new york driving force sept/oct 2012

Regulatory Landscape Feeling Tougher?

Y O U ’ R E N O T A L O N E

Regulatory Landscape Feeling Tougher?

ADVERTISING OR MARKETING?LEASE HERE-PAY HERE VS. BUY HERE-PAY HERE

ONLINE REPUTATION AFFECTS YOUR SALES

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PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . n e w y o r k i a d a . o r g

SEPTEMBER/OCTOBER 2012

T H E N E W Y O R K

N E W Y O R K I 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

DRIVING FORCE

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T H E N E W Y O R K D R I V I N G F O R C E SEPTEMBER/OCTOBER 2012

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w w w . n e w y o r k i a d a . o r g

WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

06 Advertising or Marketing?08 Lease Here-Pay Here vs. Buy Here-Pay Here14 Credit Reports: What You Need to Know16 Online Reputation Affects Sales22 Compliance Overdrive

OFFICE

ADESA .............................................Inside Front CoverAlly ............................................................................9Auto Use .................................................................16AutoTrader.com .........................................Back CoverChase .....................................................................19Corry Auto Dealers Exchange ..................................18Dealer Services Corporation. ..................................21Dodah.com ...............................................................7Manheim.com ........................................................15Manheim New York .........................Inside Back CoverNIADA Certified .......................................................12 Nowcom ..................................................................11Protective .................................................................5STARS GPS ...............................................................3Voisys ......................................................................22Westlake Financial ..................................................13Wolters Kluwer ........................................................17

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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] New York Driving Force 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 New York Driving Force 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 (c) 2011 by NIADA Services, Inc. All rights reserved.

STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

Used vehicle values have been increasing across nearly all segment most of this year; Rising gas prices have led to strength in fuel-efficient segments, yet safe to say all used-vehicle values strong through April.

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FOR INFORMATION ON HOW TO BECOME A MEMBER OF THE NYIADA, PLEASE CONTACTPAULA FRENDEL (855) 694-2324 [email protected]

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

Dr. ColorChip Introduces Systems for DealersDr. ColorChip, a nationwide provider of automotive touch-up paint, has introduced a

new line of commercial automotive paint chip repair systems catered to dealership owners looking to decrease the cost of cosmetic reconditioning of used car inventory.

Dr. ColorChip now offers an entry-level basic commercial system designed for dealers with fewer than 40 used car sales per month. It is a customizable 30-color system that enables small dealerships and dealers specializing in the resale of a particular make of vehicle to effectively touch up their inventory.

Dr. ColorChip’s standard commercial system is a more comprehensive 80-color system meant to accommodate a dealer serving from 40 to 100 cars per month. Large dealers, chain dealers and auction houses will benefit most from the 160-color deluxe system, which covers the full spectrum of car colors.

“The option of bringing this system in-house is extremely attractive and makes great financial sense” to dealerships, Dr. ColorChip co-owner/developer Dan McCool said. “Its impact is immediate – driving cash to the bottom line and generating higher profits.”

For more information, contact (561) 845-6122 or [email protected], or visit www.drcolorchip.com.

V I S I T W W W. D RC O LO RC H I P. C O M .

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BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

T H E Y ’ R E N O T N E C E S SA R I LY O N E A N D T H E SA M E

Advertising or Marketing?

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

LHPH vs. BHPH: Should My Dealership Switch?In recent years, the Lease Here-Pay

+HUH��/+3+��PRGHO�KDV�JHQHUDWHG�some buzz in the world of subprime auto sales – and for good reason.

LHPH is an offshoot of the Buy +HUH�3D\�+HUH��%+3+��FRQFHSW��EXW�LW�involves a dealer retaining the title to each vehicle and charging usage fees to customers. While the difference might VHHP�VXEWOH�DW�¿UVW��LW�FDQ�UDGLFDOO\�change how the vehicle transaction is PDQDJHG��WD[HG�DQG�UHJXODWHG�

Among the advantages of LHPH:�'HIHUUHG�VDOHV�WD[��$�IHGHUDO�LQFRPH�WD[�GHGXFWLRQ�IRU�depreciation of your assets.��,W�GRHVQ¶W�UHTXLUH�D�UHODWHG�¿QDQFH�FRPSDQ\��5)&��Less burdensome regulations.�Faster repossession times.� Vehicles can’t be claimed in a bankruptcy.

Probably the most commonly cited advantage of switching to a lease SURJUDP�LV�WKH�DELOLW\�WR�GHIHU�VDOHV�WD[�payment on your vehicles. Instead of SD\LQJ�VDOHV�WD[�XS�IURQW�±�ORQJ�EHIRUH�you’ve received all of the customer’s money – you’re allowed to pay the sales WD[�LQ�LQVWDOOPHQWV��HYHU\�WLPH�\RXU�customer pays you. That lessens your risk of losing money when a customer GHIDXOWV��DQG�LW�PDNHV�FDVK�ÀRZ�PRUH�even and manageable.

George Klinke, vice president of business development for the San Diego-based company LHPH, LLC, called that the greatest advantage of the model.³7KHUH�DUH��VWDWHV�ZKHUH�WKHUH¶V�D�

UHDO�FDVK�ÀRZ�LQFHQWLYH�´�.OLQNH�VDLG��“When you buy a car in California, \RX�SD\�DQ��SHUFHQW�VDOHV�WD[�RQ�WKDW�YHKLFOH��2Q�D��FDU��you’re paying $1,750. That’s money that comes out of the dealer’s or the FRQVXPHU¶V�SRFNHW�WRGD\�´

But in California and 31 other states,

GHDOHUVKLSV�FDQ�SD\�WKH�VDOHV�WD[�RQ�each vehicle as payments are collected, rather than at the lease’s inception. Additionally, lessors can collect a VHFXULW\�GHSRVLW��ZKLFK�LV�QRW�VXEMHFW� WR�WD[DWLRQ�

“This is a pool of money where if there DUH�RWKHU�H[SHQVHV�WKDW�FRPH�XS�LQ�WKH�lease, the security deposit can be applied DJDLQVW�WKRVH�´�.OLQNH�VDLG�

Unless state law mandates otherwise, WKH�RQO\�XS�IURQW�WD[�RQ�D�OHDVH�LV�SDLG�on the cap cost reduction.

For years, BHPH dealers have DYRLGHG�LQFRPH�WD[HV�RQ�³SKDQWRP�LQFRPH´�WKURXJK�WKH�XVH�RI�D�UHODWHG�¿QDQFH�FRPSDQ\��$Q�5)&�LV�D�OHJDOO\�separate corporation an auto dealership HVWDEOLVKHV�WR�KDQGOH�¿QDQFLQJ��RIWHQ�IRU�FXVWRPHUV�ZKR�KDYH�GLI¿FXOW\�REWDLQLQJ�credit from traditional lenders.

