With the political winds changing course, it would be prudent for dealers to revisit and evaluate their regulatory risks. There will be new leadership for the two key regulating organizations in Washington — the CFPB and FTC. Moreover, Congress may seek to eliminate the Dodd Frank Act exception for franchise dealers and certain independent dealers making them subject to the CFPB’s direct jurisdiction.
Dealers should reflect upon the fact that their businesses are unique and complex. They should also recognize that they are prime targets for regulators and lawsuits.
Changes on the federal level will cascade throughout state governments as well. State agencies will be motivated to emulate the regulatory and prosecutorial activities of the federal government
And since private attorneys are always waiting to sue dealers, a dealer’s attorney should be consulted.
The Nature of Lawyers and Attorneys
As it is written in scripture (Luke 11:46): “Alas for you lawyers also! You load men with intolerable burdens and will not lift a finger to lighten the load.” The law is long and life is short. Attorneys offer their time and advice, and dealers pay for both. Are they getting what they pay for? How can they maximize their relationship with their legal counsel?
Attorneys can be expensive as they charge for their time, a somewhat ephemeral standard.
The Nature of Dealers
Selling vehicles in the U.S. may be the most regulated commercial endeavor that exists. Dealers face a host of regulatory challenges any of which could impose great liability. Each dealership is a self-contained comprehensive business with, possibly, hundreds of employees.
The Daunting Legal Inventory of Dealer Laws (and more on the way)
The number of laws and regulations dealers must follow is mind-numbing. Consider the laws, legal strictures and obligations, on the following partial list:
Office of Foreign Asset Control (OFAC), Federal Trade Commission Act, Federal Arbitration Act, Automobile Information Disclosure Act (Monroney Labels), Modern Class Actions Rule, Truth in Lending Act (TILA), Reg M and Reg Z, Fair Credit Reporting Act (FCRA), Federal Odometer Act (FOA), Equal Credit Opportunity Act (ECOA), Magnuson-Moss Warranty Act, Holder Rule, Credit Practices Rule, Do-Not-Call, Fax, or Email laws, Gramm-Leach-Bliley Act (GLBA), Red Flags Rule, Dodd-Frank Act, State Retail Installment Sales Acts, State Consumer Leasing Acts, Civil Theft and Fraud Acts, Civil RICO, State Unfair Acts and Practices (UDAP), Age Discrimination, Revenue Recognition, ADA, Harassment, COBRA, Workmen’s Compensation, Equal Pay Act, Immigration Act, FMLA, Child Support, Drug Testing, Wage & Hour issues, Labor Laws, Auto Labeling Act, Credit Card Processing, , DOE/EPA Mileage Guide, Used Car Rule, NHTSA Regulations, IRS – Sales Incentives, EPA Emissions, Written Warranty, Patriot Act, Cash Reporting Rule, Credit Reporting, Can-Spam Act, Information Privacy, FTC Privacy Rule, Telemarketing Sales, Truth in Advertising, Clean Air Act, Clean Water Act, DOT Hazardous Materials, LIFO/FIFO, OSHA, Resource Conservation, IRS Inventory Valuation, EPA Hazardous Waste, VIN & Parts Marking, and so forth.
These are examples of a sub-species of jurisprudence called car law. It is quite broad and demanding. Your attorney is your primary guide to contend with these legal challenges.
Is Your Attorney Competent?
Every dealer would probably answer that question in the affirmative. The fact that an attorney is generally a good attorney doesn’t mean that he is a good car law attorney. Does your attorney understand the laws posted above? An example may be helpful. Many years ago, this columnist, who worked for the Florida Attorney General’s Office at that time, deposed an owner of a large dealership. This dealer principal was represented by a prominent attorney. During the deposition, this prominent attorney became impatient with this columnist’s line of questioning. In his arrogance, this prominent attorney wanted to demonstrate how an attorney, in his hubristic opinion, should question the deponent. This prominent attorney then proceeded to ask the wrong questions of his client since he didn’t understand car law. The dealer principal trusted his attorney and, consequently, volunteered information and, without realizing it, admitted to illegal practices. This prominent attorney simply did not understand the car business and placed his client in legal jeopardy that resulted in large fines. This tale should be a warning to every dealer.
The question becomes: Is your attorney competent in car law?
The Checklist of Questions and Issues
This checklist is certainly not comprehensive but could be helpful for a dealer evaluating his relationship with his attorney. Here are questions and issues that dealers may wish to consider:
- If you haven’t discussed your attorney’s experience regarding car law issues you should do so. If his experience in this area is shallow, you may wish to educate him, replace him, or identify an additional attorney who practices car law to assist you.
