New Buyers Guide Requirements, Changes to the Buyers Order & RISC Issues

1. New Buyers Guide Requirements, Changes to the Buyers Order & RISC Issues By M. Christina Floyd, Esq. VIADA Convention - July 19, 2013

2. Buyers Guide Requirements • The Buyers Guide is intended to prevent verbal misrepresentations and omissions of key purchasing and warranty information • Contains disclosures for educating the consumer: • “As Is” sale; • Warning about verbal promises that are not put in writing; • Suggesting pre-purchase inspections; and • Listing the 14 major systems of a vehicle along with the things that could go wrong with these systems. • If a dealer offers a warranty, they must disclose it on the Buyers Guide, along with the warranty's basic terms. • Including what percentage of repair costs dealer will pay

3. Buyers Guide Requirements (cont.) • Dealer must post a Buyers Guide on the vehicle before can offer it for sale, discuss it with a customer, or let a customer look at it. • Must be posted prominently and in plain view. • Can be hung from mirrors and removed for test drives, as long as it is replaced afterwards. • Includes vehicles offered under consignment • FTC “warning” to 11 Jonesboro, AK dealers • Must give buyer the original or a complete copy of the Buyers Guide at the time of sale.

4. Buyers Guide Requirements (cont.) • The Buyers Guide is not the Warranty! • If a warranty is offered, there must be a separate document stating the warranty terms/conditions. • Service Contract is not a Warranty – Check the Right Box! • The Buyers Guide must be incorporated into the sales contract and the incorporation provision must also be stated in Spanish. • Violation of the Used Car Rule can result in civil penalties up to $16,000 for each violation • Every vehicle that does not have a compliant Buyers Guide is a violation, so they can add up fast!

5. New Buyers Guide Requirements December 12, 2012 the FTC announced changes to the Used Car Rule/Buyers Guide • Revised Spanish Translation of Buyers Guide • If transactions are advertised and/or conducted in Spanish, must use the Spanish version. • Required to be in use by February 11, 2013 • FTC Notice noted dealers can use their "remaining stocks" but no formal permission was given. • Dealers cannot rely on this note if audited!

6. Revised VIADA Buyers Order • Changes made to reflect new legislation & regulations: • Sales & Use Tax now 4% • Retail Sales Tax increase to 5.3% • NOVA & Hampton Roads Higher Rate of 6% • $64 Additional Registration Fee for Alternative Fuel Vehicles • Pro-Rated When Tags are Transferred • Spanish Translation of Buyers Guide Disclosure

7. Revised Buyers Order (cont.) • Dispute Resolution Provisions • Mediation Followed by Arbitration • Why Mediate? • Very Effective & Much Lower Cost vs. Litigation • Most Disputes Involve Communication Issues • Work Towards a Mutual Resolution vs. Judgment • Fosters Good Will • Confidential and Non-Public • Where do you find a mediator? • Virginia Mediation Network • If not resolved in mediation, arbitrate!

8. Revised Buyers Order (cont.) • Arbitration • Maybe more efficient & less costly than litigation • Greatest Benefit = Conducted in Private • Dealer Operations/Practices Not Part of a Public Record • Potential Customers are not Present • Arbitrator’s award is legally enforceable with no right of appeal and limited review • CFPB Looking to Eliminate Consumer Arbitration

9. RISC Revisions & Issues • Various Revisions are being made to the Retail Installment Sales Contract forms to ensure compliance & tighten them up • Rule of 78’s Version Issue • Use is Legal but Discouraged - Simple Interest the Norm • Rule of 78’s is an antiquated way to calculate finance charge when customer pays off balance early • Consumer obligated to pay principal plus full amount of interest that will accrue over the entire term of the contract • Use of Computer Programs to Generate RISC and Calculate Interest Eliminates Need for Rule of 78’s

10. RISC Issue – Rule of 78’s (cont.) • Consumer Attorneys: “Prepayment Penalty” • “Buy Here, Pay Here” Dealers are Targets • Congress Outlawed if Term Longer than 61 Months • CFPB Targeting Dealer Finance Practices • Outlawed in 17 states, but not VA – yet!

11. Questions M. Christina Floyd, Esq. 757-213-6973 or chris@hrgclaw.com