aiada oct/nov 2012

PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . a l a b a m a i a d a . c o m

ALABAMAI N D E P E N D E N T A U T O M O B I L E D E A L E R S A S S O C I A T I O N

• SURVIVING A GOVERNMENT AUDIT• IS AN RFC RIGHT FOR YOU?• KEYS TO A WELL-RUN BHPH OPERATION

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OCTOBER/NOVEMBER 2012

Carrying on a Legacy: Joe Smith Jr. Keeps His Grandfather’s 70-Year-Old Dealership Going

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OCTOBER/NOVEMBER 2012 A I A D A

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PRESIDENTCharles MoringMidland [email protected]

PRESIDENT ELECTKen [email protected]

VICE PRESIDENTO’Neal [email protected]

SECRETARY/TREASURERRex [email protected]

CHAIRMAN OF BOARDRandy Burns [email protected]

DIRECTORS Barry SearcyMuscle [email protected]

John DunnSylacaugajohndunnauto@ charterinternet.com

Lance [email protected]

Willie [email protected]

Tommy [email protected]

John [email protected]

Paul [email protected]

Robert [email protected]

Tim [email protected]

Chad [email protected]

Jay [email protected]

Randy [email protected]

Larry [email protected]

Darrin [email protected]

Cary [email protected]

Heath [email protected]

Kelly [email protected]

Association AttorneysJohn Martin Galese and Jeff IngramGalese & Ingram PC

EXECUTIVE COMMITTEE

WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

04 Q&A with Darrell Pettie08 Q&A with Joe Smith Jr.12 Surviving a Government Audit16 Is an RFC Right for You?21 Keys to a Well-Run BHPH Operation

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected] Alabama Independent Automobile Dealers Association is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of AIADA or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2012 by NIADA Services, Inc. All rights reserved. Visit the NIADA Web site at www.niada.com.STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected] DIRECTOR Christy Haynes • [email protected] Nieman Printing

AIADA OFFICE120 VULCAN ROAD • BIRMINGHAM, AL 35209PHONE: (205) 942-1000 FAX: (205) 942-3565WEBSITE: WWW.ALABAMAIADA.COMTO BECOME A MEMBER OF AIADA, PLEASE CALL (800) 239-2423

ADESA ...............................................................11Ally ......................................................................7AutoTrader.com .....................................Back CoverDealer Center ....................................................13 Dealer Services Corp (DSC) ................................9Dodah.com ..........................................................5Manheim.com ....................................................15Manheim Nashville .....................Inside Back CoverNIADA Certified ..................................................21STARS GPS ........................................................18Sterling Credit ............................ Inside Front CoverUnited Acceptance .............................................19Voisys ................................................................26Westlake Financial .............................................17

insideLetter From the President

Dear AIADA Members:I send to you greetings and hope 2012 has been a good and profitable year for all

of you thus far. I also want to thank you for allowing me to serve as the president of your association. It is an honor, and I am dedicated to serving our industry to make it better for all.

Something I want to stress is that this is your association, the member dealers of Alabama. The association works for you, providing forms that are legal and compliant, many which are only available through AIADA. It helps you create relationships with auctions, service policy companies, lenders, attorneys and more.

AIADA is your voice in Montgomery on legislative issues. A portion of your dues goes to NIADA for your membership in the national organization. NIADA offers many services to our member dealers and works diligently in Washington, D.C., and across the nation on national legislative issues. It works closely with various state agencies like Title Section and License Division. The list goes on and on.

It is our goal to build our association, educate our members and have a good working relationship with others that serve the used automobile industry.

Feel free to contact me or our office if we can serve you in any way. In your service, I amCharles MoringAIADA president

NIADA.TV Now available at www.niada.tv:• Building an Effective

Dealership Website with Michael D. Jackson

• Tracking Devices with Jay Rose

• Legislative/Regulatory Scene with Shaun Petersen and panel

• Avoiding The Potholes with Ken Shilson

• Feel Unstoppable in 60 Minutes with Ruben Gonzalez

NIADA Dealer 20 Groups NIADA’s new 20 Groups program is designed for NIADA’s independent dealers as they do business today in BHPH, retail or both. Take your profits to the next level. Visit www.niada20groups.com

Note to DealersEach month, we will spotlight a used car dealer and a vendor, referencing a current

benefit, discount or service available to you as a member of AIADA. There are many money-saving opportunities at your fingertips and we want you to grab them!

A S S O C I AT I O N N E W S

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A I A D A OCTOBER/NOVEMBER 2012

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Q&AQ&A with Darrell Pettie

We thought it would be a good idea to hear first-hand from an attendee what it meant to be a part of the 2012 AIADA Convention.

Darrell Pettie, general manager of First Class Auto Sales in Pleasant Grove, Ala., had not attended a convention in more than 10 years, giving him a fresh perspective on the event.

Thanks to Darrell for allowing us to publish his thoughts.

What would you say to a dealer who is thinking of coming to the convention but is not sure if it is worth his or her time?

Darrell: I would be quick to say that the time spent at the convention is an investment in yourself as well as in your business – just being there to gather information first-hand, to ask questions regarding issues that are important to your specific needs of operation and to meet and greet those with whom you do business on a daily basis. In essence, I’d say coming to the convention is time and money very well spent.

What is the No. 1 idea or change you implemented as a result of attending the convention? Or what was the most important information you walked away from the convention with?

Darrell: Well, there were several, but the ones that were immediately implemented included creating a positive “delivery experience” for the customer on the purchase of a vehicle, and providing the customer with a “money envelope” after the closing. You had to have been at the session to understand that one.

Are you considering adding or did you add any new products or services as a result of talking with any of the vendors that participated in the convention? If so, was talking with the vendors at the convention helpful in your decision process?

Darrell: I have added two new finance companies as well as a new vendor for GPS. To be able to talk face-to-face with the vendors was very helpful in making those decisions.

When was your first convention? What kept you from coming to a convention before your first time?

Darrell: I attended my first convention around 2002. I was blessed to be working for a dealer who stressed the importance of being involved in the industry and to invest in yourself. I will forever be grateful for his guidance and mentorship, for without it you would not be speaking with me today.

I N D U S T RY N E W S

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Ladies Auxiliary ReportThis year’s auction was a huge success. Our 50s-themed event

was a lot of fun (some of it at the expense of others). We had several people participate in a bubble gum and hula hoop contest and some threw out their hips doing the twist.

Each year we also give a best-dressed award, and this year’s winners were Charlie Baker and Christy Dailey.

With the generosity and support of our members and vendors, we were able to raise more than $4,000. The money we raise is used for two $1,000 scholarships and the rest is given to local charities or families.

This year’s scholarship winners were Ashley Owen of Harvest, Ala., and Brandon Greenberg of Montgomery. We were also able to give $1,000 each to the Ronald McDonald House and Success by 6, a United Way reading program affiliated with Dolly Parton’s Imagination Library.

Information on the scholarship program can be found on the AIADA home page starting Nov. 1, and in the December issue of the AIADA magazine.

The 2013 convention will be in Gatlinburg, Tenn. The theme will be western, so dust off your boots and cowboy hats and come ready to Boot, Scoot and Boogie. You can also dress as

your favorite country-western singer. The best dressed receives a ticket for the cash drawing that is held on Saturday night.

Any ladies interested in becoming a part of the auxiliary can contact me at [email protected] for information. We meet four times a year to discuss the activities we will be doing at the convention. Ladies, you do not have to come to all the meetings. I can keep you informed by email or phone on what’s happening. We always need help at the convention for decorating, etc.

Again, thank you for your generosity and support to the Ladies Auxiliary.

Sincerely,Sherri McFarlandPresident, Ladies Auxiliary

A S S O C I AT I O N N E W S

Effective Aug. 1, 2012, the Motor Vehicle Division began administering the dealer licensing law. All dealers, wholesalers, rebuilders and reconditioners will be required to use a new online system to file for new licenses or renew existing licenses.

The division’s goals are to streamline the registration and renewal processes through the electronic issuance of licenses, and to standardize and minimize the number of paper documents licensees are required to submit.

