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THE CARLAWYER ©

The CARLAWYER ©

By Thomas B. Hudson and Nicole F. Munro
Here’s our monthly article on legal intended, or had the legal authority, to take State and local law enforcement agencies
developments in the auto sales, finance those actions. also enforce the recently amended Rule.
and leasing world. This month, the action
involves the Bureau of Consumer Financial The Bureau also alleged that NCA and Task Force Attacks on Several Fronts. On
Protection, the Federal Trade Commission, Hochstein continued placing debt with the July 11, the Department of Justice, the
the Department of Justice, and the companies for collection with knowledge or Bureau and the Securities and Exchange
Securities and Exchange Commission. reckless disregard of the companies’ illegal Commission announced the establishment
As usual, this month’s article features our and harmful consumer debt collection of the Task Force on Market Integrity
“Case of the Month.” practices. In addition, NCA and Hochstein and Consumer Fraud, created by the
allegedly sold consumer debt portfolios President pursuant to an Executive Order.
Note that this column does not offer legal with a face value of more than $700 million The Task Force will provide guidance
advice. Always check with your lawyer to to one of the debt collection companies for the investigation and prosecution of
learn how what we report might apply to with knowledge or reckless disregard of the cases involving fraud on the government,
you, or if you have questions. company’s illegal and harmful consumer the financial markets, and consumers,
debt collection practices. The consent including cyber-fraud and other fraud
This Month’s CARLAWYER order imposes a judgment for civil money targeting the elderly, servicemembers, and
©
Compliance Tip penalties of $3 million against NCA and $3 veterans.
million against Hochstein, but full payment
Have you been keeping an eye on the of those amounts is suspended upon NCA’s Changing of the Guard? On July 9, Mick
Federal Trade Commission’s requirement and Hochstein’s payment of a smaller Mulvaney, acting director of the Bureau,
for dealers to use a revised version of the amount. announced that he appointed the Bureau’s
Buyer’s Guide? As you’ll see from the principal policy director, Brian Johnson,
description below of the FTC’s multistate Sweeping With a New Broom. On July as deputy acting director. The President
enforcement sweep investigating the level 12, the FTC and 12 "partner agencies" in recently nominated Kathy Kraninger to
of dealer compliance, the Feds are serious seven states conducted the first compliance be the director of the Bureau. Kraninger
about enforcing the requirement. If you are sweep of car dealerships since the amended is currently an associate director at the
not fully up the compliance curve on this Used Car Rule took effect earlier this year. Office of Management and Budget. Mick
one, you’d better get some schooling about The amended Rule requires dealerships Mulvaney will continue to serve as acting
the new form and its use. to display a revised "Buyers Guide," director until Kraninger is confirmed by
containing warranty and other important the Senate.
Federal Developments information, on each used car they offer
for sale. The 20-city sweep, conducted Case of the Month
Bureau Moves Again on Debt Collection. between April and June 2018, revealed
On July 13, the Bureau announced that it Buyers Guides on 70 percent of the more With the CFPB’s announced focus on debt
obtained a consent order with National than 2,300 vehicles inspected, with almost collection, dealers and finance companies
Credit Adjusters, LLC, and its former half of those displaying the revised Buyers will no doubt face more challenges to
CEO and part-owner, Bradley Hochstein, Guide. Of the 94 dealerships inspected, 33 their debt collection efforts. With so many
resolving allegations that their use of a had the revised Buyers Guide on more than ways debt collectors can be challenged,
network of debt collection companies to half of their vehicles, and 14 had revised compliance minded folks should also zero
collect consumer debt on NCA’s behalf Buyers Guides on all of their used cars. in on collections compliance. Here’s a good
violated the Consumer Financial Protection example of why that is so.
Act and the Fair Debt Collection Practices The FTC notified each dealership of the
Act. The debt collection companies allegedly results of the inspections and provided After Leonides Guevara defaulted on
engaged in unlawful debt collection acts material to help them come into full a vehicle-secured credit agreement
and practices, including representing that compliance with the amended Rule. with Hyundai Motor Finance, Hyundai
consumers owed more than they were Dealerships not displaying the revised repossessed the vehicle and sold it. A
legally required to pay and threatening Buyers Guide can expect follow-up deficiency remained after the sale, but
consumers and their family members with inspections to ensure they are complying Hyundai anticipated certain refunds from
legal actions such as lawsuits, visits from with the amended Rule. Under the FTC the cancellation of ancillary products
process servers, and arrest, when neither Act, dealerships that fail to comply face that were sold with the vehicle that would
NCA nor the debt collection companies penalties of up to $41,484 per violation. reduce the amount of the deficiency.

54 | GIADA Independent Auto Dealer AUGUST 2018