1. True.
   The Federal Trade Commission is on the hunt for car dealers, and improper advertising is an easy find because it is public and very visible. Compliance with the Truth in Lending Act and the Consumer Leasing Act is critical because both laws are clear.
   
   The advertisement is correct so long as a dealer advertises an available rate as the annual percentage rate or APR, it is appropriate. And APR advertising is not a trigger term, so no follow-on disclosures are necessary. However, if you advertise a limitation on the duration of credit at the advertised APR (“3.25% APR available for up to 60 months”), the number of payments is a trigger term, and you then must make further disclosures under TILA. In advertising credit for a motor vehicle, any of the following is a trigger term:
   
   
   1. The amount of the down payment (expressed as either a percentage or dollar amount);
   2. The amount of any payment (expressed as either a percentage or dollar amount);
   3. The number of payments or the period of repayment; or
   4. The amount of any finance charge.

If you use a trigger term, you then must disclose:

1. • The amount or percentage of the down payment;
   • The terms of repayment; and
   • The “annual percentage rate,” using that term or the abbreviation “APR.” If the annual percentage rate may be increased after the consummation of the credit transaction, that fact also must be stated.
     
     
2. True.
   Often, dealers seek to equate lease rates to APR and advertise low rates in connection with leases and nothing more. Such actions are prohibited by the Consumer Leasing Act. In advertising a lease rate, you may not use the term “Annual Percentage Rate,” “Annual Lease Rate” or another equivalent term. In addition, if you do advertise a lease rate, the following statement must appear near the rate with no intervening language or symbols: “This percentage may not measure the overall cost of financing the lease.”
   
   
3. False.
   As you are aware from many of our articles on the subject, this is a hot item for the FTC. In addition to the FTC, private litigants, state attorneys general and the U.S. Department of Justice can all enforce equal credit laws. Moreover, practices in selling voluntary protection products are not only potential subjects of legal action by those enforcers, the Consumer Financial Protection Bureau is not prohibited from investigating VPP practices.
   
   

   If your dealership is not using a fair lending program and a program for the sale of voluntary protection products that requires offering finance rates and VPPs at uniform pricing levels, with deviations for nondiscriminatory reasons, and with results you can review and for which you can take corrective action for non-compliance, you are not adequately protecting your dealership. The “Fair Lending Program” and the “Program for Sale of Voluntary Protection Products,” published by the National Automobile Dealers Association, are comprehensive programs your dealership should implement and follow.

4. d.
   It has long been the law that lending fees charged by subprime credit sources may not be passed along to the customer directly or indirectly. Any attempt to do so that can be identified — such as listing the fee for the customer to pay on the buyer’s order, increasing the price of a vehicle to pay for the fee, or even telling the customer the vehicle could not be further discounted because of the fee the dealer had to cover — can lead to a claim for violation of the Truth in Lending Act.
   
   
5. False.
   As we have previously written about, spot delivery is a hot topic and is under attack by the FTC. The FTC and consumer groups often want to conflate lawful spot deliveries with “yo-yo” sales in an attempt to outlaw the practice of spot delivering vehicles. Protecting spot deliveries through lawful practices is of the utmost importance.
   
   

   Having decided that you can rescind the purchase contract, but the recovery service could not locate the vehicle, what do you do? The wrong reaction is to have the person arrested, which is often a decision made out of frustration. Even if the customer was not candid when he bought the car, he has not been cooperative in working with the dealership, or he appears to be hiding the vehicle, an arrest is the wrong reaction.
   
   The car was not stolen. You gave the customer possession of the vehicle under the transaction documents. Even a misdemeanor charge of wrongful use may lead to a malicious prosecution lawsuit since the customer is operating on legally issued documentation, even if it is overdue. Even if you win the suit, the publicity about the events will likely damage the dealership.

   The answer is a civil suit to recover the vehicle. The dealership then can quickly obtain a judgment it can use as the basis for discovery from the customer to find the vehicle and to potentially recover damages if the car can never be found or to recover the dealership’s losses for the period the vehicle was withheld.

6. True.
   Employees in a car dealership not entitled to premium overtime, such as salespeople, must still be paid minimum wage for every hour worked. The best way to determine the number of hours worked by employees is to have them punch in and out on a time clock. Carefully supervising that each employee is punching his or her own time is a perfectly acceptable way for the company to expect its employees to operate.
   