The licensing system will be implemented in three phases:

• Beginning Aug. 8, 2012, the system will be available for first-time

regulatory license applicants.• Beginning Aug. 15, franchised

dealers will begin renewing the regulatory license for the 2012-2013 license year.

• Prior to Sept. 1, all other dealers, wholesalers, rebuilders and reconditioners will be notified regarding renewing their regulatory licenses for the 2012-2013 license year.

Once all the application information has been submitted and approved, applicants will receive system-generated emails directing them to print their licenses. This approach enables licensees to receive credentials in a more timely manner while saving the state postage

and processing costs.The Motor Vehicle Division

appreciates the cooperation of the members of the Alabama Independent Automobile Dealers Association who served on the pilot group and tested the new online system. Their input has been instrumental in ensuring the system is user-friendly and permits licensees to obtain the credentials they need.

BY BRENDA R. COONEBRENDA R. COONE IS DIRECTOR OF THE ALABAMA DEPARTMENT OF REVENUE, MOTOR VEHICLE DIVISION. WE WISH TO THANK MRS. COONE FOR CONTINUING THE LEGACY OF COOPERATION WE, AS DEALERS OF ALABAMA, HAVE ENJOYED FOR MANY YEARS WITH THE DEPARTMENT OF REVENUE. ALABAMA IS BLESSED TO HAVE SUCH A DEDICATED PUBLIC OFFICIAL.

I N D U S T RY C H A N G E S

Changes in the Administration of the Dealer Licensing Law

RO M A L I T T L E O F T H E L A D I E S AU X I L I A RY ( L ) A N D PAU L G I A R D I N A , E X E C U T I V E D I R E C T O R O F T H E RO N A L D M C D O N A L D H O U S E C H A R I T I E S O F M O B I L E , A L ( R )

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ESTABLISHED IN 1942, RALPH SMITH MOTORS IS THE OLDEST ACTIVE USED CAR DEALERSHIP IN ALABAMA

Q&A with Joe Smith Jr., President of Ralph Smith MotorsUntil a new AIADA executive director is hired,

a group of volunteers from the board of directors is putting together the magazine. The group unanimously decided to include for the next few issues a series of articles featuring AIADA member dealers from different parts of the state.

John Pigg of Pigg Enterprises in Prattville quickly mentioned he knew the owner/operator of the oldest active pre-owned dealership in Alabama, he greatly respected him, and he would like to do the first feature on that dealership. We agreed that would be a very good place to start this series.

Ralph Smith Motors was founded in Montgomery on March 5, 1942 by Ralph Smith. Joe Smith Jr., Ralph’s grandson, runs the dealership today. John Pigg interviewed Joe at the dealership Aug. 13 to get the story of a family business that is still around and thriving after 70 years – and as an added bonus, some words of wisdom from a man doing an outstanding job of carrying on a family tradition and running a successful Buy Here-Pay Here dealership in a tough economy.

What’s your official title around here?I am the owner and president, but my

grandfather, Ralph Smith, was and always will be “The Prez” around here. Let’s just say I run the place.

I didn’t major in math, but according to my calculations your family has been here selling cars for 70 years. What’s the story of Ralph Smith Motors?

Ralph O. Smith was raised humbly in Balm, Ala., a small country town in Elmore County. The story goes when Ralph found out where he was, he “went to town.” He began selling sewing machines at age 15, with a ninth-grade education.

Ralph soon progressed from sewing machine salesman to selling life insurance. In doing so, he sold insurance to people in the automobile business and started building relationships with them. They noticed his skill as a salesman and quickly encouraged him to give the car business a try.

Hal Lamar, sales manager for McGough Chevrolet – Capitol Chevrolet today – gave Ralph his first job as a salesperson. Ralph quickly fell in love with the car business. He left Capitol Chevrolet to manage Jim Barnett Motors in Montgomery and subsequently opened his own used car business – S&O Motors. It was started by Ralph Smith and Mr. N. O’Connell. O’Connell was a carnival worker who later became restless to return to the carnival life, and Ralph bought him out. All Ralph had was $750. He went to a loan company and borrowed the remaining money to buy out Mr. O’Connell.

Ralph Smith Motors was founded on March 5, 1942. Ralph began financing his own vehicles in 1957 in an effort to help get financing for people lending institutions would not think of touching. Soon after, John T. Morgan Jr., affectionately known as “Junior,” was walking past the original Molton Street car lot. He was just off the bus from the Navy, and Ralph hired him. He managed Ralph Smith Motors until his death in 1995.

Your math was correct. Ralph Smith Motors is currently celebrating its 70th year. That’s not bad, considering it all started with a young sewing machine salesman with a ninth-grade education who decided to “come to town” from Balm, Ala.

Since we are on history, Ralph had a million sayings, and I have to share a few.

On inventory: “You can’t go to market with an empty basket.”

On accuracy in record-keeping: “A long pencil

is better than a short memory.”On value: “The only book that will buy a car is

a checkbook.”On financing: He would say, “I am the bank,”

though not arrogantly. It made a person feel secure, as though making his dream car come true was not a problem.

When you consider that in 1942 we were in the middle of World War II, the courage of Ralph taking on an endeavor so challenging can only be a testament to what I witnessed in my life watching him. He was, from beginning to end, a man who lived by faith.

How did you get involved in the business and progress through the ranks to your current position?

I began working for my dad in our salvage yard – Smith Auto Parts – when I was 15. I learned a lot about automobiles in that job, and I began selling cars for Ralph when I was 18.

It’s a dangerous thing to give an arrogant, testosterone-filled young man with an alcohol problem a brand new shiny box of business cards [laughs]. I can’t believe I made it through it alive. Most of the old salesmen weren’t geared to helping a young man learn to sell at the expense of losing commissions, so I quickly found my niche – in collections and repossessions. I monitored accounts and learned from Junior not to be heavy-handed or overzealous about collecting. Love is the most important quality in managing accounts. Balancing that with firmness ensures repeat business.

In 1985, at 25 years old, I left the automobile business to pursue a successful career in alcohol and chemical dependency counseling, only to return to the family business in 1991. My father had returned to the family business as president following a successful career selling new cars at

C O N T I N U E D O N PAG E 10

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ESTABLISHED IN 1942, RALPH SMITH MOTORS IS THE OLDEST ACTIVE USED CAR DEALERSHIP IN ALABAMA

Q&A with Joe Smith Jr., President of Ralph Smith Motors

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Cobb Kirkland Pontiac Cadillac, and he hired me to oversee collections.

Shortly after my return, my father basically told me I was going to sell cars. [Laughs] I wanted no part of it. I liked the freedom of collections. He gave me no option. I sold five cars my first day and I was hooked. I began learning the art of sales, as does everyone, through trial and error.

I think salesmen are not made, they are born. However, I learn something new every day.

I worked for my dad until about 2008, when he

began grooming me to take over daily operations. The thing I’m most grateful for in my whole life was being able to work with my father for the majority of my life. I lost him Aug. 24, 2009, and I miss him every day. We affectionately called him “Scorekeeper,” because he would call throughout the day, every day, and ask, “How many?” He’s probably still keeping score now [laughs].

Some dealers only see the car business as a way to make a living. I know you see it as a lot more than that. What is it you enjoy most about the car business?

My favorite aspect of our little business is still seeing a family driving a vehicle we had a part in helping them get in. And I can’t tell you how cool it is selling a young man a car and realizing my grandfather sold his great-grandfather cars.

What are the biggest challenges you and other dealers are facing right now?

There’s a lot of talk about government regulation on Buy Here-Pay Here dealers. Am I happy about more government involvement in the automobile industry? No. Business never needed government involvement. If you abused customers, you went out of business. It was a self-cleaning oven. I think

we can all make positive changes to help every customer purchase be successful without more government involvement.

What do you think is on the horizon for you and other pre-owned dealers?

I think the used automobile industry will continue to get better. We provide a service that I believe in. We contain losses in value that buying a new car can’t compete with. As the new car industry grows again, there will be more used cars, and I support the new car industry. If someone can afford or has the desire for a new car, I say go for it. Everybody brings something to the table. Without new car sales there are no used cars. However, the truth remains – no one drives a new car [laughs].