Usually, the dealership sells the note from each vehicle transaction to its RFC at a discount, eliminating most RI�WKH�GHDOHUVKLS¶V�SUR¿W�RQ�WKH�VDOH��ZKLFK�ZRXOG�KDYH�EHHQ�WD[DEOH�LQFRPH�even though no payments had yet been collected from the consumer.

The RFC’s income on the note SXUFKDVH��KRZHYHU��LV�WD[HG�DV�WKH�payments are collected, avoiding a large LQFRPH�WD[�RQ�SUR¿WV�WKDW�KDYHQ¶W�EHHQ�earned yet and creating a substantial FDVK�ÀRZ�DGYDQWDJH��,I�H[HFXWHG�FRUUHFWO\��WKLV�VHWXS�LV�

entirely legal. The IRS has even written D�JXLGH�IRU�LW��DYDLODEOH�DW�ZZZ�LUV�JRY�EXVLQHVVHV�DUWLFOH��LG ��KWPO��%XW�WKH�,56�DOVR�H[DPLQHV�5)&V�carefully for evidence that they’re substantive businesses that remain at ³DUP¶V�OHQJWK´�IURP�GHDOHUVKLSV��UDWKHU�than thinly disguised shell corporations. One small misstep could place you in line for an audit.

For dealers wanting to avoid this FRPSOLDQFH�KHDGDFKH�DQG�WKH�GLI¿FXOW\�

of establishing a legitimate RFC, LHPH is an attractive option.%HFDXVH�RI�WKH�LQKHUHQW�WD[�

advantages of leasing, it is not necessary WR�KDYH�D�UHODWHG�¿QDQFH�FRPSDQ\�WR�handle LHPH deals – though dealers may still choose to keep their RFCs as a buffer against bad publicity, lawsuits DQG�¿QDQFLDO�ULVN�

Because the dealer is the lessor and therefore the owner of the asset �YHKLFOH��KH�FDQ�FODLP�GHSUHFLDWLRQ�over the term of the lease based on IRS JXLGHOLQHV�DQG�XVH�LW�DV�DQ�LQFRPH�WD[�GHGXFWLRQ��UHGXFLQJ�WKH�RYHUDOO�WD[�ELOO��

Jason Berger, managing partner of AK Acceptance, an RFC in Pittsburgh, said LHPH deals are not constrained by the tougher regulatory requirements that affect BHPH dealers.

At the federal level, LHPH deals fall XQGHU�WKH�OHVV�UHVWULFWLYH�5HJXODWLRQ�0�rules that govern auto leasing, rather than the notoriously tough Regulation Z rules that govern auto sales. Under Reg 0��D�GHDOHU�LV�QRW�REOLJDWHG�WR�GLVFORVH�an annual percentage rate because there LV�QR�LQWHUHVW�UDWH�LQ�D�OHDVH�±�MXVW�D�³UHQW´�RU�³OHDVH´�FKDUJH�

The lack of an interest rate also means you are is not encumbered by state usury limits. You can impose mileage overage charges to protect the value of the vehicle. And if the lessee declares bankruptcy after starting an LHPH deal, he won’t be able to avoid repossession because he never had ownership of the vehicle.

For the same reason, if a lessee breaches the contract, there’s no mandatory grace period to comply with for repossessions.³:H�SXOO�WKH�WULJJHU�IDVWHU�´�%HUJHU�

said, noting dealerships can technically repossess a vehicle if a payment is even one day late – though that might not be a great way to build goodwill in the

T H E B E N E F I T S FO R T H E D E A L E R , R F C A N D T H E C U S T O M E R A R E R E A L LY C O M P E L L I N G .

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FRPPXQLW\��³0\�WDUJHW�WXUQDURXQG�WLPH�LV��GD\V�IURP�WKH�WLPH�RI�GHIDXOW�>WR�when the car is available to lease again]. With a loan, we’d usually let it go a little ELW�ORQJHU�´�

LHPH has some appeal for consumers, too. Because they aren’t paying for full, lifetime ownership of the vehicle, drivers can normally afford a better quality automobile than if they insisted on purchasing. Like the dealer, customers can usually pay less cash up front. And when the customer is done with the car, he can simply return it and get another car, or become the owner E\�SD\LQJ�RU�¿QDQFLQJ�WKH�DJUHHG�RQ�residual value.

Klinke said given the choice, customers should prefer to pay the security deposit on their lease rather than a down payment on a loan.

“If the lessee does everything FRUUHFWO\�´�.OLQNH�VDLG��³KH�FDQ�UROO�WKDW�>VXP@�RYHU�LQWR�D�QHZ�OHDVH�RU�JHW�KLV�PRQH\�EDFN�>DW�HQG�RI�WHUP@�´0DQ\�GHDOHUV�FLWH�WKRVH�UHDVRQV�ZKHQ�

DWWHPSWLQJ�WR�H[SODLQ�WKH�ULVLQJ�QDWLRQDO�interest in the LHPH model. Berger’s dealership partner had operated on WKH�%+3+�PRGHO�VLQFH��EXW�QHYHU�H[SHULHQFHG�WKH�JURZWK�LW�KDV�VLQFH�LW�switched to LHPH.

“Year-over-year, I’ve seen a 73 percent MXPS�LQ�RULJLQDWLRQV�´�%HUJHU�VDLG��³7KH�SULPDU\�UHDVRQ�IRU�WKDW�LV�OHDVLQJ�´

But before you take the plunge, you should also consider the challenges of LHPH.�$Q�H[SHQVLYH�UHWUDLQLQJ�SURFHVV��It requires more advanced dealer management software.��Vicarious liability issues that require contingent liability insurance.� Less liquidity than BHPH.As advantageous as LHPH can be, it

is not a simple change for dealerships to make. LHPH deals require more advanced dealership management V\VWHPV�WKDW�FDQ�SHUIRUP�FRPSOH[�OHDVH�calculations like depreciation schedules and payments that include rental FKDUJHV��GHSUHFLDWLRQ�DQG�VDOHV�WD[��Those programs often cost more than basic deal software.

Allen Lentsch, CEO of Northland 'HDOHUV�DQG�H[HFXWLYH�GLUHFWRU�RI�WKH�Northland Independent Auto Dealers Association, said there is also some liability risk involved.

“When you do LHPH, you own the title of the car, so you can be held responsible for things your customers GR�ZLWK�LW�´�/HQWVFK�VDLG��7KDW�LQFOXGHV�causing an accident. The concept is called vicarious liability.

To be protected against vicarious liability and the risk of lawsuits, dealers must purchase contingent liability insurance, which many turnkey LHPH solutions provide for their dealers.