   It is important, especially in tough times, to be sure all employees earn minimum wage for hours worked. Even for commissioned employees, there should be a regular determination that the employee earned at least minimum wage for every hour worked during the pay period. How do you know this without a time clock? Timesheets are notoriously inaccurate. Eliminating the requirement for recording time and relying solely on schedules is worse. The time clock is the best method for knowing the hours worked.

7. False.
   We have been telling you for years to stop doing pay plans on napkins. A pay plan written in haste that just provides how the employee will be paid with a minimum guarantee is likely to be misconstrued by a court as an employment contract for a specific duration. A pay plan simply describes the method for calculating pay due to a manager or salesperson. Prepare a professional pay plan.
   
   

   What are the elements of a professional pay plan?

   • It must be in writing, and it must be signed by the employee.
   • Carefully describe the basis on which the employee will be paid.
   • If it is a sales pay plan, be sure the basis for pay is commissionable gross determined in the sole discretion of dealership management, and the plan should specifically state that.
   • There should not be a specific definition of vehicle cost.
   • No length of time should be specified, or the plan could be construed as an agreement for employment for a specified time.
   • Reserve the right for the dealership to change the pay plan and to correct mistakes.
   • Reserve the right to recoup overpayments from future earnings.
   • Include a disclaimer of the contract: “This pay plan only describes the method by which employee will be paid. It does not alter employee’s status as an at-will employee. It is not a contract. It does not ensure employment for any specific duration.”
     
     
8. False.
   Retaliation can be a separate violation of the law even if there is no underlying offense. Managers and employees must be well-trained in the company’s policy and process against discrimination and harassment. Every complaint must be taken seriously. When investigating, always warn those with whom you discuss the circumstances leading to the complaint that retaliation is against company policy and can lead to discipline, including termination. Retaliation is the most prevalent category of complaints to the EEOC, according to the agency. Protect the dealership against retaliation claims.
   
   

   A company must be very careful with an employee who files a complaint alleging discrimination or harassment. It is easy to stumble into a retaliation claim by taking some sort of negative job action regarding that employee when the employer finds it groundless.
   
   Even if you believe that the employee trumped up a charge against a supervisor to create protection against termination for poor performance, do not rush into taking negative job action against the employee. If the complaining employee’s performance is subpar, after you have explained the company’s reason for not taking action regarding the complaint, you may carefully watch the performance of the employee as you would any other employee. Where the employee’s performance continues to be subpar, counsel with the employee. Give the employee the opportunity to cure shortcomings. The EEOC may view a precipitous termination of an employee after a complaint to be retaliation.

9. False.
   A car dealer must not only know of the laws about cash reporting (which require a report of cash or cash equivalents over $10,000 in a transaction or series of transactions) but also the laws preventing money laundering. Doing a transaction involving the funds you have reason to believe are the proceeds, regardless of the form of funds or amount, of over 100 specified crimes may be money laundering, a serious felony. If you know or have reason to believe that the proceeds of a transaction result from a prohibited felony, you should not do the deal. Reporting receipt of suspicious cash, although seemingly the proper thing to do, only identifies that you did a deal you know you should not have done.
   
   
10. True.
    Courts will enforce contracts as they are written. A common provision in supplier contracts to trap dealers into continuing is to establish a lengthy duration for the contract and provide that the contract will automatically renew for subsequent similar periods unless terminated with substantial advance notice. Mistakenly, many dealers believe that after the initial term, they are on a month-to-month contract. That is not the case. Courts will generally enforce these rollover provisions.
    
    

    Dealers need to review their contracts with suppliers and know what is being entered into, even the boilerplate on subjects like duration and renewal. For what reason are you signing a three-year contract? Sometimes, when the supplier has an investment, like a uniform contract, there may be justification for a one-year or eighteen-month duration. But why a cleaning contract? Sign the contract for the shortest duration possible, and there should be no automatic rollover. The contract should specifically provide that it will renew from month-to-month after the agreed term, and it can be cancelled at 30 days’ notice by either party following the end of the initial term. Your dealership should have someone who has on file all the supplier contracts and term dates and calendar the dates for the notice of cancellation.
    
    Dealers also need to be mindful of the choice of law and venue provisions. You want the state in which you operate to be the state of venue and choice of law for any disputes. You should not be fighting the vendor in Michigan if your dealership operates in Virginia.