By Eric L. Johnson
Here’s our monthly article on selected legal developments we think might interest the auto sales, finance, and leasing world. This month, the developments involve the Federal Trade Commission, the Consumer Financial Protection Bureau and the Federal Communications Commission. As usual, our article features the “Case(s) of the Month” and our “Compliance Tip.” Note that this column does not offer legal advice. Always check with your lawyer to learn how what we report might apply to you or if you have questions.
On November 8, the Federal Trade Commission issued an advance notice of proposed rulemaking seeking comment on deceptive and unfair uses of reviews and endorsements. The FTC does not propose to cover every issue in its Guides Concerning the Use of Endorsements and Testimonials in Advertising, but it proposes to address the following practices: (1) reviews or endorsements by people who do not exist, who did not actually use or test the product or service, or who are misrepresenting their experience with it; (2) review hijacking, where a seller steals or repurposes reviews of another product; (3) marketers offering compensation or other incentives in exchange for, or conditioned on, the writing of positive or negative consumer reviews; (4) owners, officers, or managers of a company: (a) writing reviews or testimonials of their own products or services, or publishing testimonials by their employees or family members, that fail to provide clear and conspicuous disclosures of those relationships, or (b) soliciting reviews from employees or relatives without instructing them to disclose their relationships; (5) the creation or operation of websites, organizations, or entities that purportedly provide independent reviews or opinions of products or services but are, in fact, created and controlled by the companies offering the products or services; (6) misrepresenting that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, reviews are being suppressed based upon their negativity; (7) the suppression of customer reviews by physical threat or unjustified legal threat; and (8) selling, distributing, or buying followers, subscribers, views, and other indicators of social media influence. Comments on the ANPR are due by January 9, 2023.
On November 8, the Federal Trade Commission issued an advanced notice of proposed rulemaking exploring a rule to crack down on “junk fees” that it claims are mushrooming throughout the country. The FTC’s advance notice of proposed rulemaking is soliciting written comment, data, and argument regarding the need for a rulemaking to prevent persons, entities, and organizations from imposing junk fees on consumers. The ANPR also solicits public comment on 21 specific questions. The FTC defines “junk fees” as unfair or deceptive fees that are charged for goods or services that have little or no added value to the consumer, including goods or services that consumers would reasonably assume to be included within the overall advertised price. The FTC stated the term also encompasses ‘‘hidden fees,’’ which are fees for goods or services that are deceptive or unfair, including because they are disclosed only at a later stage in the consumer’s purchasing process or not at all, whether or not the fees are described as corresponding to goods or services that have independent value to the consumer. The FTC believes that a junk fee can be a hidden fee, but not all junk fees are hidden fees. Finally, the FTC thinks that these junk fees are bundled as “ancillary products” in connection with loans and auto financing that end up on the final bill without the consumer’s awareness or express and informed consent. Comments on the ANPR are due by January 9, 2023.
On November 10, the Consumer Financial Protection Bureau issued a circular concerning consumer reporting agencies' and furnishers' obligations under the Fair Credit Reporting Act to investigate consumer disputes of credit report information. The circular addresses two questions: (1) Are consumer reporting agencies and the entities that furnish information to them permitted under the FCRA to impose obstacles that deter submission of disputes? (2) Do consumer reporting agencies need to forward to furnishers consumer-provided documents attached to a dispute? The Bureau answered "no" to the first question, stating that "[c]onsumer reporting agencies and furnishers are liable under the FCRA if they fail to investigate any dispute that meets the statutory and regulatory requirements, as described in more detail [in the circular]. Enforcers may bring claims if consumer reporting agencies and furnishers limit consumers' dispute rights by requiring any specific format or requiring any specific attachment such as a copy of a police report or consumer report beyond what the statute and regulations permit." The Bureau answered "[i]t depends" to the second question, stating that "[e]nforcers may bring a claim if a consumer reporting agency fails to promptly provide to the furnisher 'all relevant information' regarding the dispute that the consumer reporting agency receives from the consumer. While there is not an affirmative requirement to specifically provide original copies of documentation submitted by consumers, it would be difficult for a consumer reporting agency to prove [it] provided all relevant information if [it] fail[s] to forward even an electronic image of documents that constitute a primary source of evidence."
On November 15, the Federal Trade Commission announced a 6-month extension of the deadline for compliance with revised provisions of its Safeguards Rule until June 9, 2023.