The Graves Amendment, passed E\�&RQJUHVV�LQ��ZDV�ZULWWHQ�WR�prevent unlimited vicarious liability lawsuits, but the law has been challenged frequently. And despite the Graves Amendment, there is still potential vicarious liability for the GHDOHU�OHVVRU�XS�WR�WKH�VWDWH�PLQLPXP�¿QDQFLDO�UHVSRQVLELOLW\�OLPLWV�

Because of that risk, it’s incumbent on dealers to make certain each lessee has proper insurance coverage.

“We always make sure a customer KDV�LQVXUDQFH��MXVW�DV�PXFK�DV�ZH�PDNH�VXUH�WKH\¶UH�NHHSLQJ�XS�ZLWK�SD\PHQWV�´�%HUJHU�VDLG��³:H�GLVDEOH�YHKLFOHV�LI�>D�FXVWRPHU¶V@�LQVXUDQFH�ODSVHV�´�

If you’re a BHPH dealer who sells loan portfolios to investors, you might have a tougher time drumming up interest in your LHPH leases, partially because the product is less commonly understood.³6RPH�OHQGHUV�DUH�RSHQLQJ�XS�WR�WKLV�´�

Berger said. “From what we see, there DUH�JRLQJ�WR�EH�PRUH�LQ�WKH�QHDU�IXWXUH�´

To dodge potential complications, many LHPH dealers use consulting organizations, such as Northland Dealers, LHPH, LLC and Lease It Own It, to advise them on compliance issues and provide training materials, forms and access to specialized insurance. The services can assume various levels of responsibility for a dealer’s compliance with lease regulations.

LHPH, LLC even goes so far as to adopt the responsibilities of the lessor, shielding the dealership from some legal risks.

Before switching, it’s a good idea to contact some LHPH services to learn the different approaches and costs associated with outsourcing LHPH implementation. :RUNLQJ�ZLWK�H[SHUWV�RI�VRPH�NLQG�FRXOG�be the smartest way to go.

Implementing a LHPH Program

If LHPH sounds like the right way forward for your business, there are a

few things you should focus on right out of the gate.

“I would recommend to any dealer to try to set the most accurate residual >YDOXH@�SRVVLEOH�´�%HUJHU�VDLG��³,I�\RX� do that, you’ll get that vehicle back and SXW�WKDW�YHKLFOH�EDFN�RQ�WKH�URDG��><RX@�can get eight years out of it and lease it WKUHH�WLPHV�´

However, dealers should also remember the IRS imposes limits on how low residual values can be set and still remain a true lease.

Because dealers should keep leased YHKLFOHV�LQ�JRRG�FRQGLWLRQ�IRU�WKH�QH[W�lessee, high-maintenance autos are not recommended for an LHPH program. In addition to requiring lessees to purchase comprehensive coverage for their vehicles, many LHPH dealers package in a warranty or service agreement so they’re able to keep their vehicle in JRRG�VKDSH�ZKLOH�SUR¿WLQJ�IURP�WKH�reconditioning.

Berger said the biggest challenge for the dealership he works with is persuading customers – and employees – to go along with the LHPH plan.

“Your customers need to understand that the vehicle isn’t really an asset, it’s DQ�H[SHQVH�IRU�WKHP�´�%HUJHU�VDLG��³$W�WKH�HQG�RI�>D�WKUHH�\HDU�OHDVH@��KRZ�PXFK�ZLOO�WKLV�YHKLFOH�DFWXDOO\�EH�ZRUWK"´

Berger recalled employees at the dealership he works with took about two months to get fully used to the terminology differences between BHPH and LHPH.

“When you have people who have EHHQ�VHOOLQJ�FDUV�IRU��RU��\HDUV�DQG�all of a sudden you hand them a new PRGHO��RI�FRXUVH�WKHUH¶V�D�WUDQVLWLRQ�´�he said. “But when they see how much this helps us sell cars, they really want to OHDUQ�LW�´

To many dealers, the challenges involved in switching to the LHPH model are far outweighed by its rewards.

“I’ve never seen anybody switch EDFN�´�.OLQNH�VDLG��³7KH�EHQH¿WV�IRU�WKH�dealer, RFC and the customer are really compelling, and to switch back would MXVW�EH�D�UHDO�KHDGDFKH�IRU�HYHU\ERG\�´�

BY ALEX BRAUNALEX BRAUN IS MARKETING MANAGER OF AUTOMANAGER, A PROVIDER OF INTEGRATED DEALER MANAGEMENT SOFTWARE, DEALER WEBSITES AND ONLINE VEHICLE MARKETING FOR MORE THAN 25 YEARS. HE CAN BE REACHED AT [email protected].

C O N T I N U E D F RO M PAG E 8 | LHPH vs. BHPH: Should My Dealership Switch?

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M A R K E T I N G N E W S

Help Your Dealership Go for the Gold7KLQN�\RXU�VKRW�DW�OLYLQJ�OLNH�DQ�2O\PSLDQ�

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EHKLQG�WKH�ZLQQHUV�RIWHQ�FUHDWHV�PDVVLYH�VXSSRUW�IRU�RQH�DWKOHWH�RU�DQRWKHU��RU�VRPHWLPHV�DQ�HQWLUH�WHDP��<RX�ZHUHQ¶W�GURSSHG�RQWR�WKLV�HDUWK�UXQQLQJ�D�VXFFHVVIXO�DXWR�GHDOHUVKLS��VR�JR�DKHDG�DQG�VKDUH�ZKDW�LW�WRRN�WR�JHW�WKHUH�(YHU\�GHDOHUVKLS�EHJDQ�ZLWK�D�OLIHORQJ�ORYH�

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EXLOGV�VXSSRUW�IRU�FXUUHQW�VXFFHVV��Deliver on your promises: $FWLRQV�FRXQW�

IDU�PRUH�WKDQ�ZRUGV��VR�SURYH�ZKDW�PDWWHUV�WR�\RX�ZLWK�HYHU\�HQJDJHPHQW��HYHU\�FXVWRPHU�DQG�HYHU\�VDOH��7KH�FODLPV�\RX�PDNH�DERXW�ZKDW�GLVWLQJXLVKHV�\RXU�GHDOHUVKLS�FDUU\�D�ORW�PRUH�ZHLJKW�ZKHQ�WKH\¶UH�EDFNHG�XS�LQ�WKH�LQWHUDFWLRQV�WKDW�KDSSHQ�PLQXWH�E\�PLQXWH�

Use the right tools��$�GLYHU�FDQ¶W�XVH�D�SRPPHO�KRUVH�DQG�D�J\PQDVW�GRHVQ¶W�JHW�DQ\�PLOHDJH�RXW�RI�D�SRRO��0DNH�VXUH�\RXU�PDUNHWLQJ�PHVVDJHV�JR�WR�WKH�DXGLHQFHV�WKDW�FDQ�XVH�WKHP�EHVW��<RXU�EUDQG�DQG�\RXU�PHVVDJH�VKRXOG�EH�FRQVLVWHQW��EXW�LW¶V�VPDUW�WR�FUDIW�DQG�GHOLYHU�WKH�UHOHYDQW�SRLQWV�ZLWK�ODVHU�targeting.

