Houston Independent Automobile Dealers Association January 2016 Issue: How Compliant Are You? | Page 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
Did you know that the federal disclosure rules are very specific about how dealers handle
“deferred down payments” (also called “pickup payments”)? Many dealers who accept deferred
down payments do so by using so-called “side notes” or postdated checks. These
arrangements usually don’t comply with the federal rules, raise other unpleasant legal issues
and leave dealers on the hook for class action liability risks. If your lawyer hasn’t blessed your
pickup payment disclosures and practices, tack that chore onto the end of your to-do list.
Federal Developments
Reforming the CFPB? On November 18, the U.S. House of Representatives approved H.R.
1737, titled the “Reforming CFPB Indirect Auto Finance Act,” by a vote of 332-96. The bill,
supported by all 244 Republicans and 88 of the 184 Democrats voting, nullifies CFPB Bulletin
2013-02, dealing with dealer participation, and requires the CFPB to satisfy certain procedural
steps before issuing future guidance related to indirect auto financing.
House Committee Fires a Shot Over the CFPB’s Bow. On November 24, the U.S. House
Financial Services Committee chaired by Rep. Jeb Hensarling of Texas, released a report titled,
“Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending.” The 54-page
report is a broadside attack on the Bureau’s attempt to regulate auto financing practices of
dealers exempt from its jurisdiction.
No Change in TILA and CLA Coverage Amounts. Many dealers are unaware that the federal
disclosure laws don’t apply to some of their transactions. On November 25, the CFPB and the
FRB announced that they are not adjusting the dollar thresholds under the Truth in Lending Act
and the Consumer Leasing Act for exempt consumer credit and lease transactions. The DoddFrank Act provides that the dollar amount thresholds for TILA and the CLA must be adjusted
annually by any annual percentage increase in the consumer price index. Because the
consumer price index showed a decrease as of June 1, 2015, there will be no 2016 adjustment.
Therefore, the protections of TILA and the CLA generally will apply to consumer credit