On November 16, the Consumer Financial Protection Bureau issued its Fall 2022 issue of Supervisory Highlights, which summarizes violations of federal consumer financial protection laws identified by the Bureau during its supervisory examinations completed between January and June 2022. The report highlights, among other things, alleged violations of the Fair Credit Reporting Act by consumer reporting agencies and furnishers for failing to promptly address and update inaccurate information on credit reports. It also highlights alleged unfair and deceptive acts or practices by servicers of vehicle financing contracts, including failing to provide refunds for unearned fees related to add-on products, loan modifications, double billing consumers for collateral protection insurance, use of electronic devices that interfere with driving, and debt collection practices. The Bureau also notes in the report that it is increasing its focus on repeat offenders, particularly those who violate agency or court orders, by creating a Repeat Offender Unit. The Repeat Offender Unit is focused on reviewing and monitoring the activities of repeat offenders, identifying the root cause of recurring violations, pursuing and recommending solutions and remedies that hold entities accountable for failing to consistently comply with federal consumer financial protection laws, and designing a model for order review and monitoring that reduces the occurrences of repeat offenders.
On November 17, noting that public data on the auto loan market is relatively sparse in comparison to data on mortgages, credit cards, and student loans, the Consumer Financial Protection Bureau released a blog post announcing "an effort to work with industry and other agencies to develop a new data set to better monitor the auto loan market." The Bureau will be accepting public comment on the initiative until December 19, 2022.
On November 21, the Federal Communications Commission issued a Declaratory Ruling and Order finding that the Telephone Consumer Protection Act regulates "direct drop" or "ringless" voicemails as telephone calls. The petitioner argued that, as a technical matter, ringless voicemails are not telephone calls: the sender does not dial the recipient's phone number, and the recipient's phone does not ring. Rather, the recipient simply gets a notification of a new voicemail. The FCC concluded that the arguments for regulating ringless voicemails as telephone calls overwhelmed the petitioner's technical argument. The FCC emphasized the point that, from the consumer's perspective, there isn't much difference between ringless voicemails and other telephone calls: in all cases, unwanted contacts invade consumers' privacy. The FCC also noted that the public comments in this proceeding clearly articulated the point that consumers are just as bothered by this type of contact as by any other on their phones. Because case law has also taken this position, companies have likely already been reluctant to treat ringless voicemails as outside the scope of the TCPA. With the FCC's Declaratory Ruling and Order, companies should now apply their TCPA policies and procedures to this technology, if they haven't already. This means, among other things, applying the TCPA's consent and content requirements applicable to prerecorded messages as well as the TCPA's do-not-call and telemarketing standards, when the ringless voicemail is used for marketing.
Case(s) of the Month
This Month’s CARLAWYER© Compliance Tip
So, there’s this month’s roundup! Stay legal, and we’ll see you next month.
Eric (firstname.lastname@example.org) is a Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®, a monthly legal newsletter for auto dealers and a contributing author to the F&I Legal Desk Book. For information, visit www.counselorlibrary.com. ©CounselorLibrary.com 2022, all rights reserved. Single publication rights only to the Association. HC# 4891-1017-2480.
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Used car dealerships can provide better services by offering a wide selection of vehicles and providing customers with a more personalized experience ranging from financing options to protection plans and test drives. Here, we are going to dive into more detail about the best practices that a car dealership can follow.
When it comes to finding the best deal on a car, car dealerships are your best bet. They have access to all the information necessary to help you make an informed decision about your purchase. Car dealers can offer competitive pricing, discounts, extended warranties, or free maintenance packages by keeping an eye on the competition. This can help make the deal more attractive to potential customers and entice them to purchase the vehicle.
With the internet at your fingertips, it's easier than ever to locate a reputable used car dealership. However, it's important to remember that not all dealerships are created equal. While some will be honest about the car's condition and their value, others may not be so open with these details.
It is essential that you feel comfortable with the dealership and its staff while making your purchase. Make sure they understand your desired vehicle, budget, and any other expectations you may have. When browsing, dealerships often have a variety of cars on display. This allows them to get a better idea of what kind of car would work best for you and if it’s in line with the cars currently available for sale. If the dealership staff do not comprehend your requirements, they may not be able to provide the service you need.
By providing exceptional customer service and garnering positive ratings from consumer reports and other sources of customer reviews, dealerships can ensure that their audience will support them in their efforts to improve their business practices.
Car financing by car dealerships can be a great way to purchase a new or used vehicle. They can help you get a loan and arrange to finance. With car financing, dealerships can offer buyers options such as lower down payments, lower monthly payments, and even 0% interest rates. They often have relationships with major lenders and banks specializing in auto loans, giving them the ability to offer better rates than other companies in the same industry. This can make the process of buying a car much more affordable and easier.
