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HOT TOPICS
2015 GNYADA Membership Directory
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substantially all of the vehicles meet those criteria. If your ad says “factory authorized,” be prepared to
produce the written “factory authorization” that supports that statement. Be wary of advertisements
promising credit to subprime borrowers (e.g., “bankruptcy not a problem”). If you use an advertising
agency, try to get the agency to indemnify you if the ads it produces lead to litigation or an FTC or Attorney
General action. Be very careful with footnotes to headlines or inviting copy text in your ads. Fast-talking
TV or radio disclaimers are also problematical. The CFPB specifically cited fast-talking telemarketers as
part of the deceptive selling process. The FTC has also warned about running ads where every statement is
literally true on a stand-alone basis but the “sting” or impression of the entire advertisement collectively is
deceptive or misleading. The FTC looks at an ad in totality of its impression and not just the literal accuracy
of all statements.
4. Be specific in listing in the Used Car Buyer’s Guide the vehicle systems covered by any warranty. “Powertrain”
is not adequate for this purpose. If you give a warranty in connection with the sale of a used car, always
offer a“limited warranty”and not a“full warranty”. The obligations that accompany the description of a full
warranty are detailed and onerous.
5. Understand your state’s law on a dealer’s ability to disclaim warranties and make sure it is clear in service
contracts you sell. If you have “entered into” a service contract, you cannot disclaim implied warranties
under the MMWA. Service contracts and insurance contracts to cover the obligations can be structured
in a number of different ways, each of which has different tax and liability issues. Two examples are
“retro” policies and “reinsurance” policies. In “retro” policies, a portion of the customer premiums is sent
by the dealer to an insurer who deposits it into an account to pay claims. When contracts expire or at
predetermined times, the dealer receives a portion of the earned premiums. In reinsurance policy programs,
the dealer sends a fixed amount to an insurance company who in turn cedes the amount to a reinsurance
company that may be affiliated with the dealer. The insurer offsets claims payments against sums paid to
the reinsurance company. When National Warranty went bankrupt, reinsurance companies were deemed
to own the reserves, which remained available for customer claims. Retro accounts were considered part of
National Warranty’s bankruptcy estate and not available to satisfy consumer claims. State insurance laws
also contain requirements for insurance and reinsurance for service contracts. State laws also determine
whether the sale of GAP is an insurance product (requiring a license from the state Insurance Department)
or not. Review how your service contracts are structured and insured with your lawyer and accountant.
6. Adopt a Social Media Policy in accordance with the guidelines described above and in consultation with
your attorney or compliance professional. Remember that advertising online must be considered from the
perspective of the devices that will be used to review it, including
cell phones and tablets.
If you cannot be clear and conspicuous in a medium like
Twitter, do not
advertise on Twitter but simply put
an invitation to come to your
website. Make sure that your
Social Media Policy does not
inhibit employee communications
to the point where your policy could
be held by the National Labor
Relations Board to violate rights of
employees to engage in “concerted
activities”under federal labor law.