Working in the car business isn’t a 40-hour week – sometimes it’s twice that, especially when you are running it. It’s hard to find time for extracurricular activities, but I know you are into helping people by sharing your experiences and advice.

I’ve had challenges in my life that have seemed like the end. That which does not kill you makes you stronger. I’m always willing to share my failures if it can help someone else. I’ll just say I’m a fan of watching people turn their lives around and I try to have no judgment about where a person is.

Thanks to Joe Smith Jr., for sharing his family’s story.

C O N T I N U E D F RO M PAG E 8

F RO M L E F T, J O E S C O T T, WA LT E R A N D E R S O N , R A L P H S M I T H , L AW R E N C E BYA R S , B E R N A R D LOW E RY A N D B I L L H A RG ROV E , I N A P H O T O B E L I E V E D T O B E TA K E N AT A N E A R LY I N D E P E N D E N T D E A L E R A S S O C I AT I O N M E E T I N G I N T H E 1 9 5 0 S .

R A L P H O . S M I T H .

A D E A L E R S H I P ’ S L E G AC Y: FO U N D E R R A L P H S M I T H ( S E C O N D F RO M R I G H T ) W I T H ( F RO M L E F T ) G R A N D S O N J O E S M I T H J R . , S O N J O E S M I T H S R . , A N D B RO T H E R CA R L S M I T H .

A P R E - 1 9 4 9 C L I P O F T H E SA L E S FO RC E AT J I M B A R N E T T M O T O R S . R A L P H S M I T H , T H E N T H E SA L E S M A N AG E R , I S O N T H E L E F T I N T H E P H O T O .

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Q&A with Joe Smith Jr., President of Ralph Smith Motors

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T H E B E S T WAY T O S U RV I V E A N AU D I T W I L L A LWAYS B E T O H AV E O N E C O N D U C T E D P R I VAT E LY T O S E E W H E R E YO U S TA N D

Would Your Dealership Survive a Government Audit?In July 2011, the Consumer Financial

Protection Bureau (CFPB) was established by the federal government. The CFPB has primary responsibility for regulating consumer protection in the United States, and has jurisdiction over banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, credit card issuers, mortgage companies and other financial companies – including used car dealerships.

The CFPB was intended to assume responsibility for consumer protection, a function which had been scattered among numerous federal agencies, such as the Federal Trade Commission (FTC), the Federal Deposit Insurance Corporation and the Federal Reserve. Additionally, the FTC recently began an aggressive course of enforcement. Between CFPB, FTC and other various regulatory agencies, dealerships face a more substantial risk than ever of facing – and failing – an audit of their operations.

So what steps can you take to prepare? While the CFPB is a relatively new federal agency, it helpfully published a Supervision and Examination Manual, (available at www.consumerfinance.gov/guidance/supervision/manual) in October 2011.

The manual is a valuable tool for ensuring compliance, and provides important clues as to how the CFPB – and potentially the FTC, as well – will go about enforcing its regulations.

A central theme of the guidelines is that businesses must maintain effective systems and controls to manage their compliance responsibilities in order to detect, prevent and correct practices that present a significant risk of violating the law and causing consumer harm.

Dealerships frequently use forms prepared by outside sources to ensure compliance in their operations. However, compliance with CFPB guidelines requires more than merely picking up some forms, distributing them to employees for use and considering the matter resolved. Dealerships have ongoing responsibilities to comply with the law, a point ignored by all too many dealers.

Perhaps you have implemented policies

to comply with regulations. Have you done anything with those policies since then? Probably not. Without proactive and ongoing legal evaluations of the policies adopted by dealerships, such policies are little more than words on paper – and would likely be treated as such by courts.

Dealerships must do more than simply acquire forms from their attorneys and draft toothless policies to escape unscathed from a regulatory audit. Under the guidelines, dealerships must have an effective compliance management system to ensure the dealership complies with its legal responsibilities.

Four “interdependent control components” are required: Board and management oversight, a vigorous compliance program, response to consumer complaints and compliance audits.

Proper board and management oversight requires the board to demonstrate its compliance expectations clearly to employees and outside service providers. There should be clear policy statements regarding compliance.

Dealerships should appoint a qualified chief compliance officer who has the authority to enforce compliance with regulations and accountability for the failure to do so. And dealerships must be prepared to devote additional resources to ensure ongoing compliance, and must periodically audit their compliance with the regulations.

The compliance program required by the CFPB guidelines must involve the development of appropriate policies, training in those policies and – most importantly and most frequently overlooked – monitoring the policies for effectiveness, enforcing the policies vigorously and taking all necessary corrective actions required by the policies.

It is important that the compliance system be a formal, written program, but it’s even more important that the program be proactive and adequately funded. The best way by far to test the compliance of your dealership is to conduct an audit to identify compliance failures, and to take steps to address the problems revealed by the audit.

Ask yourself: Has your dealership conducted a vigorous and independent

audit of the performance of your compliance programs? Can you point to specific changes you have made in your policies in response to audits? Have you revised outdated content brought to your attention by the audit?

If not, your program is little more than a hollow shell of what is required by regulation, and you are hardly any better off than a dealership that has no compliance program at all.

The training program required by the CFPB should provide effective training that is current and complete, directed to the appropriate employees based on their roles, and appropriately funded in light of the size of the entity, its nature and the risks to consumers. The training should be consistent with the written policies of the dealership.

Additionally, your compliance personnel should receive appropriate training to administer your compliance program. Designating a salesman or other employee with no training in regulatory compliance is an invitation for calamity. Dealerships should ensure their compliance personnel undergo extensive training from legal professionals or other regulatory compliance experts to ensure those employees are actually qualified to train other employees on compliance issues.

The training of the compliance personnel should be documented so it can be produced in the event of an audit and the planned training should match the actual training. The training should also be revised and updated as frequently as possible, and all revisions and updates recorded for additional protection in the event of an audit.

Consumer complaints must be appropriately recorded, categorized, addressed and resolved promptly. If a complaint appears to raise legal issues involving unfair treatment, discrimination or other regulatory compliance issues, those complaints should be treated with particular seriousness.

Corrective action should be taken and documented in response to the complaints. Such corrective action can include appropriate discipline, additional training or revision of a policy of the dealership in response to the complaint.

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Ask yourself truthfully: Does your dealership have a written plan to accomplish any of this?

Perhaps the most important requirement of the CFPB is the compliance audit requirement. There is no better test for how your dealership would fare in the event of an audit than conducting one. The guidelines require CFPB examination personnel to go on-site and observe, conduct interviews and review additional documents and information.

CFPB auditors will interview senior managers, account personnel and compliance officers, and observe how actual operations compare to the business’ stated policies. Dealerships should conduct similarly thorough audits following the same procedures CFPB auditors would use.

While a more thorough, on-site audit requires the expenditure of greater resources, it remains a less costly option than incurring the fines, license revocation and/or court judgments that could result from a government audit of an unprepared dealership. Your audits should be documented so they can be produced later if needed to demonstrate the vitality of the dealership’s compliance program.

The guidelines also prohibit unfair,

deceptive or abusive acts or practices. Even a small amount of monetary harm can be enough if the harm is to a large number of people. Actual harm is not necessary. Only a “significant risk” of harm is required. Emotional harm alone is not normally sufficient, though in specific circumstances, such as debt collection, it might be.

Perhaps surprisingly, an act can be deceptive even if no one is misled. The act need only be “likely” to mislead the consumer’s reasonable interpretation of the meaning of the act. Even written disclosures might not be enough to correct such an act. Exaggerated claims can be considered to be not deceptive if the claims would not be taken seriously by a “reasonable consumer.”

One example identified in the guidelines involved an action by the FTC against a vehicle leasing company that advertised the lease of a vehicle for “$0 down.” The blur of unreadable fine print at the end of the commercial disclosed costs of at least $1,000. The FTC required that companies that advertise in that manner must make an equally prominent disclosure of the total fees due at lease signing.

Concerned? If not, you should be. Now more than ever, dealerships face heightened legal scrutiny. When problems are found,

they should be corrected. When a policy fails, it should be reevaluated.

