Page 13 - MIADA-Q2 2023

supervised institutions that the use of for the Northern District of Ohio granted COMPLIANCE TIP
U.S. dollar LIBOR panels will end on June the motion. The buyer argued that the
30, 2023. The agencies also reiterated their dealership violated TILA by improperly How do you handle negative equity on your
expectations that financial institutions with crediting her down payment to the deals? Although our Case of the Month
USD LIBOR exposure should complete their negative equity on her trade-in rather was favorable to the dealer, it highlights the
transition of remaining LIBOR contracts than to the purchase price of the BMW. importance of properly handling negative
as soon as practicable. The agencies stated The court found that the RISC clearly equity in the transaction. In this case, the
that failure to adequately prepare for provided that her down payment was court found that dealer’s Retail Installment
LIBOR’s discontinuance could undermine applied to reduce the negative equity on Sales Contract clearly provided that down
financial stability and institutions’ safety the Jeep. Moreover, the court found that payment was applied to reduce the negative
and soundness and create litigation, even if there was a TILA violation, the equity. However, the Truth in Lending Act
operational, and consumer protection one-year statute of limitations ran on and Regulation Z provide two acceptable
risks. Two days after the issuance of the the buyer’s claim five months before she methods for disclosing negative equity on
joint statement, the Consumer Financial brought this action. Therefore, the TILA the RISC – known as the “netting” or “non-
Protection Bureau issued an interim final claim failed. The buyer also argued that the netting” methods. You’ll want to make sure
rule, effective May 15, 2023, which amends dealership violated the FDCPA. The court you’re doing it right like this dealer. Time to
Regulation Z to reflect the enactment of the found that because the FDCPA governs call or text your knowledgeable compliance
Adjustable Interest Rate (LIBOR) Act and the conduct of debt collectors and there lawyer! n
its implementing regulation promulgated were no allegations that the dealership
by the Federal Reserve Board. The interim participated in the collection of the buyer’s Eric (ejohnson@hudco.com) is a Partner
final rule is intended to facilitate the debt, the FDCPA claim also failed. Finally, in the law firm of Hudson Cook, LLP,
transition of consumer loans that currently the buyer alleged that she was entitled to Editor in Chief of CounselorLibrary.com’s
use the LIBOR index to other replacement rescind the transaction under the OCSPA. Spot Delivery®, a monthly legal newsletter
indices. Comments on the interim final Because the court dismissed the federal for auto dealers and a contributing
rule are due within 30 days after the date of claims, it declined to exercise jurisdiction author to the F&I Legal Desk Book. For
publication in the Federal Register. over the state law claim. See Barnes v. information, visit counselorlibrary.com.
Santander Consumer USA, Inc., 2023 U.S. ©CounselorLibrary.com 2023, all rights
On April 26, the Consumer Financial Dist. LEXIS 47903 (N.D. Ohio March 21, reserved. Single publication rights only to
Protection Bureau’s Office of Research 2023). the Association. HC# 4858-2456-5854.
issued a blog post and working paper
on the incidence of civil judgments and
implications for consumers, including
wage garnishment and asset seizures.

CASE(S) OF THE MONTH It’s time to change

Applying Down Payment to Negative your approach to F&I compliance
Equity on Trade-in Rather than to with this special offer...
Price of Vehicle Aligned with RISC’s
®
Language and Did Not Violate TILA: Subscribe to Spot Delivery and, at no
An individual bought a used BMW from additional charge, we will send you a
a BMW dealership. In connection with copy of your choice of any of
the purchase transaction, the buyer traded our legal compliance books,
in her Jeep on which she owed $4,775 CARLAW , CARLAW II
®
®
more than the Jeep’s value. The dealership ®
applied the buyer’s $2,000 down payment Street Legal or CARLAW Reloaded.
to the negative equity on the trade-in and To order, visit us at
January/February 2019
rolled the remaining $2,775 in negative Vol. 21, Issue 7 Delivery ® www.counselorlibrary.com/offer/spot
equity into the new financing. The buyer SPOT CounselorLibrary ® , publisher of
®
sued the dealership and the assignee of her A Monthly Legal Update for Auto Dealers and Finance Companies from IN THIS ISSUE: or call us at 877.464.8326.
Dealers Are from Mars, Finance Companies
retail installment sale contract for violating, DEALER/BANK RELATIONS 5 Federal Law Also follow us on 000000
What Access Problems?
By Thomas B. Hudson

Are from Venus

Vendor’s Single Interest
among other laws, the Truth in Lending By Thomas B. Hudson* 6 Insurance Issues
Over the years, I have represented both dealers who enter into retail
Insurance—Important Pesky Details

installment contracts and the banks and finance companies that buy the

By Elizabeth C. Yen
RICs from the dealers. In working with folks from both sides of this

Act, the Fair Debt Collection Practices Act, divide, I quickly concluded that, in viewing dealership financing, the 8 Privacy
dealers were looking through one end of the binoculars, while the banks
The Brand-New Right to Privacy in

and finance companies were looking through the other end.
California
I’ve found that there are few dealers who understand that, in a typical
By Patricia E.M. Covington

and the Ohio Consumer Sales Practices RIC transaction, the dealer is the creditor. Many (most?) dealers feel that 10 Commentary
they are in the business of selling cars and that the financing of those sales
transactions is the job of the bank or finance company, entities that dealers
Post-Election Musing
regularly erroneously refer to as “lenders.” These dealers might consider

By Michael A. Benoit

buyers and in getting the RICs and other related documents signed by
Act. The dealership moved to dismiss the themselves as agents in gathering credit and other information from car 11 Arbitration

Arbitration Clause in Vehicle Retail
the buyers. But, if you asked these dealers if they financed their buyers’
Installment Contract Applies to

Buyers’ Defamation Claim Against

complaint, and the U.S. District Court purchases, they would deny it. (see DEALER/BANK RELATIONS, page 2) Salesperson
By Latif Zaman
Words (and Texts) Matter: When “As Is”
WARRANTY LAW 12 Jurisdiction
Sued Out of State?

Does Not Mean “As Is”
By Nicole F. Munro
By Catharine S. Andricos and Christopher J. Capurso* 13 Marketing
Like to Live Dangerously? Have I
When you sell something “as is,” what do you generally understand
that to mean? Our guess is something along the lines of “what you see is Got a Deal for You! MSIADA MISSISSIPPI DEALER Q2 2023 | 13

By Eric L. Johnson
When a used car is sold “as is,” the Federal Trade Commission requires

the dealer to post a Buyer’s Guide on the car, with a checkbox indicating Protection Bureau
what you get.” 14 Consumer Financial
that the car is sold “AS-IS – NO DEALER WARRANTY” (along with a
CFPB Watch
statement—“THE DEALER DOES NOT PROVIDE A WARRANTY
By Michael A. Benoit
FOR ANY REPAIRS AFTER SALE”). In a recent case, a federal district
(see WARRANTY LAW, page 3)
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