintain normal business hours. This includes but not limited to 10 Am to 4 Pm five days each week. Business hours should be posted by the front door. When a dealer closes during normal business hours, a sign must be posted on the main door stating when he/she will be open for business and how he/she may be contacted. A Wholesale dealer must list storage facilities with the department and maintain a telecommunications system. A sub-agency is a place other than the principal location when the dealer does business. A separate license is required for each sub-agency including an additional bond. Offsite sales are considered sub-agencies. According to the Department of Licensing a frequent violation is failure to maintain a proper business location and selling from other than licensing location. A second major violation is not transferring title within 45 days. Dealers should be online with e-permitting which monitors the timeline closely. When you sell a car you need to know where the title is and have all the documents, i.e. odometer statements, ready to take to licensing for a timely transfer. Any overcharge in license fees needs to be refunded and records kept of the refunds.

9 1. Attached utilities means you 6. Business hours must be posted need a landline and phone near the front door. listing in the local yellow pages. TRUE FALSE TRUE FALSE 2. You must keep your books and 7. A dealer must never close records at your home office and during regular business hours. take them to the business TRUE FALSE location when requested by 8. A wholesale dealer must list Department of Licensing. storage facilities with TRUE FALSE Department of Licensing. 3. You must show evidence of TRUE FALSE lease or ownership of your 9. An off-site sale must have a business. license and bond, it is a sub- TRUE FALSE agency. 4. You must have a sign stating the TRUE FALSE name and nature of the 10.The number 1 violation with business. Department of Licensing is not TRUE FALSE transferring title within 45 days. 5. The purchase documents may TRUE FALSE be signed off premises if it more 11.AIIIicense overcharges must be convenient for your customer. refunded no matter how small. TRUE FALSE TRUE FALSE Name: Dealership Name: Mailing Address: Telephone: Dealer License Expiration Date: Signature: Title: Dealer Number: Zip: Fax: Fax To: Or send to: WSIADA PO BOX 1837 Auburn, Wa 98071

10 WASHINGTON STATE INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION MOTOR VEHICLE DEALER CORRESPONDENCE COURSE SPRING 2012

11 FTC PERSPECTIVES By lesley Fair SPRING 2012 last month, the FTC announced it had reached settlement orders with five dealerships- Billion Auto in Sioux Falls, S.D., Frank Myers Auto Maxx in Winston-Salem, N.C., Key Hyundai in Manchester, Conn., Hyundai of Milford in Milford, Conn., and Ramey Motors in Princeton, W.V.- requiring them to stop running ads in which they promised to pay off their customer's trade-in no matter how much was owed on the vehicle. The FTC charged that the ads, which ran on the dealer's websites and YouTube, were deceptive because if the loan balance exceeded the trade-in's value, the difference was rolled into the customer's new loan or required to be paid by the customer out of pocket. No fines were levied and no criminal charges were brought by the FTC. The consent order, which was agreed to by all five dealerships, requires them to stop running the ads and prohibits them from using similar language- or misrepresenting any other facts- in the future ads. It also requires them to keep copies of all ads or promotional materials for FTC inspection for the next five years and provide copies of the order employees and any other personnel involved in the dealership's operation. In addition, Billion Auto, the Hyundai dealerships and Ramey Motors, which were cited for violations of the Truth in lending Act and Regulation Z, are required to include "clear and conspicuous" disclosures regarding credit terms of annual percentage rate in its ads. Billion and the Hyundai stores were also ordered to make similar disclosures regarding their leasing operations. You've seen the ads: "We'll pay off your trade no matter what you owe... even if you're upside down." It's an attractive claim to people struggling with their finances. But law enforcement settlements with five dealers from around the country announced by the Federal Trade Commission demonstrate the importance of giving people the straight story when making promises about trade-ins where negative equity is involved. The cases are the first of their kind brought by the FTC. According to the agency, the dealers misrepresented to consumers that they would no longer be responsible for paying off the loan balance on their trade-in, even if it was greater than the car's actual trade-in value. How did they convey that claim? Through statements like: "Uncle Frank wants to pay {your trade} off in full, no matter how much you owe." (Frank Myers Auto Maxx) "I want your trade no matter how much you owe or what you're driving. In fact, I'll pay off your trade when you upgrade to a nicer, newer vehicle." (Key Hyundai and Hyundai of Milford) "Ramey will pay off your trade no matter what you owe... even if you're upside down." (Ramey Motors) "Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off you're your car." ( Billion Auto- that as drove moving forward, turning it upside down, and then flipping it right-side up again) So what was really going on? According to FTC, the dealers rolled the negative equity into the consumer's new vehicle loan or, in the case of one dealer, required buyers to pay it out of pocket as part ofthe down payment. The complaints allege the despite the dealer's claims, consumers still ended up responsible for paying the difference between the trade-in loan balance and the vehicle's value. Thus, said the FTC representations that