Details, details:�7U\�WR�WKLQN�DERXW�WKH�GHDOHUVKLS�H[SHULHQFH�IURP�D�FXVWRPHU¶V�SHUVSHFWLYH��7KH�OLWWOH�GHWDLOV�RI�HDFK�SKRQH�FDOO�RU�YLVLW�DUH�FULWLFDOO\�LPSRUWDQW�LQ�VKDSLQJ�WKH�LPSUHVVLRQ�YLVLWRUV�WDNH�DZD\�IURP�DQ\�FRQWDFW�

It’s all connected:�$XWKHQWLFLW\�PDWWHUV�HYHU\ZKHUH�\RXU�GHDOHUVKLS�KDV�D�SUHVHQFH��7KH�FXVWRPHUV�ZKR�VHHP�WR�GLVDSSHDU�DUH�VWLOO�PDNLQJ�ZDYHV�DQG�LQÀXHQFLQJ�\RXU�UHSXWDWLRQ�ORQJ�DIWHU�WKH\¶YH�OHIW�WKH�SUHPLVHV��:KDW�KDSSHQV�RQ�WKH�VKRZURRP�ÀRRU�DQG�LQ�WKH�¿QDQFH�GHSDUWPHQW�WRGD\�ZLOO�DVVXUHGO\�EH�UHÀHFWHG�VRPHGD\��VRPHKRZ��LQ�D�FRQYHUVDWLRQ�RQOLQH�RU�LQ�SHUVRQ�ZKHUH�\RX�GRQ¶W�KHDU�LW�

You can only run today’s race today: /HWWLQJ�JR�RI�WKH�SDVW��ZLQV�DQG�ORVVHV�DOLNH��LV�WKH�EHVW�ZD\�WR�IUHH�XS�HQHUJ\�WR�IRFXV�RQ�WRGD\¶V�FKDOOHQJHV��/HDUQ�IURP�ZKDW�ZRUNHG�DQG�ZKDW�GLGQ¶W��EXW�JUHHW�HDFK�QHZ�FXVWRPHU�ZLWK�IUHVK�DQG�IXOO�LQWHQW�WR�FUHDWH�D�ODVWLQJ�asset.

Remember the team: *RRG�VSRUWVPDQVKLS�LV�DSSHDOLQJ��$FNQRZOHGJLQJ�DOO�WKH�SHRSOH�ZKR�PDNH�\RXU�GHDOHUVKLS�VXFFHVVIXO�LV�DV�UHOHYDQW�DV�WKH�FDUV�DQG�GHDOV�WKHPVHOYHV��)URP�WKH�PDQXIDFWXUHUV�WR�WKH�VHUYLFH�SHUVRQQHO��\RXU�WHDP�PHULWV�UHVSHFW�DQG�DSSUHFLDWLRQ��7KH\�ZLOO�DSSUHFLDWH�WKH�UHFRJQLWLRQ��WRR��+DSS\�HPSOR\HHV�ZLOO�ZRUN�KDUGHU�DQG�DUH�PRUH�OR\DO��:KLOH�\RX�PLJKW�QHYHU�VWDQG�RQ�D�SRGLXP�

DQG�SURXGO\�OLVWHQ�WR�WKH�QDWLRQDO�DQWKHP�ZKLOH�\RXU�IDQV�FKHHU�ZLOGO\��\RX�FDQ�FHUWDLQO\�HQMR\�VWURQJ�SRSXODU�VXSSRUW�DQG�WKH�OR\DOW\�RI�FXVWRPHUV�ZKR�VHH�\RX�DV�D�ZLQQHU�)ROORZ�WKHVH�VWUDWHJLHV�DQG�JR�IRU�WKH�

JROG��

BY JIM FITZPATRICKJIM FITZPATRICK IS PRESIDENT/CEO OF FITZPATRICK ADVERTISING, A FULL-SERVICE AUTOMOTIVE ADVERTISING AGENCY, AND FOUNDER OF FORCE MARKETING, A DIGITAL AND DIRECT MARKETING COMPANY. FOR MORE INFORMATION, CALL 1-800-917-8637, EMAIL [email protected] OR VISIT FITZPATRICKADVERTISING.COM.

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14


I N T H E I N D U S T RYF E D E R A L T R A D E C O M M I S S I O N G U I D E ( W W W. F T C . G OV )

Credit Reports: What Information Providers Need To Know7KH�)DLU�&UHGLW�5HSRUWLQJ�$FW��)&5$��

is designed to protect the privacy of credit report information and to guarantee that information supplied by consumer UHSRUWLQJ�DJHQFLHV��&5$V��LV�DV�DFFXUDWH�as possible.

If you report information about consumers to a CRA, you are considered D�³IXUQLVKHU´�RI�LQIRUPDWLRQ�XQGHU�WKH�FCRA. The responsibilities of information SURYLGHUV�DUH�H[SODLQHG�KHUH��,WHPV��DQG�5 apply only to furnishers who provide information to CRAs “regularly and in WKH�RUGLQDU\�FRXUVH�RI�WKHLU�EXVLQHVV�´�$OO�information providers must comply with the other responsibilities.

1. General prohibition on reporting inaccurate information: You may not furnish information you know – or consciously avoid knowing – is inaccurate. If you “clearly and FRQVSLFXRXVO\´�SURYLGH�FRQVXPHUV�with an address for dispute notices, \RX�DUH�H[HPSW�IURP�WKLV�REOLJDWLRQ�EXW�VXEMHFW�WR�WKH�GXWLHV�GLVFXVVHG�LQ�item 3.

:KDW�GRHV�³FOHDU�DQG�FRQVSLFXRXV´�mean? Reasonably easy to read and XQGHUVWDQG��)RU�H[DPSOH��D�QRWLFH�EXULHG�in a mailing is not clear or conspicuous.

2. Correcting and updating information: If you discover you’ve supplied one or more CRAs with incomplete or inaccurate information, you must correct it, resubmit it to each CRA and report only the correct information in the future.

3. Responsibilities after notice of a consumer dispute from a consumer: If a consumer writes to the address you specify for disputes to challenge the accuracy of any information you furnished and if the information is, in fact, inaccurate, you must report only the correct information to CRAs in the future. If you are a regular furnisher, you will also have to VDWLVI\�WKH�GXWLHV�LQ�LWHP��

Once a consumer has given notice that he or she disputes information, you may not give that information to any CRA without also telling the CRA that the information is in dispute.

4. Responsibilities after receiving notice from a consumer reporting DJHQF\��,I�D�&5$�QRWL¿HV�\RX�WKDW�a consumer disputes information

you provided:��You must investigate the dispute

and review all relevant information provided by the CRA about the dispute.