The best way to survive an audit will always be to have one conducted privately to see where you stand. If your compliance program is woefully lacking, it is better to learn it now than when an FTC auditor is preparing to submit his findings.

Ultimately, the guidelines and compliance recommendations are intended to ensure that a business policy is more than ignored words on paper and to encourage dealerships to take regulatory compliance more seriously.

With an increasingly aggressive FTC and the creation of the CFPB, dealerships face a higher risk of compliance audits than at any point in living memory. Would your dealership survive one today?

BY JEFF INGRAM GALESE & INGRAM, P.C.JOHN GALESE AND JEFF INGRAM ARE AIADA’S ATTORNEYS AND ARE ON RETAINER FOR THE ASSOCIATION. THEY HAVE GIVEN THEIR TIME AND MONEY TO HELP MAKE THE ASSOCIATION A SUCCESS. PLEASE CALL ON THEM IF YOU NEED AUTOMOBILE-RELATED LEGAL CONSULTATION.

I I A D A G O L F T O U R N A M E N T - A W A R D S D A Y - T R A D E S H O W C O N T I N U E D F RO M PAG E 1 2 | Would Your Dealership Survive a Government Audit?

We have had inquiries concerning the re-titling of U.S. Government/Government Services Administration-sold vehicles.

When GSA sells a vehicle, the purchaser is given Standard Form 97 instead of a title. This form reassigns the ownership of the vehicle to the purchaser. Some dealers are confused as to the transferability of ownership to a retail purchaser using this form and wonder if they must first take title in the name of the dealership before transferring ownership.

The answer is that by using an Alabama Secure Re-Assignment Supplement, Form MVT-8, a dealer can transfer ownership of the vehicle.

The only disadvantage for a dealer is Standard Form 97 has the purchase price of the vehicle recorded on it. Standard Form 97 cannot be altered in any way.

If any entry on the form is altered, the form is void and a replacement Standard Form 97 must be obtained.

I have supplied the regulations and procedures for your review. I hope this will help make the procedure clear for our Alabama dealers.

810-5-75-.29. Title Procedure – First Title for Vehicle Obtained From the United States Government. Reference: Sections 32-8-1 through 32-8-87, Code of Alabama 1975, as amended.

(1) Designated agent completes MVT 5-1 (Application for Title). Application must be properly filled in with a typewriter (BLACK INK) and signed by designated agent and owner.

(2) Supporting Documents: (a) Standard Form 97, issued by GSA,

properly completed. NOTE: Sales made after October 1992 shall be accompanied

by Standard Form 97 (Revised 4-91). (b) A licensed Alabama motor vehicle

dealer who purchases or otherwise acquires a motor vehicle from a government agency that is exempt from the requirement of certificate of title and holds the acquired vehicle for sale may transfer the vehicle without first obtaining title in the name of the dealership by properly completing a Secure Re-Assignment Supplement Form MVT 8-3 (Revised 1-92). NOTE: Every purchaser of a government vehicle, with the exception of properly licensed motor vehicle dealers, shall make application for certificate of title in the purchaser’s name.

(c) Fee (See Schedule of Fees and Commissions).

(Authority: §32-8-1 through 32-8-88, Code of Alabama 1975) (Adopted January 25, 1994.)

F RO M T H E D E S K O F M I K E G A M B L E , A S S I S TA N T D I R E C T O R , A L A B A M A M O T O R V E H I C L E D I V I S I O N

Re-Titling GSA-Sold Vehicles

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I N D U S T RY N E W S

A related finance company (RFC) can be an advantageous addition to your Buy Here-Pay Here dealership operations if certain factors are present.

The information needed to make that decision includes the prior three years’ federal and state income tax returns for the dealership and the individual owner(s) and any affiliated companies, the prior year-end financial statements (balance sheet and income statement), the most current month-end financial statements for your dealership, a current installment note receivable aging or list, and your static pool history analysis.

A review of your company’s tax returns must be completed to decide if they are set up correctly to complement an RFC. Some factors to consider are what type of taxable entity they are, whether they have accumulated earnings and profits, whether there are any carryovers that need to be considered going forward, what type of tax elections have been made in the past, and are they currently in compliance with all elections and regulations.

A review of your dealership’s financial statements should also be completed. The analysis will reveal if you have enough cash and liquid assets to help fund the setup of an RFC if necessary funds are not available elsewhere. The type of company tax status might also govern if you are able to use those funds for that purpose.

Projections should be completed as if you have sold the notes to an RFC so you can review the effect on net income, cash flow, net worth, working capital and other factors that are important to the operation and health of your dealership.

If your note portfolio is too small, it might be too expensive to add an RFC. If your intent is to grow your portfolio to exceed the minimum of $500,000 to $1 million, and your dealership is incurring substantial federal and state income taxes, then it could be time to review whether you are a candidate for an RFC.

Since you are starting a new company with your RFC, another federal income tax return and any applicable state returns will need to be filed annually. If your financial institution requires your CPA to prepare financial statements at the end of the year or during interim periods, additional accounting rules must be followed in their preparation. You might be required to prepare and issue combined financial statements to remain

in compliance with GAAP and other accounting standards.

You might have to purchase or add an adequate note receivable collection software program and accounting system that is capable of handling the sale of the note from the dealership to your RFC with the proper integration so as not to increase your grief in accounting and to allow for proper income tax preparation.

It is very important you choose the software carefully and fully understand what the software can and can’t do. Some software requires you to print all your month-end reports on the last day of the month before any new month’s business is entered to obtain the correct month-end receivable, inventory, repo loss, discount income and other amounts necessary to reconcile your general ledger accounts on both companies. Failure to do so will leave you without valid detailed reports to adequately reconcile your general ledger accounts without a lot of manual work.

You will need to properly train your bookkeeper or controller in all aspects of the accounting and tax transactions that will need to be recorded. They will need to learn how to reconcile the intercompany and other RFC-type general ledger accounts and transactions and recognize when they are not in balance. You will need to understand the cash flow needed on both companies to maintain or increase your sales volume and still have the available cash in the RFC to pay its own expenses, any shared expenses and, more importantly, to pay for all the notes when they are actually purchased.

You should review all the legal implications with an attorney who is familiar with the BHPH and RFC industry to ensure your paperwork and other related documents comply with all regulations and laws. They will also need to help you draft an asset purchase and various management or shared expense agreements to document the legal transactions taking place. You should also complete the necessary minutes and corporate resolutions that document the sale of the notes and any other agreements you complete.

You and your staff will need to become familiar with the IRS regulations that govern these types of transactions to ensure compliance and enable you to correctly record all the transactions necessary to document the activity between the dealership and the RFC.

The IRS is very familiar with RFCs and has established audit checklists with very specific questions and documents to review on both the dealership and the RFC. Failure to comply could result in the disallowance of the discount deduction on the dealership and immediate recognition of all the gross profit realized from the sale. That would also result in additional interest and penalties, along with the past due tax, being payable immediately.

A qualified third-party finance company or consultant will need to review your loan portfolio to provide a quote or purchase offer to arrive at a fair market value that can be used to sell the notes to the RFC and remain in compliance with IRS regulations. Adequate capital and cash must be available in the RFC to purchase and pay for the notes at time of purchase. The RFC must incur its own expenses and should be responsible for all collection efforts and costs after the purchase of the notes from the dealership, including repo fees and repo losses.

This article touches the surface of the considerations needed to decide if an RFC is right for you and your current tax situation. You should consult your tax advisor, preferably someone who is familiar with the BHPH and RFC industry, along with your state and national associations, to gain more insight.

Frequently Asked QuestionsWhat is an RFC? An RFC, or related

finance company, is a company that provides financing to customers who cannot obtain financing through normal channels. The customer purchases a vehicle from a Buy Here-Pay Here dealership, which then sells the note to the RFC. The customer makes payments to the RFC on a weekly, bi-weekly, semi-monthly, etc. basis as defined in their contract.

Who should have an RFC? A BHPH dealership that carries its own notes and is generating taxable income might have a need for an RFC. A review of the dealership’s operations, software used, cash flow, income tax liabilities and capital requirements should be completed to help with this decision.