- Your attorney should know all about your store. If he hasn’t done so, he should take a tour of it and meet your employees. He should know all about your business, as your business is unique. In addition, there are always physical risks at places of commerce. Your attorney can identify them for correction or posting warnings. For example, slip-and-fall lawsuits are quite prevalent. OSHA, NHTSA, and other government agencies also regulate the workplace and demand compliance.
- Which employees at the dealership should be able to contact your attorney? Access should be controlled for financial, confidential, and compliance reasons. Only certain employees should have this approval.
- Prior to contacting your attorney, preparation is necessary. Investigating and thoroughly learning about the legal issues can save money and improve efficiency. Open-ended questions should be avoided since attorneys will gladly answer these questions, but it may add significant costs to the legal bills. Moreover, identifying the issues before calling your attorney will produce better results.
- Not all legally related matters require contacting your attorney. Dealers should discuss with their attorney about which issues he needs to be consulted. What are these criteria and dollar amounts? However, contacting him too late can exacerbate problems.
- Certain federal laws require dealers to appoint someone at the store to oversee both the privacy and red flags laws. They are essentially compliance officers. With the complexity of car law, all dealers should appoint someone their compliance officer. This person could navigate the intricacies of the compliance requirements and advise the dealer organization about how to contend with these laws. Moreover, the compliance officer could be instrumental in collaborating with the dealership’s attorney in addressing problems.
- As part of appointing a compliance officer, dealers should consider implementing a compliance management system with their attorney’s input.
- Your compliance officer should be appropriately trained. Training programs, such as ACE (Automotive Compliance Specialist), provide appropriate compliance officer training. Trained compliance officers will save money when interacting with your store’s attorney.
- Is the attorney’s hourly rate competitive with the market? This may not be all that relevant provided that your attorney is meeting your needs effectively. Many attorneys are worth what they charge. Understand completely how your attorney is charging you.
- What is the best method to communicate with your attorney? By telephone, e-mail, regular mail, or other means? Your attorney should advise you as to what he prefers. A record of the interactions should be kept.
- When is the best time of day, or of the week, to contact your attorney?
- It is important to know the attorney’s staff. What other attorneys or associates know your business in that firm?
- Make your attorney understand what you desire from him. As the client, you should outline your needs and requirements. In return, you should understand what your attorney expects of you in your relationship with him.
- Depending on your business model, routine calls with your attorney may be appropriate on a periodic basis.
- Continue to educate your attorney about your unique business.
- Your attorney should know your other professional advisors such as your accountant, insurance agents, bankers, and key vendors.
- Addressing consumer complaints should be a high priority. An integral part of a compliance management system is to have a protocol in addressing consumer complaints. Most consumer complaints can be addressed without consulting your attorney. However, complaints or letters sent by opposing counsel or government agencies should be brought to the attention of your attorney. Your attorney should advise you as to what topics need to be referred to him. Certain improper employee behaviors should be referred to your attorney for his advice.
- If there are legal proceedings or investigations, you should request that your attorney keep you informed.
- If you need to call upon your attorney often, you may wish to explore a flat fee on a quarterly or annual basis.
- If your attorney is not providing you with the representation that you seek, alert him about his shortcomings and allow him to correct it. Replacing an attorney is costly in time and money. If all else fails, however, replace him.
- Dealers should be completely honest with their attorneys. Embarrassing or damaging information needs to be explained in order to derive the best legal representation.
- Outside legal counsel for state automobile dealer associations can be helpful with the attorney-client relationship. State dealer association attorneys are consistently highly competent and are usually willing to provide assistance to your attorney and you.
- Does your attorney routinely review your sales and contractual documents for leasing and selling vehicles? Does he have the necessary frame of reference to do so competently? Your attorney should also be reviewing your sales presentation materials.
- Does your attorney stay abreast of the vicissitudes of car law by reading publications such as the National Consumer Law Center’s publications, Spot Delivery, and other such publications?
- Is your attorney a member of the NADC (National Association of Dealer Counsel)? Does he attend its conferences?
- If you need to hire an attorney, the NADC website provides a listing of attorneys who practice car law in the various states. The website is www.dealercounsel.com.
- When preparing and working with your attorney, dealers should educate themselves and utilize checklists for their thinking. The NADA produces excellent checklists such as the Regulatory Labyrinth and the Dealer Survival Checklist.
- Finally, your attorney works for you. You should feel fully confident in your representation.
Dealers should reflect upon the fact that their businesses are unique and complex. They should also recognize that they are prime targets for regulators and lawsuits. By judiciously maximizing their client-attorney relationship, they can foreclose many of these potential liabilities.
GOVERN YOURSELVES ACCORDINGLY.
Terrence J. O’Loughlin, J.D., M.B.A. is director of compliance at The Reynolds and Reynolds Company.