��<RX�PXVW�UHSRUW�\RXU�¿QGLQJV�WR� the CRA.

��If your investigation shows the information to be incomplete or inaccurate, you must provide corrected information to all national CRAs that received the information.

��You should complete these steps within the time period the FCRA sets for the CRA to resolve the dispute – normally 30 days after receipt of a dispute notice from the consumer. If the consumer provides additional relevant information during the 30-day period, the CRA has 15 days more. The CRA must give you all relevant information it gets within ¿YH�EXVLQHVV�GD\V�RI�UHFHLSW��DQG�must promptly give you additional relevant information provided from the consumers. If you do not investigate and respond with the VSHFL¿HG�WLPH�SHULRGV��WKH�&5$�PXVW�delete the disputed information from LWV�¿OHV�

5. Reporting voluntary account closings: You must notify CRAs when consumers voluntarily close credit accounts. That is important because some information users might interpret a closed account as an indicator of bad credit unless it is clearly disclosed that the consumer – not the creditor – closed the account.

6. Reporting delinquencies: If you report information about a delinquent account that’s placed IRU�FROOHFWLRQ��FKDUJHG�WR�SUR¿W�RU�ORVV��RU�VXEMHFW�WR�DQ\�VLPLODU�DFWLRQ��\RX�PXVW��ZLWKLQ��GD\V�DIWHU�\RX�report the information, notify the CRA of the month and year of the commencement of the delinquency that immediately preceded your action. That will ensure CRAs use the correct date when computing how long derogatory information FDQ�EH�NHSW�LQ�D�FRQVXPHU¶V�¿OH�

How do you report accounts you have charged off or placed for collection?$�IHZ�H[DPSOHV��A consumer became delinquent on

0DUFK��7KH�FUHGLWRU�SODFHG�the account for collection on October ��

In that case, the delinquency began RQ�0DUFK��7KH�GDWH�WKH�FUHGLWRU�placed the account for collection has no VLJQL¿FDQFH�IRU�FDOFXODWLQJ�KRZ�ORQJ�WKH�account can stay on the consumer’s credit report. In that case, the date that must be UHSRUWHG�WR�&5$V�ZLWKLQ��GD\V�DIWHU� \RX�¿UVW�UHSRUW�WKH�FROOHFWLRQ�DFWLRQ�LV�0DUFK��A consumer fell behind on monthly SD\PHQWV�LQ�-DQXDU\��WKHQ�brought the account current in June ��SDLG�RQ�WLPH�DQG�LQ�IXOO�HYHU\�PRQWK�WKURXJK�2FWREHU��EXW�thereafter made no payments. The creditor charged off the account in 'HFHPEHU��

In that case, the most recent delinquency began when the consumer failed to make the payment due in 1RYHPEHU��7KH�HDUOLHU�GHOLQTXHQF\�is irrelevant. The creditor must report WKH�1RYHPEHU��GDWH�ZLWKLQ��GD\V�RI�UHSRUWLQJ�WKH�FKDUJH�RII��)RU�H[DPSOH��if the creditor charged off the account LQ�'HFHPEHU��DQG�UHSRUWHG�WKH�FKDUJH�RII�RQ�'HF��WKH�FUHGLWRU�must provide the month and year of the GHOLQTXHQF\�±�1RYHPEHU��±�ZLWKLQ��GD\V�RI�'HF��A consumer’s account became GHOLQTXHQW�RQ�'HF��7KH�DFFRXQW�ZDV�¿UVW�SODFHG�IRU�FROOHFWLRQ�RQ�$SULO��&ROOHFWLRQ�ZDV�QRW�successful. The merchant placed the account with a second collection DJHQF\�RQ�-XQH��

The date of the delinquency for UHSRUWLQJ�SXUSRVHV�LV�'HFHPEHU��Repeatedly placing an account for collection does not change the date the delinquency began.��A consumer’s credit account became GHOLQTXHQW�RQ�$SULO��7KH�consumer made partial payments IRU�WKH�QH[W�¿YH�PRQWKV�EXW�QHYHU�brought the account current. The merchant placed the account for FROOHFWLRQ�LQ�0D\��

Since the account was never brought current during the period partial payments were made, the delinquency that immediately preceded the collection FRPPHQFHG�LQ�$SULO��ZKHQ�WKH�FRQVXPHU�¿UVW�EHFDPH�GHOLQTXHQW�

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16


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7KH�RQO\�ZD\�WR�UHFWLI\�D�QHJDWLYH�UHYLHZ�LV�WR�FRQWDFW�WKH�SHUVRQ�ZKR�SRVWHG�LW��DGGUHVV�KLV�FRPSODLQWV�DQG�WXUQ�WKH�FRPSODLQW�LQWR�D�FRPSOLPHQW��7KDW¶V�ZK\�PRQLWRULQJ�ZKDW�LV�VDLG�DERXW�\RX�LV�LPSHUDWLYH�

7KHUH�DUH�SURDFWLYH�PHDVXUHV�\RX�VKRXOG�WDNH�EHIRUH�D�QHJDWLYH�UHYLHZ�LV�SRVWHG�DERXW�\RX��1RW�RQO\�GR�\RX�QHHG�WR�FRQVWDQWO\�HQFRXUDJH�\RXU�FXVWRPHUV�WR�SRVW�SRVLWLYH�UHYLHZV��\RX�QHHG�WR�KDYH�VRPHRQH�UHVSRQVLEOH�

How Your Online Reputation Affects Sales C R E D I B I L I T Y I S T H E M O S T I M P O R TA N T PA R T O F A N Y D E A L E R S H I P ’ S SA L E S .

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SEPTEMBER/OCTOBER 2012 T H E N E W Y O R K D R I V I N G F O R C E

17


IRU�IROORZLQJ�XS�ZLWK�HDFK�DQG�HYHU\�FXVWRPHU�DIWHU�WKH�SXUFKDVH�RI�D�YHKLFOH�RU�D�VHUYLFH�YLVLW�WR�HQVXUH�HYHU\�FXVWRPHU�ZDV�FRPSOHWHO\�VDWLV¿HG�ZLWK�KLV�H[SHULHQFH��

+DYH�D�SROLWH�VFULSW�RI�QR�ORQJHU�WKDQ��VHFRQGV�LQ�SODFH��,W�LV�LPSRUWDQW�WKDW�WKH�SHUVRQ�UHVSRQVLEOH�IRU�FRQWDFWLQJ�\RXU�FXVWRPHUV�KDV�WKH�DXWKRULW\�DQG�XQGHUVWDQGLQJ�RI�ZKDW�JRHV�RQ�LQ�WKH�GHDOHUVKLS�WR�SURDFWLYHO\�DGGUHVV�DQ\�FRPSODLQWV�LPPHGLDWHO\��7KH�FXVWRPHU�VKRXOG�QRW�EH�SDVVHG�WR�WZR�RU�WKUHH�PDQDJHUV��ZLWK�QRQH�RI�WKHP�UHDOO\�VXUH�RI�WKH�HQWLUH�VLWXDWLRQ��0DNLQJ�WKH�FXVWRPHU�UHSHDW�KLPVHOI�UDLVHV�KLV�OHYHO�RI�IUXVWUDWLRQ��

7KH�SHUVRQ�FRQWDFWLQJ�WKH�FXVWRPHU�LQLWLDOO\�VKRXOG�EH�DEOH�WR�PDNH�D�GHFLVLRQ�

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,I�WKH�IROORZ�XS�SURFHVV�LV�QRW�KDQGOHG�FRUUHFWO\��\RX�ZLOO�HQG�XS�ZLWK�PRUH�FRPSODLQWV�WKDQ�LI�D�IROORZ�XS�ZDV�QRW�PDGH��%H�VXUH�WR�KDYH�SROLFLHV�LQ�SODFH�IRU�KRZ�WR�KDQGOH�D�FRPSODLQW�DQG�EH�VXUH�HYHU\�PDQDJHU�XQGHUVWDQGV�WKH�LPSRUWDQFH�RI�KDQGOLQJ�D�FRPSODLQW�ZLWK�WKH�KLJKHVW�VHQVH�RI�SULRULW\�DQG�XUJHQF\�

7KH�ERWWRP�OLQH�LV��\RXU�GHDOHUVKLS�QHHGV�WR�KDYH�VWUDWHJLHV�LQ�SODFH�WR�HQVXUH�LWV�UHSXWDWLRQ�LV�VHFXUH��,I�\RXU�RQOLQH�UHSXWDWLRQ�LV�QRW�EHLQJ�PRQLWRUHG�DQG�SURDFWLYHO\�PDLQWDLQHG��LW�ZLOO�GHFOLQH�

:LWK��SHUFHQW�RI�\RXU�SURVSHFWV�FKHFNLQJ�\RXU�UHYLHZV�EHIRUH�PDNLQJ�D�SXUFKDVLQJ�GHFLVLRQ��LW�VKRXOG�EH�RQH�RI�\RXU�WRS�SULRULWLHV��

BY PETER MARTINPETER “WEB DOC” MARTIN IS PRESIDENT OF CACTUS SKY COMMUNICATIONS. HE CAN BE REACHED BY CALLING (941) 756-1932 OR E-MAILING [email protected]. FOR MORE INFORMATION, VISIT WWW.CACTUSSKY.COM AND CLICK ON “REPUTATION BUILDING”

NY_0912.indd 17 8/13/12 3:06 PM


18


3D\1HDU0H��WKH�FDVK�WUDQVDFWLRQ�QHWZRUN��KDV�ODXQFKHG�3D\1HDU0H�Lending, a cash payment system for subprime lenders, and has teamed with Westlake Financial Services to integrate 3D\1HDU0H¶V�WHFKQRORJ\�LQWR�H[LVWLQJ�systems, enabling customers to repay UHWDLO�LQVWDOOPHQW�FRQWUDFWV�LQ�FDVK��DW�DQ\�RI��SDUWLFLSDWLQJ��(OHYHQ®

stores nationwide.8VLQJ�3D\1HDU0H��FXVWRPHUV�RI�

Westlake’s network of more than 15,000 new and used car dealers will be able to make account payments in cash at their local 7-Eleven store, where a unique loan EDUFRGH�RU�3D\1HDU0H�&DUG�LV�VFDQQHG�DW�WKH�UHJLVWHU��:LWK�3D\1HDU0H��WKH�transactions are completed instantly, and consumers’ accounts are credited instantly.³3D\1HDU0H�RIIHUV�D�UHPDUNDEO\�VLPSOH�

way to make our collections process more HI¿FLHQW�´�:HVWODNH�GLUHFWRU�RI�RSHUDWLRQV�-RKQ�0DVRQ�VDLG��³:H�DQWLFLSDWH�UHGXFHG�operational costs while adding payment ORFDWLRQV�IRU�RXU�FXVWRPHUV�´

“Subprime lenders need to make cash payments as easy as possible for WKHPVHOYHV�DQG�WKHLU�FRQVXPHUV�´�3D\1HDU0H�&(2�'DQQ\�6KDGHU�VDLG��“We’ve dramatically changed how cash payments are made by opening up thousands of additional payment locations, accessible any time they are QHHGHG�´3D\1HDU0H�/HQGLQJ��D�VHFXUH�

hosted web application, provides a comprehensive turnkey service lenders can use to accept cash payments without integration. Lenders can set XS�3D\1HDU0H�/HQGLQJ�LQ�OHVV�WKDQ��minutes and start collecting immediately, and can add additional sites almost LQVWDQWO\��%HFDXVH�3D\1HDU0H�/HQGLQJ�does not require any integration with H[LVWLQJ�V\VWHPV��LW�FDQ�EH�XVHG�E\�OHQGHUV�of any size.³:H�DSSUHFLDWH�WKDW�3D\1HDU0H�DOORZV�

our customers to make payments at any WLPH�´�7LGDOZDYH�)LQDQFH�&RUS��SUHVLGHQW�Ted Beresford said. “In fact, we’ve been pleasantly surprised by how many customers make their payments at ��S�P�´�

V I S I T W W W. PAY N E A R M E . C O M

Westlake Financial Adds PayNearMe’s Technology

Autobytel Launches Mobile WebsiteAutobytel Inc. has launched a dedicated mobile version of its website.Studies show shoppers prefer using a browser to a downloadable mobile app, so

Autobytel’s mobile website was developed from the ground up with today’s mobile consumer in mind. Autobytel mobile includes many of the popular features on the full ZHEVLWH�EXLOW�VSHFL¿FDOO\�IRU�WKH�PRELOH�HQYLURQPHQW�7KH�VLWH�IHDWXUHV�D�FXVWRPL]HG�GHDOHU�GLUHFWRU\�WKDW�DOORZV�FRQVXPHUV�WR�¿QG�ORFDO�

dealers as well as new and used vehicle research and automotive industry news, and FXVWRPL]HG�VKRSSLQJ�WRROV�VXFK�DV�D�XVHG�FDU�¿QGHU��FDU�FDOFXODWRUV�DQG�WKH�DELOLW\�WR�determine used car values and submit purchase requests directly to dealers.

For more information, visit www.autobytel.com.

M O B I L E N E W S

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SEPTEMBER/OCTOBER 2012 T H E N E W Y O R K D R I V I N G F O R C E

19


V I S I T W W W. PAY N E A R M E . C O M

M A R K E T N E W S

Report: Expect to See More Hybrids([SHFW�WR�VHH�PRUH�K\EULGV�FUXLVLQJ�

DURXQG�WKH�ZRUOG¶V�KLJKZD\V�LQ�WKH�QH[W�few years.