When should I form an RFC? You might want to form an RFC if you are currently incurring income tax liabilities that exceed the cost and additional time incurred to form and operate an RFC.

How much capital does an RFC need?

C O N T I N U E D O N PAG E 1 8

Is an RFC Right for Your BHPH Dealership?

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Capital requirements will vary greatly based on the note portfolio size and the intended growth, but you should have enough cash and lines of credit available to pay for the purchased notes at the time of the sale of the notes from the dealership to the RFC, and sufficient cash to pay for the normal operating expenses an RFC will incur.

What are the income tax effects of having an RFC? The sale of the notes to an RFC will defer part of the gross profit realized on the sale of the vehicle until the principal is actually collected from the customer. You will not pay income taxes on the deferred gross profit until you actually have received the principal in cash from the customer. Therefore, on repossessions, you will not have paid income tax on profits you will never realize.

Who can own an RFC? Anyone can own an RFC. Normally it has the same or very similar ownership as the BHPH dealership to offset the income tax effects of both companies.

What tax structure is most advantageous for an RFC? Normally both the BHPH dealership and the RFC are taxable as corporations. Many times, both companies are formed as, or

converted to, S corporations to offset the income tax effects of both companies.

The following is an explanation of a typical BHPH-RFC transaction:

1. The dealership sells the vehicle to a customer and takes a note receivable due from the customer on the sale.

Sample Facts: Sale $11,000 Cost ($5,000) Gross profit $ 6,000 Sale price $11,000 Down payment ($1,000) Note taken $10,000 2. The dealership decides to sell the

$10,000 note to its RFC at a discount of 40 percent. The $10,000 note is sold for $6,000 and the dealership records a $4,000 discount loss to other deductions.

At this point, the dealership has recorded a $6,000 gross profit from the vehicle sale and a $4,000 discount loss to other deductions for a net profit from the vehicle and note sale of $2,000. The dealership will use this gross profit to pay for its operating and other expenses.

3. The RFC records a note receivable for $10,000 and unearned discount income of $4,000. The unearned discount income is really deferred

income to be recognized over the life of the note as principal is collected. As each dollar of principal is collected by the RFC, 40 cents of unearned discount income on the RFC balance sheet will be picked up as earned discount income on the RFC income statement along with any interest income earned with the payment collected from the customer.

This is a noncash-type transaction on the RFC to record the earned discount income.

Whenever the note receivable is fully collected, the unearned discount income will be zero also.

The unearned discount income on the RFC balance sheet should always be equal to the approximate discount percentage taken by the dealership times the principal balance of notes receivable.

4. The RFC can carry the unearned discount income on its books at the approximate discount loss percentage or it can also record a generally accepted accounting principles account, or GAAP adjustment account, to lower the percentage to the actual losses incurred (suppose 30 percent losses). The balance sheet GAAP adjustment account will be equal then to 10 percent of the outstanding principal left as a reduction

I I A D A G O L F T O U R N A M E N T - A W A R D S D A Y - T R A D E S H O W C O N T I N U E D F RO M PAG E 16 | Is an RFC Right for Your BHPH Dealership?

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of the 40 percent unearned discount income account.

Notes receivable $10,000Unearned discount income ($4,000)GAAP adjustment account $1,000 In effect, for GAAP presentation

of financial statements, the unearned discount income and GAAP adjustment account net out to be a 30 percent allowance for doubtful accounts for presentation purposes only. For tax purposes, the dealership still accounts for the discount at 40 percent. Therefore, there is an M-1 book-to-tax difference shown on the tax return page 4, book to taxable income reconciliation schedule.

5. If the vehicle is repossessed, the outstanding principal balance at that time is reduced by the actual cash value

(ACV) of the repossessed vehicle. With this transaction you would also record earned discount income of the ACV amount times the discount percentage. The remaining balance of the principal after the ACV is applied is then written off as a repo loss. With this transaction you would also record unearned discount income of the principal amount times the discount percentage.

Example of a repo on the RFC and how it is recorded using the above 40% discount example: (see chart below)

In the above example the repossession loss for tax purposes is reduced by the remaining unearned discount income associated with the remaining principal being written off.

Note: All the transactions above are really deferring the $4,000 of gross profit

income for tax purposes until the principal is actually collected and there is cash available to pay the income taxes due. The unearned discount income on the RFC also acts somewhat as an allowance for doubtful accounts with an extra reserve above the GAAP allowance needed. The reason is the IRS allows you to take a discount loss equal to fair market value and GAAP allows you to reserve for actual expected losses. Normally the tax discount is always in excess of the GAAP allowance needed for GAAP bad debt reserves.

BY JDAVID KELLER, CPA, CFE A DEALERSHIP PARTNER WITH CLIFTONLARSONALLEN, A NATIONAL CPA FIRM WITH EXTENSIVE EXPERIENCE IN SERVING THE NEW, USED, BUY HERE-PAY HERE AND RF INDUSTRIES.

chart

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Dealers Auto Auction of Huntsville celebrated its eighth anniversary with a sale during which it ran 716 vehicles, sold 470 and had 50 ifs. General manager Roger Fields said he was very pleased with 67 percent. The auction gave away a 2009 Dodge Charger, won by Ken Bates. Bates immediately auctioned the vehicle and sold it for $10,500, donating the proceeds to Young Life, a Christian Ministry for adolescents.

From left: Missy Porter, general manager Roger Fields, Ken Bates (winner of the 2009 Dodge), Chasity Randolph and DAA of Huntsville owner Dave Andrews.

From left: Roger Fields, former AIADA executive director Tony Wilkerson, Ken Bates and Dave Andrews. Bates donated the 2009 Dodge to be auctioned off, with proceeds going to Young Life.

Auction owner Dave Andrews (right) congratulates Nick Lanza, used car manager of Bill Penney Toyota, which brought 140 cars to the sale and sold 138.

pp

pp

ABC – ATLANTA444 Joe Frank Harris ParkwayCartersville, GA 30120Sale every Tuesday 6 p.m.& Friday 11 a.m.Phone: (770) 382-1010

ABC BIRMINGHAM1046 A.E. Moore DriveMoody, AL 35004Sale every Wednesday 12:30 p.m. Inops at 12 pmPhone: (205) 640-4040

ADESA ATLANTA AUTO AUCTION5055 Oakley Industrial Blvd.Fairbum, GA 30213Sale every Wednesday 8:30 a.m. Phone: (770) 357-2277

ADESA OF BIRMINGHAM804 Sollie Dr.Moody, AL 35004Sale every Monday 6:30 p.m. & Wednesday 9 a.m.Phone: (205) 640-1010

ADESA KNOXVILLE1011 Adesa PkwyLenoir City, TN 37771Sale every Tuesday 6:30 p.m. & Friday 9:30 a.m.Phone: (865) 988-8000

ADESA OF MEMPHIS5400 Getwell Rd.Memphis, TN 38118Sale every Tuesday 9 a.m.Phone: (901) 365-6300

ALBANY AUTO AUCTION1421 Liberty Expressway SEAlbany, GA 31702Sale every Thursday 6:30 p.m.Phone: (229) 435-7709

AMERICA’S AUTO AUCTION6615 Mobile Hwy.Pensacola, FL 32526Sale every Tuesday 9:30 a.m.Phone: (850) 944-1945

ATLANTA AUTO AUCTION4900 Buffington Rd.Red Oak, GA 30272Sale every Thursday 9 a.m.Phone: (404) 762-9211

AUTO AUCTION OF MONTGOMERY6142 Troy HighwayPike Road, AL 36064Sale: every Thursday 10:00 a.m.Phone: (334) 288-3399

BAMA AUTO AUCTION4103 Gault Avenue SouthFt. Payne, AL 35967Sale: every Thursday 6:00 p.m.Phone: (256) 304-0947

BIRMINGHAM AUTO AUCTION125 Meadland CircleBirmingham, AL 35023Sale every Thursday 6 p.m.Phone: (205) 744-4030

CENTER POINT AUTO AUCTION100 13th Ct. NEBirmingham, AL 35215Sale every Monday 6 p.m.Phone: (205) 856-6527

