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HOT TOPICS
2017
MEMBERSHIP
DIRECTORY
173
The penalties for failure to comply with IRS cash reporting laws can be devastating if the IRS deems it to be
intentional or in reckless disregard of the dealer’s obligations. Intentional disregard is the knowing or willful
failure to file. Merely failing to file on time subjects a dealer to a penalty of $250 per instance (i.e., a negligent
violation), up to a maximum of $3 million over a calendar year. Intentional disregard raises the maximum penalty
to $25,000 per instance or the cash received by the dealer in the transaction, up to a maximum of $100,000. A
dealer should adopt a written policy to educate employees on cash reporting (including the definition of cash
and cash equivalents), the dealer’s obligations, and how to avoid illegally structuring transactions with the
person providing the cash. A dealer should also file a SARS form with the U.S. Treasury Department if it suspects
a customer is laundering money from an illegal activity. The criminal penalties for money laundering, the signs of
money laundering, and the dealer’s written policy to report suspicious transactions should also be a part of your
compliance plans. Consider training, monitoring and using the DMS system in the background to flag transactions
based on types of funds received.
Disclosure of Starter-Interruption Devices or GPS Systems
Dealers who charge customers for starter-interruption devices or GPS technology when the dealer or finance
company requires themmay violate TILA and face class action risks unless such charge is included in the disclosure
of the finance charge and APR. Consult your attorney for guidance in connection with any disclosure requirements
or limitations on usage.
Failing to Obtain the Customer’s Signature
If you fail to obtain a customer’s signature on a RISC, Buyer’s Order, or other document, the dealer should not sign
the customer’s name.
CASE STUDY
Background
A dealer sold a vehicle to a consumer under a RISC and allegedly committed numerous violations in connection
with that sale and financing. For example, the plaintiff was not given a review copy of the RISC disclosing the
finance charge prior to the time of sale; and she didn’t take delivery because the dealer was going to install a
GPS device. When she returned to pick up the vehicle and a copy of the RISC, she was told the price she was being
charged for the vehicle included a bank fee based on her credit rating.The RISC also included an extended warranty
the plaintiff did not request. When the plaintiff called the warranty company to cancel, the warranty company
indicated it had not received any paperwork from the dealer. The plaintiff never received a refund. The plaintiff
made her first paymentto the creditor-assignee, but when she went to make her second payment a representative
informed her that the dealer had canceled the contract. The dealer claimed the plaintiff had not provided all the
required documentation and told her to return the car or it would be repossessed. Plaintiff didn’t return the car,
the dealer repossessed it, and then sold it to a third party without informing the plaintiff.