According to market research report distributor ReportStack.com, the global K\EULG�FDU�PDUNHW�LV�H[SHFWHG�WR�JURZ�DW�D�UDWH�RI��SHUFHQW�RYHU�WKH�QH[W� three years.

The cause for the potential double-digit growth: increasing global oil consumption, the report, titled “Global Hybrid Car 0DUNHW��´�H[SODLQHG��0RUHRYHU��DV�JRYHUQPHQWV�DURXQG�WKH�

world try to cut down on fuel emissions, the hybrid car market has “been witnessing an increase in initiatives by governments to create awareness and DFFHSWDQFH�RI�K\EULG�FDUV�´�WKH�UHSRUW�VDLG�

The report also cites labor arbitrage, such as the various advantages offered

by the hybrid car to the end user, such as HQHUJ\�HI¿FLHQF\��OHVV�SROOXWLRQ��EHWWHU�performance, reduced dependency on natural resources and more, as reasons for WKH�K\EULG�PDUNHW�H[SDQVLRQ��

That said, even with the push from politicians, the high cost of hybrid cars is acting as a barrier to the market growth, the report said.

‘’With the time and research on the development of the battery systems of hybrid cars, the overall cost of batteries DQG�WRWDO�FRVW�RI�RZQHUVKLS�ZLOO�GHFUHDVH�´�an analyst from the publishing automotive WHDP�VDLG��³%\��WKH�WRWDO�FRVW�RI�ownership of plug-in hybrid electric vehicles with a battery of 10 kilowatt-hours will be below that of an internal FRPEXVWLRQ�HQJLQH�YHKLFOH��DQG�E\��the total cost of ownership of plug-in

hybrid electric vehicles with a battery of 15 KWh will be lower than an internal combustion engine vehicle.

“The total cost of ownership of battery electric vehicles will be less than an internal combustion engine vehicle by ��ZLWK�WKH�GHYHORSPHQW�RI�EDWWHULHV��This reduction in cost will fuel the growth RI�WKH�JOREDO�K\EULG�FDU�PDUNHW�´:KR�ZLOO�EHQH¿W�PRVW�IURP�WKLV�

potential growth?The vendors currently dominating the

hybrid market space include Toyota 0RWRU�&RUS��+RQGD�0RWRU�&R��)RUG�0RWRU�&R��DQG�1LVVDQ�0RWRU�&R��/WG�� the report noted.*HQHUDO�0RWRUV�&R��%0:�$*�DQG�

9RONVZDJHQ�*URXS�DUH�DOVR�H[SHFWHG�WR�SOD\�D�UROH�LQ�WKH�IXWXUH�IXHO�HI¿FLHQW�vehicle market.

NY_0912.indd 19 8/13/12 3:06 PM


20


AU T O C R E D I T N E W S

Auto Credit Continues to LoosenFor car buyers seeking auto loans,

happy days are here again. 8�6��EDQNV�DQG�DXWR�¿QDQFH�FRPSDQLHV�

are once again welcoming all kinds of customers, even those with less-than-stellar credit. The average credit scores of new and used car buyers, which spiked during the economic downturn, have IDOOHQ�WR�QHDUO\�WKH�VDPH�OHYHO�DV��±�before the recession. %HWWHU�\HW��H[SHUWV�GRQ¶W�WKLQN�WKH�FUHGLW�

pipeline will dry up anytime soon. Low interest rates are making it cheaper for banks to get money, which makes them more willing to lend. The federal funds rate – the rate at which banks lend money to each other – is near zero percent, down IURP��SHUFHQW�LQ�WKH�VXPPHU�RI��

Loans to subprime buyers – those ZLWK�FUHGLW�VFRUHV�RI��RU�ORZHU�±�DUH�particularly attractive, since banks can charge higher interest rates. The average interest rate for a deep subprime loan �FUHGLW�VFRUH�OHVV�WKDQ��RQ�D�QHZ�FDU�LV��SHUFHQW��FRPSDUHG�ZLWK��percent for buyers with the highest scores, DFFRUGLQJ�WR�([SHULDQ�$XWRPRWLYH��ZKLFK�tracks automotive credit data.

At the same time, both banks and consumers have lowered their debts, meaning even subprime loans are less risky because borrowers are less likely to EH�LQ�GHEW�DQG�XQDEOH�WR�SD\��)RU�H[DPSOH��SHUFHQW�RI�DXWR�ORDQV�ZHUH��GD\V�GHOLQTXHQW�LQ�WKH�¿UVW�TXDUWHU�RI�WKLV�\HDU��FRPSDUHG�ZLWK��SHUFHQW�LQ�WKH�¿UVW�TXDUWHU�RI��([SHULDQ�KDGQ¶W�UHOHDVHG�VHFRQG�TXDUWHU�

data at press time, but analysts said the trend will hold as long as interest rates stay low.

“Consumer spending is still very conservative. People aren’t going hog wild like they did before the recession,’’ said

Lacey Plache, chief economist for the auto information site Edmunds.com.

Here is what buyers with various credit VFRUHV�FDQ�H[SHFW�LI�WKH\¶UH�VKRSSLQJ�for a new or used car, and the estimated PRQWKO\�SD\PHQW��H[FOXGLQJ�VDOHV�WD[��RQ�D�¿YH�\HDU�ORDQ�LI�WKH\�WUDGH�LQ�D�FDU�ZRUWK��IRU�D�QHZ��IXOO\�ORDGHG��Toyota Camry sedan. 6XSHU�SULPH��DQG�XS��/RDQ�UDWHV�

DYHUDJH��SHUFHQW�IRU�D�QHZ�FDU�DQG�4.4 percent for a used car, according to ([SHULDQ��$�VXSHU�SULPH�EX\HU�FDQ�H[SHFW�to pay $357 per month for the Camry. 3ULPH��/RDQ�UDWHV�DYHUDJH�

��SHUFHQW�IRU�D�QHZ�FDU�DQG��SHUFHQW�IRU�D�XVHG�FDU��$�SULPH�EX\HU�FDQ�H[SHFW�WR�SD\��SHU�PRQWK��1RQSULPH��/RDQ�UDWHV�

DYHUDJH��SHUFHQW�IRU�D�QHZ�FDU�DQG��percent for a used car. A nonprime buyer FDQ�H[SHFW�WR�SD\��SHU�PRQWK�6XESULPH��/RDQ�UDWHV�DYHUDJH�

��SHUFHQW�IRU�D�QHZ�FDU�DQG��SHUFHQW�for a used car. A subprime buyer can H[SHFW�WR�SD\��SHU�PRQWK��'HHS�VXESULPH��RU�OHVV��/RDQ�

UDWHV�DYHUDJH��SHUFHQW�IRU�D�QHZ�FDU�DQG��SHUFHQW�IRU�D�XVHG�FDU��$�GHHS�VXESULPH�EX\HU�FDQ�H[SHFW�WR�SD\��per month.