CHATTANOOGA AUTO AUCTION2120 Stein Dr.Chattanooga, TN 37421Sale every Tuesday 10 a.m.Phone: (423) 499-0015

DEALERS AUTO AUCTION OF HUNTSVILLE26125 Hwy 72Athens, AL 35613Sale every Tuesday 9:30 a.m.Phone: (256) 232-0201

DEANCO AUTO AUCTION3664 South Oates St.Dothan, AL 36301Sale every Wednesday 10 a.m.Phone: (334) 792-1116

GEORGIA-CAROLINA AUTO AUCTION884 E. Ridgeway Rd.Commerce, GA 30529Sale every Wednesday 3 p.m. & Friday 6 p.m.Phone: (706) 335-5300

GEORGIA DEALERS’ AUTO AUCTION7205 Campbellton Rd.Atlanta, GA 30331Sale every Tuesday 10 a.m.Phone: (404) 349-5555

GREATER NEW ORLEANS AUTO AUCTION61077 St. Tammany Ave.Slidell, LA 70460Sale every Wednesday 9:30 a.m.Phone: (504) 643-2061

HIGHWAY 101 DEALERS AUTO AUCTION2100 Hwy. 101Rogersville, Al(256) 247-3600Sale Day – Thursday 10:30 a.m.

KELLEY AUTO AUCTION3485 US Hwy. 431Attalla, AL 35954Sale every Tuesday night Phone: (256) 538-9095

LONG BEACH AUTO AUCTION, INC.8494 County Farm Rd.Long Beach, MS 39560Sale every Wednesday 3 p.m.Phone: (228) 452-2030

LOUISIANA’S 1ST CHOICEAUTO AUCTION18310 Woodscale Rd.Hammond, LA 70401Sale every Tuesday 8:30 a.m.Phone: (985) 345-3302

MANHEIM CENTRAL FLORIDA9800 Bachman Rd.Orlando, FL 32824Sale every Wednesday 9 a.m.Phone: (407) 438-1000

MANHEIM NASHVILLE8400 Eastgate Blvd.Mt. Juliet, TN 37122Ford Factory Sale every other Monday 11 a.m.Open Sale every Wednesday 9 a.m.GM Factory Sale every other Thursday 10 a.m.Nissan Factory Sale once per month Friday 9 a.m.Phone: (615) 773-3800

MANHEIM MISSISSIPPI 7510 US Hwy. 49 NHattiesburg, MS 39402Sale every Monday 5 p.m. & Thursday 9 a.m.Phone: (601) 268-7550

MANHEIM METRO ATLANTA2244 Metropolitan Pkwy SWAtlanta, GA 30315Sale every Tuesday noonPhone: (404) 767-3652

MIDFIELD CAR AUCTION1468 Hartman Industrial Blvd.Midfield, AL 35228Sale every Wednesday and Saturday-6:30 p.m.Phone: 205-923-6535

PENSACOLA AUTO AUCTION401 West Burgess Rd.Pensacola, FL 32503Sale every Thursday 9:30 a.m.Phone: (850) 477-3063

SHOALS NORTH ALABAMAAUTO AUCTION651 Fairground RoadMuscle Shoals, AL(256) 381-2745Sale every Tuesday night @ 6:30 p.m.

SOUTH ALABAMA AUTO AUCTION LLC27472 Wilcox RoadRobertsdale, Al251-964-7012Sale Days – Tuesday & Thursday 6:30 p.m.Sat. Auction @ 11 a.m.

YOUR AUCTION3010 Scherer Dr. NSt. Petersburg, FL 33716Sale every other Tuesday 11 a.m. – BirminghamThe Jim Burke Automotive GroupPhone: (800) 675-4444

AUCTION DIRECTORY

(COUPON BOOK IS AVAILABLE WHEN YOU RENEW YOUR MEMBERSHIP)

AUCTIONS PARTICIPATING IN THE 2012-2013 AIADA BENEFIT COUPON BOOK

1. ABC Birmingham $250.00 $250.00 2. ADESA Birmingham $1800.00 $1800.00 3. AMERICA’S AUTO AUCTION –Pensacola $500.00 $500.00 4. ANAHEIM AUTO AUCTION –Birmingham $600.00 $600.00 5. AUTO AUCTION OF MONTGOMERY $600.00 $600.00 6. BAMA AUTO AUCTION – Fort Payne $600.00 $600.00 7. BIRMINGHAM AUTO AUCTION $100.00 $100.00 8. CITY AUTO FINANCE – Floor Plan Floor Plan Fee 9. DEALERS AUTO AUCTION OF HUNTSVILLE LLC $600.00 $600.0010. DEALERS AUTO AUCTION OF MURFREESBORO $600.00 $600.0011. DEALER’S AUTOMOBILE AUCTION OF MOBILE $600.00 $600.0012. DEALER’S AUTOMOBILE AUCTION MISSISSIPPI $600.00 $600.0013. DEANCO AUTO AUCTION - Dothan $600.00 $600.0014. DRIVER’S WAY AUTO AUCTION - Birmingham $225.00 15. FORT PAYNE AUTO AUCTION $200.00 $200.0016. HIGHWAY 101 DEALERS AUTO AUCTION $600.00 $600.0017. INSURANCE AUTO AUCTION- $50.00 each $150.00 (Huntsville, Birmingham & Dothan Locations)18. KELLEY AUTO AUCTION - Attalla $600.00 $600.0019. LONG BEACH AUTO AUCTION - Mississippi $100.00 $100.0020. LOUISIANA’S 1st CHOICE AUTO AUCTION $200.00 $200.0021. MANHEIM ATLANTA $750.00 $750.0022. MANHEIM GEORGIA $750.00 $750.0023. MANHEIM NASHVILLE $600.00 $600.0024. MANHEIM PENSACOLA $250.00 $250.0025. MIDFIELD CAR AUCTION $300.0026. MID SOUTH AUTO AUCTION Pearl, Mississippi $900.00 $900.0027. SHOAL’S NORTH ALABAMA AUTO AUCTION $600.00 $600.0028. TALLAHASSEE AUTO AUCTION $300.00 $300.00

BUY FEE OR SELL

TOTAL VALUE IS $ 13,825.00 $13,450.00

DEALERS AA OF HUNTSVILLE8 T H A N N I V E R SA RY

AUCTIONS PARTICIPATING IN THE 2012-2013 AIADA BENEFIT COUPON BOOK

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Do you enjoy what you do each work day?Maybe I’m a little off, but I enjoy

the craziness of a very busy day. You know, the ones when so many folks are on the lot it reminds you of a county fair. Everybody’s phones are ringing almost nonstop. There is a line at the payment window. Inside the building, the employees and customers are moving around like you’re in a big-city train station.

When I have those days I always stand back for a minute and watch the action. It is like coaching a baseball team that keeps turning double plays.

The satisfaction I get from that scene helps make the daily grind worth it. I have always trained staff using a coaching style that includes cross-training of personnel so there is “depth” at every position. Our employees work hard and understand the decisions they make every day affect how the public perceives our dealership.

I try to include as many of our people in “teachable moments” as I can. If an issue arises, everyone is brought together for an explanation of what took place and why

it was good or bad for the customer (or employee) and our company.

I believe if your people understand what is happening in your store and why you want certain responses to occur, your team will be more proactive in solving problems instead of just reacting to issues as they happen.

As a manager/owner of any business that deals with customers, it is important to realize the attitude and motivation of your personnel is directly affected by your actions. Compensation is important to maintain morale, but that is only one aspect of your duty to your people.

I believe an atmosphere free of useless stress is important. Our people work well together. We never hire anyone without taking the team into consideration. If your people dread coming to work, you are not getting the best performance from them. When that crazy-busy day comes and everyone is on their feet, running from one customer to the next, I want my employees’ minds on doing what is right for our dealership. Right for the dealership means satisfying our customers

while maintaining a profit. I have always made sure the employees

know I am concerned about them. I do not over-hire, so our employees can get all the hours possible, and they know the team needs them every day. If I see or hear about personal issues affecting someone, I will interject myself and make sure the employee(s) involved get to a reasonable settlement quickly so the focus at work remains on work.

