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 article on legal developments in the auto sales, finance and lease world. This month’s report is skimpy.  Perhaps the Consumer Financial Protection Bureau is hunkering down a bit to avoid the attentions of its detractors in Congress and the Trump administration, but maybe it’s just a slow month.  In any event, this month’s article features our “Case of the Month,” activity from the CFPB and the Office of the Comptroller of the Currency.

Why do we include items from other states? We want to show you 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 lawyer to learn how what we report might apply to you, or if you have questions 

 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


Federal and state privacy laws affect dealerships in unexpected ways. Here are a couple of examples: Do you do a thorough search of vehicles you take in trade? Your buyers may have left behind all sorts of personal financial documents that could be a problem in the wrong hands. If your make-ready checklist doesn’t contain a box to check to indicate the vehicle has been thoroughly searched, consider adding one. Getting rid of copiers or other electronic devices? Some of these machines retain information from the documents that have been run through them. The federal disposal rule requires that you handle the disposal of protected information in a way that reduces the likelihood that the information will end up where it shouldn’t. Another checklist item?

                                                                             Federal Developments

More Reading for Compliance Folks.  On April 12, the OCC issued the "Retail Lending" booklet of the Comptroller's Handbook used for examinations of all institutions engaged in retail lending. The Retail Lending booklet describes characteristics of an effective retail credit risk management framework and discusses the risks associated with retail lending.

Quo Vadis? 
On April 14, the CFPB released its Fair Lending Report summarizing the Bureau's fair lending supervision and enforcement activities and education initiatives during 2016. The Bureau states that in the coming years it will increase its focus on fair lending compliance in the following areas or markets: redlining, mortgage and student loan servicing, and small business lending. While any mention of auto financing is noticeably absent, the CFPB has said it will continue to address fair lending issues in auto finance during examinations.

CFPB Sues Lenders, Alleging they Collected Debts Consumers Did Not Legally Owe. 
On April 27, the CFPB filed suit in federal court against four online lenders – Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. –alleging they deceived consumers by collecting debts they did not legally owe. The CFPB’s theory is that the loans were void under state laws governing interest rate caps or lender licensing, i.e., the companies were neither licensed nor in possession of legal authority to collect interest at the rates contracted for in the loan documents.  The CFPB seeks to stop the allegedly unlawful practices, recoup relief for harmed consumers, and impose penalties.


                                                                                  Case of the Month

Dealer's Fraudulent Misrepresentations Regarding Condition of Used Vehicle Invalidated Implied Warranty Disclaimer:
A buyer bought a truck with a salvage title from a dealership. During the test drive, the check-engine light was on, and the truck smoked. The dealership's salesperson explained that the truck smoked because it was a diesel and that the check-engine light was due to a faulty oxygen sensor that would be easy to fix. The dealership sold the truck "as is" and provided the buyer with a third-party vehicle protection plan at no cost. Within days of purchase, the truck lacked power and continued to smoke. The dealership refused to diagnose or repair the truck. The buyer sued, alleging fraud and breach of the implied warranty of merchantability and seeking attorneys' fees under the Magnuson-Moss Warranty Act. The trial court granted judgment for the buyer, and the appellate court affirmed, finding that the dealership's failure to disclose known engine problems, as well as its representations that the truck was in working condition and the check-engine light was merely an oxygen sensor problem, misled the buyer. The appellate court agreed with the trial court that the dealership's fraudulent misrepresentations rendered the warranty disclaimer ineffective because the buyer would not have bought the truck or agreed to the warranty disclaimer if she knew the truck had severe engine problems. See Sorchaga v. Ride Auto, LLC, 2017 Minn. App. LEXIS 39 (Minn. App. March 20, 2017).


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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