Page 38 - GIADA-May-2018-Final

THE CARLAWYER ©

The CARLAWYER ©

By Thomas B. Hudson and Nicole F. Munro

Here’s our monthly article on legal product … has had the warranty seal on force-placed collateral protection insurance
developments in the auto sales, finance and the [product] altered, defaced, or removed. on consumers’ vehicles that were already
lease world. This month, the action involves The FTC staff requested that each company covered by insurance policies voluntarily
the Bureau, the Office of the Comptroller review promotional and warranty materials obtained by the consumers. In instances
of the Currency (OCC), the Federal Trade to ensure the materials do not state or imply where the company appropriately force-
Commission (FTC), the U.S. Senate and the that warranty coverage is conditioned placed insurance on consumers’ vehicles, the
New York Office of the Attorney General. on the use of specific parts or services. In company improperly maintained the force-
As usual, this month’s article features our addition, the FTC staff requested each placed insurance policies on the consumers’
“Case of the Month.” company to revise its practices to comply accounts even after the consumers had
with the law. The letters state that FTC staff obtained adequate insurance on their
Note that this column does not offer legal will review the companies' websites after 30 vehicles and provided proof of insurance.
advice. Always check with your lawyer to days and that failure to correct any potential Wells Fargo also allegedly failed to provide
learn how what we report might apply to violations may result in law enforcement sufficient refunds of fees associated with
you, or if you have questions. action. The press release about the action the improper forced-placement of collateral
can be found at https://www.ftc.gov/news- protection insurance. The consent order
This Month’s CARLAWYER events/press-releases/2018/04/ftc-staff- requires the company to undertake certain
©
Compliance Tip warns-companies-it-illegal-condition- activities related to its risk and compliance
warranty-coverage. management, and the company has begun
If you offer a warranty with the cars you sell, voluntarily providing remediation to
pay close attention to the FTC warning on Senate Rejects “Guidance.” On April 18, consumers to address deficiencies cited in
warranties described immediately below. If the U.S. Senate passed a joint resolution the consent order. The Bureau assessed a
your warranty contains provisions like the using its powers under the Congressional $1 billion penalty against Wells Fargo and
ones the FTC objects to, it’s time to sit down Review Act to vacate the Bureau's March credited the $500 million penalty collected
with your lawyer for a rewrite. 2013 guidance for indirect auto lenders by the OCC toward the satisfaction of its
on compliance with the Equal Credit fine. Information about the action can be
Federal Developments Opportunity Act and Regulation B. The found at https://www.consumerfinance.
joint resolution passed with a 51-47 vote. gov/policy-compliance/enforcement/
Warning to Warrantors. On April 10, the In December 2017, the Government actions/wells-fargo-bank-na-2018/.
FTC announced that its staff sent warning Accountability Office concluded that the
letters to six major companies that market CFPB's guidance was, at the time of its So, there’s this month’s report. See you next
and sell cars, cellular devices, and video issuance, a rule subject to the Congressional month!
gaming systems in the United States. The Review Act. The joint resolution now heads Case of the Month
letters reportedly warn that FTC staff has to the House for a vote, where it is expected
concerns about the companies' statements to pass. The president is also expected to Dealership's Fraudulent Misrepresenta-
requiring consumers to use specified sign the joint resolution. tions Regarding Condition of Used Vehicle
parts or service providers to keep their Invalidated Implied Warranty Disclaimer:
warranties intact. Unless warrantors Did You Say a Billion Dollar Fine? On April During a test drive of a truck with a salvage
provide the parts or services for free 20, the Bureau announced a settlement title, the potential buyer noticed that the
or receive a waiver from the FTC, such with Wells Fargo, N.A. in a coordinated check-engine light was on and the truck
statements are generally prohibited by the action with the OCC. The Bureau alleged smoked. The salesperson explained that
Magnuson-Moss Warranty Act. Similarly, that Wells Fargo’s policies and practices the truck smoked because it was a diesel
those statements may be deceptive under regarding force-placed collateral protection and that the check-engine light was due to
the FTC Act. Here are some examples insurance on vehicles that are collateral for a faulty oxygen sensor that would be easy
of provisions the FTC staff questioned: loans (probably retail installment contracts) to fix.
(1) The use of [company name] parts is it originated or acquired were unfair under
required to keep your … manufacturer's the Consumer Financial Protection Act The buyer bought the truck "as is" and
warranties and any extended warranties (CFPA). In addition, the Bureau alleged received a third-party vehicle protection
intact; (2) This warranty shall not apply if that certain fees Wells Fargo charged plan at no cost. Within days of purchase,
this product … is used with products not mortgage loan borrowers for extensions the truck lacked power and continued to
sold or licensed by [company name]; and on interest rate locks were unfair under the smoke. The dealership refused to diagnose
(3) This warranty does not apply if this CFPA. Specifically, Wells Fargo allegedly or repair the truck. The buyer had the truck
36 | GIADA Independent Auto Dealer MAY 2018