The gears of your machine have to mesh well together and that requires attention from you, even if that means helping a team member deal with a problem at home.

The days when our team is pushed to the limit are very satisfying because our people are sure of what they are doing and why. As a manager, it’s what you do when it’s not busy that is important. Good procedures and trained people who work well together make those crazy-busy days manageable and profitable.

BY GENE DAUGHTRYSPECIAL FINANCE INSIDER

G O O D P RO C E D U R E S A N D T R A I N E D P E O P L E W H O WO R K W E L L T O G E T H E R M A K E T H O S E C R A Z Y- B U SY DAYS M A N AG E A B L E A N D P RO F I TA B L E

Training and Attitude: Keys to a Well-Run BHPH Operation

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Alan Willard (right) of ABC Orlando Auto Auction receives a check from AIADA president Charles Moring for winning the $10,000 grand prize drawing at the 2012 State Convention.

RESULTS FROM SPECIAL MEMBERSHIP TICKET DRAWING 2012 A.I.A.D.A. CONVENTION

BELOW IS A LIST OF THE LAST TEN TICKETS DRAWN: (We sold 381 Tickets-(gave 12 as door prizes/awards)=393 #DRAWN NAME (S) TICKET # CITY SOLD BY 384 Melvin Taylor 337 Clanton Chad Tillery 385 Mike Jones & Moody Faulk 253 Dothan Mike Jones 386 Jerry Giles 420 Hoover Jerry Giles/Verta Meherg 387 Lynn Howard 410 Thorsby Chad Tillery 388 Jason Taylor 219 Palm Harbor, FL John Pigg 389 Ricky Conley/Robert Case 146 Hartselle Robert Case 390 Sarah Howell 122 Oxford Henry Mullinax 391 Billy Heard 191 Washington Anthony Underwood 392 Cory Halverson 185 Mississippi Judy Benton 393 ABC Orlando Auto Auction 240 Orlando, FL Charles Moring TOP FIVE MONEY TICKETS DRAWN **$300.00**- Ricky Conley/Robert Case Ticket # 146 (Sold by Robert Case) **$600.00**- Sarah Howell Ticket # 122 (Sold by Henry Mullinax) **$800.00**- Billy Heard Ticket #191 (Sold By Anthony Underwood) **RUNNER UP PRIZE - $2000** Cory Halverson Ticket # 185 ***GRAND PRIZE WINNER -$10,000**- ABC ORLANDO AUTO AUCTION Ticket # 240 Sold by Charles Moring

WINNERS OF $100.00-$200.00 FOR EVERY 25TH AND 50TH TICKET DRAWN Christy Dailey $200.00 Rex Canterbury 100.00 Wayne Sasser 200.00 Joe Smith 100.00 Jim Hardy 200.00 Mike & Fran Jones 100.00 Mike Abney 200.00 Automax USA 100.00 Jim Hardy 200.00 Natalie Nations 100.00 Tracy & Bill Brill 200.00 Adrian Braughton 100.00 Ray Roddam 200.00 Debbie Oaks 100.00 Martha & Billy Levins 200.00 Larry Carter 100.00 TOP TICKET SELLERS WERE: 1st Place-Verta Meherg/Jerry Giles , 2nd Place- Chad Tillery 3rd Place- Bill Brill, 4th Place-Judy Benton, 5th Place –Mark CRUMP

RESULTS FROM SPECIAL MEMBERSHIP TICKET DRAWING 2012 A.I.A.D.A. CONVENTIONBELOW IS A LIST OF THE LAST TEN TICKETS DRAWN: (We sold 381 Tickets-(gave 12 as door prizes/awards)=393

AIADA CONVENTION HIGHLIGHTS

p

OUR FEATURED SPEAKERS AT THE 2012 CONVENTION IN JULY, DON’T MISS 2013 IN BEAUTIFUL GATLINBURG, TN.

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ASC Warranty & the Alabama Independent Automobile

Dealers Association We hear time and time again about the importance of "adding value". But what does this really mean? Well, according to the dictionary, "value" means: worth in usefulness or importance to the possessor, utility or merit. Ok, so, basically adding to the companies worth, and/or "making it better". Now that we know what it is, let’s take a look at the AIADA and see how they add value to ASC. The obvious one of course is they give us the opportunity to interact and work with quality dealers across the great state of Alabama. But what else is there? Ah yes, the ability to familiarize ourselves with the inner workings of the dealerships which allows us to address and meet the immediate needs of the dealers. A great example of this is our user friendly online entry system designed specifically with the dealer in mind, giving their customer immediate coverage at the time of sale. How else does the AIADA add value? The Association does a fantastic job of creating a networking atmosphere, especially at the annual conventions, that lead to innovation and opportunities to meet the market needs for the industry. For this reason, ASC gives their dealers the opportunity to win free registration and lodging at the annual show. In addition, the AIADA keeps ASC up to date on legislative issues that directly affect our dealers. ASC warranty insures our service agreements through a division of Assurant Solutions namely American Bankers Insurance Company ("A" rated), 400 Carillon Parkway, Suite 300, St. Petersburg, Florida 33716. Assurant, which is traded on the New York Stock Exchange under the symbol AIZ, has over 22 Billion in assets and $7 Billion in revenue. That’s value in the truest sense of the word. To summarize, the AIADA is helping ASC and Alabama dealerships come together with one goal... Sell more cars!

www.ascwarranty.com 800-442-7116

[email protected] [email protected]

Scott Butler, national director of business development for ASC, is a longtime participant in AIADA and has been very generous with his time and money for the betterment of our member dealers. Many thanks to Scott for taking the time to contribute to our magazine.

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TONY WILKERSONAUTO DEALER SERVICES INC.BIRMINGHAM

GARY LINAM, GMCHRYSLER DODGE JEEP RAM OF GADSDENGADSDEN

BRETT DAVISD & B AUTO LLCSPANISH FORT

FRED LANEFRED LANE AUTOMOTIVENEW MARKET

RON MOATES/DALE MOATESMOATES AUTO XCHANGE INCOZARK

CHRIS STOKESSIMPLE AUTO IMPORTSHOMEWOOD

RAYMOND WEBBWEBB MOTORSCULLMAN

RENEWALS:ROBERT L HEMBREE JRBOB HEMBREE MOTOR COGUNTERSVILLE

DAVID PHILLIPSCLASSIC MOTORSBIRMINGHAM

JAMES HINTONHOONEY’S AUTO SALES INCTHEODORE

JAMES (JAS) PARKERJ & C AUTO SALES INCPELHAM

ABED AL JALLADMERCY CAR CORPHOOVER

R. ALLEN DOUGLASSTARS GPSTHOMASVILLE

JULY RENEWALSSIDNEY CLEMENTSABC AUTO PARTS INCBIRMINGHAM

MARC & SUZANNE HARRISAUTO SAVE LLCOPELIKA

TERRY SMALLAUTO SERVICES COMOUNTAIN HOME, ARK.