When financing through a car dealership, buyers will typically need to provide proof of income, identification, and proof of residence. Along with this, a credit check will be conducted to determine the buyer’s creditworthiness. This helps the dealership to determine the lending terms and rates available to the buyer. Accordingly, it would be helpful if car dealers let customers know what documents they need to facilitate the buying process.
Dealers can offer supportive car protection plans to their customers in order to give them peace of mind that their vehicles will be taken care of no matter what. A comprehensive mechanical breakdown plan which covers all necessary repairs, including parts and labor, to keep the vehicle running can be very useful to car buyers. The plan can also include towing, car rental coverage, and roadside assistance. Extended warranty plans can be another suitable option. This plan should cover any unexpected repairs that may arise after the vehicle's original warranty has expired. It should also cover any factory defects or recalls that may occur down the road. This will make customers more likely to purchase from the dealer and ensure that their vehicles are always in top condition.
Car dealers can offer a better test drive experience by providing a more comprehensive overview of the car and its features. For example, they can explain in detail the car's safety, performance, and comfort features, as well as the available options and accessories. Additionally, car buyers can be provided with a detailed walk-through of the car’s interior and exterior, or using 360 car photography, allowing potential buyers to get a better feel for the car before actually getting behind the wheel. To make the test drive experience more enjoyable, car dealers can provide refreshments and snacks, offer a comfortable and inviting atmosphere, and have knowledgeable staff members on hand to answer any questions.
Conducting a follow-up process after the test drive makes sense, which could include an invitation to schedule a second test drive or the offer of discounts and incentives. This will help ensure that potential buyers have a positive experience and are more likely to purchase the car.
If you have any questions or comments regarding this article, please email Sean@Glo3D.com
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**August 2022- FOR YOUR REVIEW
Breaking Down Email Encryption Requirements Under the Safeguards Rule By K. Dailey Wilson* On October 27, 2021, the Federal Trade Commission finalized its long-awaited updates to the Safeguards Rule. The 2021 changes to the rule require financial institutions, including auto dealers and finance companies that offer financing, to dust off their existing information security programs and likely make some significant changes. This article highlights one key change—the requirement to encrypt emails containing customer information. What is encryption? As of December 9, 2022, financial institutions will be required to protect by encryption all customer information held or transmitted by the financial institution both in transit over external networks and at rest or to secure such information through effective and equivalent alternative safeguards. Technically speaking, "encryption" means the "transformation of data into a form that results in a low probability of assigning meaning without the use of a protective process or key, consistent with cryptographic standards and accompanied by appropriate safeguards for cryptographic key material." I don't know about you, but that definition is about as clear as mud to me, and I am a millennial. In non-IT speak, "encryption" is a process whereby plain text, like a text message or email, is scrambled into an unreadable format. When the intended recipient accesses the message, it is unscrambled and translated back into the original plain text. What must be encrypted? When a financial institution sends any customer information through email over an external network, that financial institution will need to encrypt that email. So, what is customer information? "Customer information" means any record containing nonpublic personal information about a customer of a financial institution, whether in paper, electronic, or other form, that is handled or maintained by or on behalf of the financial institution or its affiliates. In layman's terms, "customer information" can include: • information a consumer provides to you on an application to obtain a credit transaction; • payment history; • account balance information; • the fact that an individual is or has been one of your customers or has obtained a financial product or service from you; • any information a consumer provides to you or that you or your agent otherwise obtain in connection with collecting or servicing a credit account; • any information in connection with a financing transaction that you collect through an internet "cookie"; and • information from a consumer report.
"Customer information" encompasses a lot of types of information that may be included on or in communications you have with your customers. For example, information from the consumer's credit report would be included in an adverse action notice. Account balance information is likely included on monthly statements provided to customers in connection with their motor vehicle financing transactions. If you email these communications to customers, you will now be required to encrypt these emails. Practical considerations When implementing an email encryption solution, it is critical to consider the encryption process from the customer's point of view. Encryption solutions that require customers to take additional steps, such as downloading special software to access the encrypted email, could frustrate customers and reduce the likelihood that they take the extra step to actually receive and read important legal disclosures. Accordingly, it is a good idea to test a potential email encryption solution and evaluate its impact on the customer experience before fully implementing it. Additionally, you should notify both new and existing customers that you use an email encryption solution. Customers who are not expecting to receive an encrypted communication from you may be confused and even concerned that the communication is a phishing attempt rather than an important customer communication. Finally, note that you could avoid the requirement to encrypt emails by making communications containing customer information available through an alternative method. For example, you could make the information available in a customer's account accessible via username and password (e.g., through an online customer portal), only using email to notify the customer that such communication is available. Because the email would only alert the customer that a notification is available and would not itself contain customer information, email encryption would not be required. Customers will appreciate the added protection to their nonpublic personal information that an encryption email solution or other equivalent safeguard will provide. Just make sure it's simple to use and not unexpected. *K. Dailey Wilson is an associate in the Tennessee office of Hudson Cook, LLP. Dailey can be reached at 423.490.7567 or email@example.com. Copyright © 2022 CounselorLibrary.com LLC. All rights reserved. This article appeared in Spot Delivery®. Reprinted with express permission from CounselorLibrary.com. CounselorLibrary LLC and Hudson Cook LLP are affiliated companies with common ownership. CounselorLibrary LLC does not provide legal services, representation or advice. It is not necessary for you to use the legal services of Hudson Cook in order to be a customer of CounselorLibrary, and vice versa.
