The Carlawyer

The NMIADA is happy to bring It's members a monthly news blog from the Carlayer. This page will bring you up to date about legislation that can affect your business.


                                                                                 The CARLAWYER©

                                                              By Thomas B. Hudson and Nicole Frush Munro

Here’s our monthly report of legal developments in the auto sales, finance and lease world. This month, we feature developments from the Consumer Financial Protection Bureau the Federal Trade Commission and a congressional committee, as well as our “Case of the Month.” Remember – we aren’t reporting every recent legal development, only those we think might be particularly important or interesting.

Why do we include items from other states? We want to show you new legal developments and trends. Also, another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state.  

 Note that this column does not offer legal advice.  Always check with your own lawyer to learn how what we report might apply to you, or if you have questions.

                                                           This Month’s CARLAWYER© Compliance Tip

Your dealership is probably a corporation or a partnership.  If so, and the dealership is sued by a consumer or a regulator, it’s likely that your adversary in the litigation will want to poke around your corporate records looking for ways to make or bolster its case.  When that happens, what will the minutes of your board of directors or partnership meetings reveal?  Will they show regular meetings, with reports by your compliance, red flags, and privacy officer(s), reports on customer complaints, root cause analysis, and the resolution of those complaints, an update of applicable laws and regulations affecting your operation, the effectiveness of your training program, and similar sorts of things?  If not, maybe you ought to meet with your attorney and discuss the topics and operational issues that should be reflected in those minutes.

                                                                             Federal Developments

The FTC and Selling Recalled Vehicles.
On December 16, the FTC announced that CarMax, Inc., Asbury Automotive Group, Inc., and West-Herr Automotive Group, Inc. settled allegations that the dealerships advertised rigorous used car inspections, but failed to adequately disclose that some cars were subject to unrepaired safety recalls. The proposed consent orders prohibit the dealerships from claiming their used vehicles are safe, have been repaired for safety issues, or have been subject to safety-related inspections, unless the vehicles are free of open recalls or the companies clearly and conspicuously disclose that the vehicles may be subject to unrepaired recalls for safety issues and explain how consumers can determine whether a vehicle is subject to such a recall that has not been repaired. The FTC also approved final consent orders in similar cases, settled earlier this year, against General Motors Company, Jim Koons Management Company, and Lithia Motors, Inc.

 Curbing Debt Collectors. 
Buy-here, pay-here dealers need to keep a careful eye on the CFPB’s actions involving debt collectors.  On January 9, the CFPB announced a consent order with two Oklahoma-based law firms, resolving allegations under the Fair Debt Collection Practices Act that the law firms' debt collection letters and phone calls misrepresented that attorneys had reviewed consumers' accounts before initiating collection efforts. The CFPB also alleged that the law firms improperly notarized affidavits in collection lawsuits against consumers and furnished information to credit reporting agencies without written policies or procedures to ensure the information’s accuracy and integrity, in violation of the Fair Credit Reporting Act. The order requires the law firms to refund $577,135 to consumers harmed by the allegedly illegal debt collection actions and to pay a civil money penalty of $78,800.


House Republicans Hammer CFPB on Discrimination Actions – Again.
On January 18, the Republican staff of the House of Representatives' Committee on Financial Services released a report titled "Unsafe at Any Bureaucracy, Part III: The CFPB's Vitiated Legal Case Against Auto Lenders." This is the third staff report released by committee Republicans over the last 14 months about the CFPB's efforts to regulate auto financing and the CFPB’s Equal Credit Opportunity Act enforcement actions against indirect auto financers. This report makes public additional CFPB documents that discuss the CFPB's disparate impact methodology in more detail and that reveal potential legal problems with the CFPB’s 2015 rule authorizing it to supervise the larger participants of the auto finance market. The report also discusses whether the CFPB’s use of the disparate impact theory in enforcement actions against auto financers would survive judicial scrutiny.

 Case of the Month

Sale of Extended Warranty that Did Not Cover Consumer's Vehicle Deemed Unfair or Deceptive Trade Practice:
A consumer bought a used truck from a dealership. The truck’s odometer read 157,000 miles. The dealership sold the buyer a 3-month/3,000-mile "deluxe extended warranty." After the truck broke down twice within the first month, the buyer replaced the engine and transmission at a cost of $6,000. The warranty only covered half of that expense because the mileage on the truck exceeded the 125,000-mile limit for the full, deluxe extended coverage. The buyer sued the dealership, claiming that it knew that the warranty would not provide full coverage when it sold the warranty. The trial court ruled for the buyer, and the Court of Appeals of Ohio affirmed. The appellate court explained that the dealership engaged in an unfair or deceptive trade practice when it sold the warranty to the buyer because he paid for a warranty that he did not get. The invoice showed that the repair shop charged the buyer for parts that the warranty supposedly covered. The sales contract, warranty, and invoice together were enough to convince the court that the buyer did not get the benefit of the warranty. As a result, the court concluded that the dealership made a false representation when it told the buyer that the "deluxe extended warranty" covered the truck. Note that “extended warranty” is the term used in the court’s decision – the product sold was most likely a vehicle service contract or similar product. See Greenwood v. Quality Motor Cars by Butch Miller, 2016 Ohio App. LEXIS 5027 (Ohio App. December 15, 2016).

So there’s this month’s roundup!   Stay legal, and we’ll see you next month. 

Tom ( and Nikki ( are partners in the law firm of Hudson Cook, LLP.  Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers.  He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry.  Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit  Copyright 2015, all rights reserved.  Single publication rights only, to the Association. (7/15).  HC# 4816-7599-4150.



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