Auto loans suffered a similar fate to KRPH�PRUWJDJHV�GXULQJ�WKH�¿QDQFLDO�crisis. When banks sustained losses and tightened lending requirements, the average credit score for new car buyers URVH�QHDUO\��SRLQWV�WR�D�KLJK�RI��LQ�WKH�¿UVW�TXDUWHU�RI��

Standards have been loosening ever since, but only now are they approaching pre-recession levels. The average credit VFRUH�IRU�D�QHZ�FDU�EX\HU�LQ�WKH�¿UVW�TXDUWHU�RI�WKLV�\HDU�ZDV��ZKLOH�WKH�DYHUDJH�VFRUH�IRU�D�XVHG�FDU�EX\HU�ZDV��

The loosening standards are good news for the auto industry, which has seen a steady recovery despite bumpy economic QHZV��8�6��FDU�DQG�WUXFN�VDOHV�DUH�H[SHFWHG�to climb as high as 14.5 million units this year, up from a 30-year low of 10.4 PLOOLRQ�LQ��7KDW¶V�VWLOO�ZHOO�EHORZ�WKH�KHDG\�GD\V�RI�WKH�PLG��V��ZKHQ�HDV\�credit drove annual sales to 17 million, but analysts say the growth rate this time is healthy and sustainable, with consumers PDNLQJ�EHWWHU�¿QDQFLDO�GHFLVLRQV��%X\HUV�DOVR�KDYH�PRUH�RSWLRQV��,Q��

*HQHUDO�0RWRUV�&R��ERXJKW�$PHUL&UHGLW�,QF��D�7H[DV�EDVHG�FRPSDQ\�WKDW�specializes in subprime lending, because *0¶V�PDLQ�¿QDQFH�FRPSDQ\�ZDV�XQDEOH�to risk taking on subprime buyers. As D�UHVXOW��SHUFHQW�RI�ORDQV�IRU�*0�vehicles went to subprime customers this spring, nearly double the number before the AmeriCredit purchase.7KH�DYHUDJH�IRU�WKH�DXWR�LQGXVWU\�LV��

percent. *0�VD\V�VXESULPH�ORDQV��LI�PDQDJHG�

properly, are good for business. “The recession created an awful lot of new

subprime buyers, but it doesn’t mean they’re D�EDG�FUHGLW�ULVN�´�VSRNHVPDQ�-LP�&DLQ�VDLG��

Some are sounding the alarm about the easing of credit standards. In a note to LQYHVWRUV�7XHVGD\��0RRG\¶V�ZDUQHG�WKDW�the subprime auto lending market is seeing the same kind of heated competition and SRRU�XQGHUZULWLQJ�WKDW�GURYH�XQH[SHFWHGO\�KLJK�ORVVHV�LQ�WKH�PLG��V�0RRG\¶V�VDLG�ORDQ�SHUIRUPDQFH�KDV�

been strong over the past few years, but lenders should beware of weakening VWDQGDUGV�LQ�RUGHU�WR�LQFUHDVH�SUR¿WV�DQG�market share.

BY DEE-ANN DURBINTHE ASSOCIATED PRESS

NY_0912.indd 20 8/13/12 3:06 PM

NY_0912.indd 21 8/14/12 9:27 AM


22


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

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 MXVW�EHFDXVH�WKH�UHTXLUHPHQWV�FRQWLQXDOO\�change.

If you feel like it’s becoming increasingly FRPSOH[��\RX¶UH�QRW�DORQH��+HUH�DUH�WKH�likely culprits:

Shorter notice: Some states have started publishing regulatory changes RQ�UDWKHU�VKRUW�QRWLFH��)RU�H[DPSOH��LQ�1HZ�0H[LFR�WKH�DWWRUQH\�JHQHUDO�UHFHQWO\�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 WKH�¿QDO�UHJXODWLRQ�FDPH�DV�D�VXUSULVH�WR�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 E\��GD\V��DSSDUHQWO\�DIWHU�VLJQL¿FDQW�LQGXVWU\�IHHGEDFN��

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 �LQFUHDVH��WKH�UHODWHG�IHHV�PRUH�HDVLO\��%XW�often the changes come with little or no notice, which underscores how important it LV�IRU�GHDOHUV�DQG�OHQGHUV�WR�EH�FRQ¿GHQW�LQ�their ability to monitor the changes that are constantly taking place.

Volume of information: While it FDQ�EH�GLI¿FXOW�WR�NHHS�XS�ZLWK�WKH�SDFH�RI�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.)RU�H[DPSOH��WKH�&RQVXPHU�)LQDQFLDO�

3URWHFWLRQ�%XUHDX��&)3%��SXEOLVKHG�D�SURSRVHG�UXOH�-XO\��UHJDUGLQJ�LQWHJUDWHG�mortgage disclosures under RESPA and the 7UXWK�LQ�/HQGLQJ�$FW��,W�ZDV�RQH�RI�WKH�¿UVW�VLJQL¿FDQW�SURSRVHG�UXOHV�IURP�WKH�&)3%��DQG�WKH�SODQQLQJ�SURFHVV�LQYROYHG�H[WHQVLYH�research and solicitation of industry and consumer feedback.

As a result, the proposed rule and H[SODQDWRU\�PDWHULDOV�WRWDO�PRUH�WKDQ�1,000 pages. The good news is the SURSRVHG�UXOH�SURYLGHV�VLJQL¿FDQW�GHWDLOV�DQG�H[SODQDWLRQV�RI�WKH�FKDQJHV��7KH�EDG�news is that many pages of material can be overwhelming (aren’t you glad you’re not in WKH�PRUWJDJH�OHQGLQJ�EXVLQHVV"��

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, GLVSDUDWH�¿OH�IRUPDWV��¿HOG�QDPLQJ�conventions, calculation engines, software and hardware, and reliance on PXOWLSOH�YHQGRUV�FDQ�PDNH�LW�GLI¿FXOW�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 RUJDQL]DWLRQV��'HDOHUVKLSV�DQG�¿QDQFLDO�institutions should regularly question ZKHWKHU�WKH\�IHHO�FRQ¿GHQW�WKDW�QHZ�ODZV�and regulations are being embedded in their business operations.

The challenges underscore a need for JUHDWHU�RSHUDWLRQDO�HI¿FLHQF\��'LVSDUDWH�systems and procedures can make even relatively simple changes more time-FRQVXPLQJ�DQG�FRPSOH[�

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 HI¿FLHQF\�QRZ�ZLOO�PDNH�LW�WKDW�PXFK�HDVLHU�for you to respond to the LQHYLWDEOH�QH[W�FRPSOLDQFH�crunch-time event.

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new york driving force sept/oct 2012

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