This letter serves as notice that as of April 15, 2021, the Tennessee Motor Vehicle Commission, in an effort to promote a fair and level playing field for all licensees and to prevent abuses to the public, will begin auditing advertising through all media, state-wide.
Please ensure all advertising is compliant. Failure to do so may result in substantial civil penalties. Again, the Motor Vehicle Commission will begin a thorough review of advertising across all mediums beginning April 15, 2021.
The Tennessee Motor Vehicle Commission has primary authority over motor vehicle dealer advertising. Remedies include civil penalties, license suspension and/or revocation. Its authority is also shared with other authorities, such as the Attorney General’s Office and the Federal Trade Commission. For Federal Advertising regulations, please visit www.ftc.gov.
Specifically, Tenn. Code Ann. § 55-17-114(b)(1)(E), outlines conditions under which the Motor Vehicle Commission maintains authority for license revocation and/or suspension. Additionally, pursuant to Tenn. Code Ann. § 55-17-117(a), any person violating this part or any rule promulgated under this part, or any order issued by the commission, is subject to a civil penalty of not less than one hundred dollars ($100) nor more than five thousand dollars ($5,000) for each day of violation or for each act of violation.
We thank you and appreciate your attention to this important matter.
Tennessee Motor Vehicle Commission
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Notice of Rulemaking Hearing TN Motor Vehicle Commission
Pursuant to Tenn. Code Ann. § 4-3-1306(d), you are receiving this notice because you have elected to receive notification by e-mail of certain changes or potential changes to the law applicable to your profession.
The Tennessee Motor Vehicle Commission (“Commission”) will be conducting a Rulemaking Hearing on Tuesday, October 26, 2021 at 9:00 A.M CST. in Room 1-A of the Davy Crocket Tower, 500 James Robertson Pkwy., Nashville, TN 37243. Pursuant to the Tennessee Open Meetings Act (Tenn. Code Ann. § 8-44-101, et seq.), the above-referenced hearing is open to the public. If you have any comments regarding the rules, you may either submit your written comments in advance of the Rulemaking Hearing to Maria P. Bush, Associate Counsel at (615) 741-3072, electronically at Maria.P.Bush@tn.gov, or appear at the rulemaking hearing to make your comments on the record.
This rule amendment adds language to the definition, advertising, licensee fee, and auction requirement sections of the Commission’s rules.
This amendment adds the following terms to the definitions section of the rule: “factory installed options,” “dealer installed accessories,” and “factory transportation costs.”
The price advertising section of the rule will have language added stating that advertisements for motor vehicles must include factory-installed options and dealer-installed accessories in the advertised price. Furthermore, there is a provision requiring that new motor vehicles must include the manufacturer's suggested retail price, as well as fees associated with any factory-installed options, factory transportation costs, and any dealer-installed accessories.
This rule further requires advertised prices to state that optional equipment selected by the purchaser, the cost of any additional fees described under the Commission’s statute including any dealer-imposed fee, and state and local taxes, tags, registration, and title fees are not included in the advertised price.
This rule amendment will add language in the license fees section stating that dealership licensees are subject to a re-inspection fee amounting to the cost incurred by the Commission from the re-inspection. The fee assessed will not exceed four-hundred dollars ($400). This provision will apply in instances where the licensee’s action or inaction requires an inspector to be sent to the dealership location more than once. An example of such is in the instance where an annual inspection is scheduled with the licensee, however, the licensee fails to show for the inspection, thus requiring the inspector to reschedule and travel back to the dealership at a later date.
Finally, this amendment requires automobile auction licensees to have an auto auction license from the Motor Vehicle Commission and a principal auctioneer license from the Tennessee Auctioneer Commission. This provision is due to recent changes in the auctioneer statutory scheme.
A copy of the rules to be considered at the rulemaking hearing can be viewed online at:
Dept. of Commerce & Insurance | 500 James Robertson Pkwy | Nashville, TN 37243-0565