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HOT TOPICS
2015 GNYADA Membership Directory
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disclosures including up to four to five key factors that adversely affected the credit score if the credit score
was a factor in the adverse action. See the model adverse action notice included at the end of this Chapter.
4. Accurately fill in all spaces on the RISC and give the customer time to read the contract before they sign it.
Contract terms must be stated accurately. If the customer wants to have someone help them understand
the contract, let that person read the contract as well. Do not pressure a consumer to sign a contract without
reading it first. Do not misrepresent the terms of a contract. Do not roll negative equity into the sales price of
the vehicle. Do not engage in payment packing by including additional optional items in the vehicle price.
Do not backdate contracts, especially on re-contracted spot deliveries that you unwind.
5. Do not charge credit customers higher prices than cash customers. Be prepared to show that vehicle prices
are individually negotiated in all cases, there is no set price in advance and there is no negative purchase
price differential for credit as opposed to cash customers. Use a menu-selling process for aftermarket items
to show you consistently offer the same products to all consumers at the same prices. For menu selling,
employ the 300% rule – offer 100% of your products to 100% of your customers, 100% of the time. Comply
with the California and Minnesota Car Buyer’s Bill of Rights and/or other applicable state law requirements
for disclosures of aftermarket products.
6. Know your state laws on permissible fees you can charge, especially doc fees. Don’t charge excessive doc
fees or any fees in excess of your state’s specific limits. Plaintiffs’ lawyers have brought UDAP cases under
state law claiming that doc fees are excessive charges and hidden profits that dealers charge which are
unrelated to their actual costs.
7. If spot deliveries are permitted in your state, always use a spot agreement containing terms permitted or
required by your state’s law or approved in a case decided by a state appellate court. Try to include language
that gives both you and the buyer the right to unwind or re-contract if you cannot obtain financing approval
of the original contract “on terms acceptable to the dealer.”Your attorney should review and approve your
form spot agreement for compliance with your state’s laws. Track your percentage of unwound spot deals.
A significant percentage can lead to claims of deliberate “yo-yo” financing by the dealership which courts
have held to be an unfair trade practice, as a reasonable sales or F&I officer should have a good sense of
what kinds of paper their lenders will buy.
8. Do not sell the customer’s trade-in vehicle when doing a spot delivery until you have finalized financing
and delivery of the customer’s new vehicle purchase or lease. Selling a trade-in vehicle before you have
a final deal completed can subject you to a conversion (theft) claim or similar liability. Reported cases in
which the dealer sells the consumer’s trade-in and then unwinds the spot deal almost always are a critical
factor in a UDAP or similar finding against the dealer. The FTC has cautioned against doing so as well.
9. Document the customer’s consent to re-contract an unwound spot deal. When you re-contract a spot
deal, get the customer to sign a form acknowledging their right to unwind the deal but indicating that
re-contracting is their voluntary choice. Show on the form the different terms from the initial contract
that you could not get financed. Do not backdate the new contract the customer is signing. Date the new
contract on the day when both parties sign. And don’t forget to give the customer an adverse action notice
for unwinding the original contract.