DALE PRIDGENAUTONET, INCBESSEMER

BILLY RAY TAYLORBILLY RAY TAYLOR AUTO SALESCULLMAN

MALCOLM CAMPBELLCAMPBELL WHOLESALE CARSPHENIX CITY

JEFF MILES VPCAR BUCKSGREENVILLE

JASON BUNCHCARFINDERS AUTO OUTLETMOBILE

TOM MAHARREYCARS FOR LESS LLCWARRIOR

MARK GATESCHASE CARS INCMADISON

RON WORKS, MGRCOPART AUTO AUCTIONSFAIRFIELD, CA

DONALD BATTLESDON’S AUTO SALESLEESBURG

TODD SMITHDOTHAN MOTOR CODOTHAN

ROYCE JONESECONOMY AUTO SALESDOTHAN

RAY EDWARDSED’S AUTO SALES INCDEMOPOLIS

GLENN/SHANE VAUGHNG & S AUTO SALLESANDALUSIA

ROGER ADKINSONGFA WHOLESALERSDOTHAN

MIKE THROWERH & W MOTOR CO INCOPELIKA

DENNIS HUGGINSHUGGINS USED CARSGENEVA

JAMES L MARTINJAMES MARTIN MOTOR COMONTGOMERY

JAVAN SNOWDENJAVAN SNOWDEN AUTO SALES LLCMONTGOMERY

DEWAYNE & STEVE KERLEYKERLEY MOTOR COMPANYALEXANDER CITY

JEFFERY BROWNLICENSE COMMISSINER/TUSCALOOSA COTUSCALOOSA

PATRICK GRAVES/ROY SEWELLLR AUTO SALESMOODY

LAWRENCE PANKEYM & L ECONOMY MOTORS INCBOAZ

GREG & KRISTY MITCHELLMGM AUTOMOTIVEBIRMINGHAM

HAWLEY MONEYMONEY MOTORSABBEVILLE

SHANE MURPHY/MICHELLE MURPHYMURPHY WHOLESALE LLCALBERTVILLE

FRANK DOERFLINGER/ROBERT DORTCHPEN-MAR AUTO SALES INCFLORENCE

RAY DEAN/BETTY J. DEANRAY DEAN AUCTIONNEWTON

RICKY FOLEYRICK’S AUTO SALESANDALUSIA

D L SHADDIX/JERRY SHADDIXSHADDIX MOTORS INCCULLMAN

BUDDY & DAVID SHAWSHAW MOTORS INCWEST OVER

JEFF FREEMANSOUTHTOWN MOTORS HOOVERHOOVER

TERRY RATLIFF/EMMETT VICKERYT R MOTORSOPELIKA

ADEL MOUAWADTRIANGLE AUTO SALESMOBILE

JOE HUBBARDVEHICLE ACCEPTANCE CORPDALLAS, TEXAS

BILL SCARBOROWHOLESALE AUTO EXPRESSCOLUMBUS, MISS.

TAMI ORWANDA WOOD, CONTACTWOOD AUTO SALES INCTUSCALOOSA

BOBBY YARBROUGHYARBROUGH MOTOR COBIRMINGHAM

AUGUST RENEWALSWARD TAYLORANDALUSIA MOTOR COMPANY-SUPER LOTANDALUSIA

BRIAN SUMMERVILLE B & B AUTOMOTIVEALBERTVILLE

BRAD HAMILTONB & J ENTERPRISES LLC DBA ROADSHOWAUTOJASPER

RONNIE WILKERSONB & M AUTO SALESMONTGOMERY

CARLOS HALLCARLOS HALL USED CARSBIRMINGHAM

JEFF DEMEISCAR FINANCIAL SERVICES INCHOOVER

DONALD BROTHERSDONALD BROTHERS MOTORS INCBOAZ

BECKIE DONALDSONDOTHAN EASY FINANCE AUTO SALESDOTHAN

DOUG ANDERSON, GMDRIVER’S WAYPELHAM

HEATH HENDRICKHEATH HENDRICK MOTOR COGREENVILLE

EUFORD JOHNSON/LARRY JOHNSONJOHNSON MOTORS SOUTHPELHAM

ROMA LITTLE/RANDY LITTLELITTLE’S AUTO SALES INCSATSUMA

TODD ODENMTO MOTOR LEASING INCBIRMINGHAM

RICHARD HUGHESRICHARD HUGHES AUTO SALESHUNTSVILLE

H. W. SMITTY SMITHSMITTY’S TRUCK SALES INCBIRMINGHAM

STEVEN C AMESSTEVE AMES MOTORSCLOVERDALE

DAVID E DAVISDAVIS AUTO SALESEDWARDSVILLE

KYLE MEDDERS, CONTACTCURT SASSER, PRESIDENT/CEOFT. MCCLELLAN CREDIT UNIONFT. MCCLELLAN

GARY THOMPSONGARY THOMPSON AUTO SALESONEONTA

HARVEY C MORROWHARVEY’S MOTORSCULLMAN

JEFFERY BURLESONJEFF’S AUTO SALE INCLEESBURG

DALE E CALVINOMEGA WHOLESALE AUTO LLCCHELSEA

DANNY TOOLERUCKER AUTO SALESENTERPRISE

RICK GREEN/STEVE GREENSELECT AUTO SALESMUSCLE SHOALS

RANDY SHEFFIELDSHEFFIELD MOTORSTHOMASVILLE

SYED S. KABIRSKCO AUTOMOTIVEMOBILE

TOM SIBLEY/GREG SIBLEYT & G AUTO SALESFLORENCE

KENNY BRANCHTARRANT AUTO LAND INCBIRMINGHAM

BRENDA RANDALLTHE USED CAR DEPOT INCTUSCALOOSA

RANDY TOUCHSTONETOUCHSTONE AUTO SALESMOBILE

ROGER TOUSLEYTOUSLEY MOTORSCOLUMBUS, MS

WILLIAM BARKLEYTUSCALOOSA HYUNDAITUSCALOOSA

RANDALL VAUGHNVAUGHN’S USED CARSGUIN

JEFF NOOJINWE-NO KARS LLCARAB

WELCOME NEW MEMBERS AND RENEWALS

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26


BY CHIP ZYVOLOSKICHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

There is no denying that dealers and lenders have grown accustomed to a regulatory environment that is constantly changing, with new laws and regulations.

But today’s regulatory landscape is different than it was years ago – and not just because the requirements continually change.

If you feel like it’s becoming increasingly complex, you’re not alone. Here are the likely culprits:

Shorter notice: Some states have started publishing regulatory changes on rather short notice. For example, in New Mexico the attorney general recently gave 30 days’ notice to add a new spot delivery disclosure to the sales transaction document or purchase order.

The short notice was made worse because a proposed regulation had not been published – at least not recently – so the final regulation came as a surprise to the industry. While one month might feel

Regulatory Landscape Feeling Tougher? You’re Not Alone

like a long time to add one disclosure, the required notice is quite large and requires substantial formatting changes to the documents affected.

The attorney general eventually delayed the effective date of the regulation by 60 days, apparently after significant industry feedback.

More frequent changes and updates: Across the country, there seem to be more frequent changes being made. That has clearly been the case with state motor vehicle title forms. Previously, those forms were rarely revised. But over the past few years, some states have changed their title forms as many as two or three times per year.

One potential driver for that might be that technology now allows states to redesign and reissue their forms and revise (increase) the related fees more easily. But often the changes come with little or no notice, which underscores how important it is for dealers and lenders to be confident in their ability to monitor the changes that are constantly taking place.

Volume of information: While it can be difficult to keep up with the pace of change and various deadlines and effective dates, it’s also quite a task to consume the volume of information and content surrounding new laws and regulations.

For example, the Consumer Financial Protection Bureau (CFPB) published a proposed rule July 9 regarding integrated mortgage disclosures under RESPA and the Truth in Lending Act. It was one of the first significant proposed rules from the CFPB, and the planning process involved extensive research and solicitation of industry and consumer feedback.

As a result, the proposed rule and explanatory materials total more than 1,000 pages. The good news is the proposed rule provides significant details and explanations of the changes. The bad news is that many pages of material can be overwhelming (aren’t you glad you’re not in the mortgage lending business?).

Operating in a highly regulated industry, one can’t help but wonder if that is an indication of the volume of change yet to come and how dealers and lenders will absorb all of the changes and their nuances.

Disparate technology systems: Though computer technology allows us to do many things faster than before, disparate file formats, field naming conventions, calculation engines, software and hardware, and reliance on multiple vendors can make it difficult to quickly change or revise transaction documentation and its completion tools. That often means all the component parts need to be updated in sequence rather than in parallel – adding more time to make the required changes.

Today’s environment is characterized not only by constant change, but by tougher enforcement as well. There is more visibility and greater scrutiny of compliance and risk management in all organizations. Dealerships and financial institutions should regularly question whether they feel confident that new laws and regulations are being embedded in their business operations.

The challenges underscore a need for greater operational efficiency. Disparate systems and procedures can make even relatively simple changes more time-consuming and complex.

As you prepare for additional changes, consider reviewing your process maps, technology, vendor coordination and steps necessary to respond to compliance changes. Creating greater operational efficiency now will make it that much easier for you to respond to the inevitable next compliance crunch-time event.

C O M P L I A N C E OV E R D R I V E

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