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Your dealership should also have procedures designed to ensure that spot deliveries are conducted in accordance
with applicable law.
Failure to use appropriate documentation and procedures for spot deliveries invites lawsuits from consumers
and the attention of regulators. In many states, botched spot deliveries may result in claims under state laws
prohibiting unfair and deceptive acts. You should consult an attorney and know your state’s laws on spot deliveries
before engaging in the practice.
Spot Agreements
Except in states where the spot delivery terms and conditions are required to be in a stand-alone document, it
is good practice to incorporate the spot delivery terms and conditions in the RISC. This minimizes the risk that a
consumer will be able to require your dealership to honor the terms of the RISC even if no financing source has
agreed to purchase the RISC. Even in states where spot deliveries are unregulated, the spot delivery terms and
conditions should always be agreed upon in writing.Without a signed spot agreement, the dealer will have signed
an unconditional RISC with a buyer for the purchase and financing of a vehicle. If the dealer can’t sell the RISC, the
dealer is obligated to honor the deal unless it has a spot agreement demonstrating that the parties agreed that
the deal could be unwound.
Generally, spot agreements permit either the dealer or the consumer to unwind the deal if the dealer cannot find
a financing source willing to purchase the contract on the terms set forth in the RISC.
In the event that a sale is unwound and the dealer and the consumer elect to“re-contract”by entering into a new
sale on different terms, it is generally a good practice to have the consumer sign a document that memorializes
the fact that the parties have agreed to cancel the prior contract and enter into a new transaction. This helps a
dealer to demonstrate that the consumer made a voluntary decision to sign the new contract. It is also a good
practice to conduct another menu transaction when re-contracting an unwound spot deal and to keep all the
documentation from both transactions together in one master deal jacket in case an issue comes up later.
Dealers should never backdate a new contract to the original date of vehicle delivery. This practice is likely to
violate TILA disclosure requirements which mandate that finance charges can only accrue from the date of
consummation. If the contract is backdated, a plaintiff’s attorney could argue that the date of consummation was
the date the customer signed, meaning that the customer will have paid interest for the days between the date
on the contract and the date it was consummated and, as a result, that the APR and finance charge disclosures are
incorrect. Class actions have been brought against dealers who backdate new contracts on unwound spot deals.
A pattern of numerous unwinds of spot deals may give plaintiffs’lawyers or regulators grounds to claim the dealer
is engaging in “yo-yo financing,” which can be a deceptive trade practice under Section 5 of the FTC Act or state
law. It is a good practice to monitor what percentage of your spot deals are unwound. If you see the percentage
rising, investigate and train your sales and F&I officers on what types of deals you believe your lenders will buy. A
dealer should be prepared to show that the dealership made a good faith effort to get the original deal financed
with multiple finance sources.
Many of the principles applicable to spot deliveries in a sale transaction would apply to a lease transaction, though
some terms and conditions of the spot delivery might change based on state law. Any forms used to document the
terms of the lease spot delivery would need to reflect those changes.