Houston Independent Automobile Dealers Association December 2015 Issue: Year in Review | Seite 10

The CARLAWYER©
By Thomas B. Hudson and Nicole Frush Munro
Hello again! This month, we feature developments from the Consumer Financial Protection
Bureau and the Federal Trade Commission we thought might interest those in the auto sales,
finance or leasing business. We also recap some of the auto sale and financing lawsuits we
follow each month. Remember – we aren’t reporting every recent legal development, only those
we think might be particularly important or interesting to industry.
Why do we include items from other states? We want to show you new 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 own lawyer to learn
how what we report might apply to you, or if you have questions.
This Month’s CARLAWYER© Compliance Tip
Do your deal jackets look like rats’ nests? Believe it or not, imposing order on the contents of
your deal jackets will improve your compliance and reduce risks. If you have a checklist for
each document you require for a deal jacket and every deal jacket has a specific place for each
required document, you will be more likely to have complete files. Also, if there is no specific
place for a document that someone’s trying to put into a deal jacket, that will raise the issue of
whether the document is one that actually needs to be retained in the jacket. The result will be
tighter compliance all the way around.
Federal Developments
CFPB Makes “Stealth” Change in Reg. Z Disclosure Requirements. Regulation Z Section
1026.18(k), requiring disclosure of prepayment penalties in closed-end transactions, was
revised effective October 3, 2015. The section now states that in an obligation with a finance
charge computed from time to time by applying a rate to the unpaid principal balance (e.g., a socalled “simple interest” retail installment sales contract), the prepayment penalty disclosure
should indicate whether or not a charge may be imposed for partial or full prepayment (rather
than just full, as previously required). This change was hidden in the new TILA/RESPA
Integrated Disclosure Rule for mortgage loans. The change may require updates to the
prepayment disclosure in the federal box on installment sales and loan forms entered into by
covered persons. The CFPB has not revised the prepayment language for this disclosure in the
model forms it publishes, and creditors will need to address the effect of this change on the
TILA safe harbor provisions. Also, the Bureau's change from the term "obligation" to "loan" calls
into question the effect of the change with respect to credit sale transactions. In another odd
twist, because the Federal Reserve has not yet changed its version of Regulation Z, this
revision does not apply to dealers exempt from CFPB authority.
CFPB Targets Auto Finance Companies’ Collection Practices. On October 1, the CFPB
announced a consent order with Westlake Services, LLC, an indirect auto finance company,
and Wilshire Consumer Credit, LLC, a wholly-owned subsidiary of Westlake that offers and
services auto title loans. The CFPB alleged that the companies used illegal debt collection