12 the dealers would "pay off' what consumers owed were false and misleading. In addition, complaints in three of the allege violations of the Truth in Lending Act and Regulation Z for failing to disclose certain credit-related terms. Two complaints charge violations ofthe Consumer Leasing Act and Regulation M. The proposed orders prohibit the five dealers from misrepresenting that they'll pay the remaining loan balance on a consumer's trade-in so the consumer will have no further obligation for any amount of that loan. The orders also ban misrepresentations about any other fact related to financing or leasing a vehicle. For Billion Auto, Key Hyundai and Ramey Motors- the companies charged with violating the Truth in Lending Act and Rec Z- those orders mandate future compliance with the law, including clear and conspicuous disclosures when advertising certain terms related to consumer credit. The orders also require that if any finance charge is advertised, the rate must be stated as an "annual percentage rate" or "APR " What about Key and Billion, the dealers charged with Consumer Leasing Act and Reg m violations? They'll have to clearly and conspicuously make all lease-related disclosures the law requires, including the monthly lease payment. For those who follow what's going on at the FTC regarding the motor vehicle industry, this isn't the first they've heard of these practices. Negative equity financing was discussed at "The Road Ahead," the FTC's public roundtables about consumer protection issues that may arise in the sale, financing or lease of motor vehicles. In conjunction with the case announcements, the FTC released a new publication, "Negative Equity Ads and Auto-Trade-Ins," to help consumers understand ads like this. It's available at "Permission from April 2012 issue NIADA magazine"

13 ADVERTISEMENT /DOC FEES In addition dealers must disclose the name of the dealership, or use the word "dealer" or "dlr" This applies to newspapers, e-bay, Craigslist, Auto trader, etc. For display ads (multiple cars), you can state "VINs posted at store", but then you must do that and keep a copy of the ad and list of VIN numbers on file for one year. You must disclose all material limitations of an offer including expiration date. Example=offer expires 4/30/12. You must sell at the advertised price regardless of trade in price and at no time may inflate the selling price to compensate for negative equity. You may not have a different price on your web site, i.e. web specials (or any other place), for the same car. You cannot offer 100% financing when more than one security agreement of financing institution is involved. You cannot state "no down payment" when a down payment is involved. You must clearly and conspicuously disclose all mandated credit and lease terms, including lease with option to purchase and explain "triggering" terms like monthly payment and inception fees. Define words or phrases like OAC, Cap Cost Reduction, etc. If you offer later model used cars and you call them fleet-lease cars or program cars you must explain that they are USED cars. If you change a negotiable documentary service fee of up to $150 it must be under the following conditions. It is disclosed in writing before the execution of the purchase and sale agreement that it is a negotiable fee, the type must be the same size as the rest of the document but standout by being boldface, italic, capitalized, underlined, or otherwise is conspicuous. The documentary service fee cannot be represented as a state mandated fee; it is a separated designated line item on the purchase order. You disclose in any advertisement that it is a negotiable documentary service fee of up to $150 that may be added to the sales price or capitalized cost. list the number of vehicles for sales at the ad price. Use actual photos, not clip art. Don't use general misrepresentations, "We have the lowest prices, we have the best prices." The print has to be large enough to be read and close to what is being advertised. Can the reader easily read and understand the disclosure? False reference pricing. If you are offering a discount from a former price that former price had to be real.

14 1. It is OK to advertise. "We pay off your trade, paid for or not, even if you're upside down TRUE FALSE 2. The Federal Trade Commission understands that this is common practice and customers understand that the balance of the trade in will be rolled over. TRUE FALSE 3. This practice violated Regulation Z, Truth in Lending act. TRUE FALSE 4. The Federal Trade Commission has published a new document available online to help dealers and consumers. TRUE FALSE 5. You must identify yourself as a dealer in any advertisement TRUE FALSE 6. You don't have to sell at the advertised price if you take a trade in TRUE FALSE 7. If you offer 100% financing you can only go to one source TRUE FALSE 8. Any industry phrases must be defined so the customer knows what they are TRUE FALSE 9. If you advertise a "program" car or a "fleet" car that is sufficient TRUE FALSE 10. If you charge a $150 Documentary Service Fee it is best to lead the customer to think it is a state mandated fee TRUE FALSE 11. You must list the number of vehicles available at the price listed in the ad. TRUE FALSE 12. It's fair game to "beat the competition" in your ads" We have the lowest prices in town!" TRUE FALSE 13. False reference pricing refers to discounting from a fake former price TRUE FALSE 14. The print must be clear, readable, and close to what is being described TRUE FALSE 15. The reader must be able to understand the disclosure TRUE FALSE Name: Dealership Name: Mailing Address: Telephone: Dealer license Expiration Date: Signature: Title: Dealer Number: Zip: Fax: FAX TO: Mailing: Po Box 1837 Auburn, 98071