1. New Buyers Guide Requirements, Changes to the Buyers Order & RISC Issues By M. Christina Floyd, Esq. VIADA Convention - July 19, 2013

2.  The Buyers Guide is intended to prevent verbal misrepresentations and omissions of key purchasing and warranty information  Contains disclosures for educating the consumer : ◦ “As Is” sale; ◦ Warning about verbal promises that are not put in writing; ◦ Suggesting pre-purchase inspections; and ◦ Listing the 14 major systems of a vehicle along with the things that could go wrong with these systems.  If a dealer offers a warranty, they must disclose it on the Buyers Guide, along with the warranty's basic terms.  Including what percentage of repair costs dealer will pay

3.  Dealer must post a Buyers Guide on the vehicle before can offer it for sale, discuss it with a customer, or let a customer look at it. ◦ Must be posted prominently and in plain view. ◦ Can be hung from mirrors and removed for test drives, as long as it is replaced afterwards. ◦ Includes vehicles offered under consignment  FTC “warning” to 11 Jonesboro, AK dealers  Must give buyer the original or a complete copy of the Buyers Guide at the time of sale.

4.  The Buyers Guide is not the Warranty! ◦ If a warranty is offered, there must be a separate document stating the warranty terms/conditions. ◦ Service Contract is not a Warranty – Check the Right Box!  The Buyers Guide must be incorporated into the sales contract and the incorporation provision must also be stated in Spanish.  Violation of the Used Car Rule can result in civil penalties up to $16,000 for each violation ◦ Every vehicle that does not have a compliant Buyers Guide is a violation, so they can add up fast!

5. December 12, 2012 the FTC announced changes to the Used Car Rule/Buyers Guide  Revised Spanish Translation of Buyers Guide ◦ If transactions are advertised and/or conducted in Spanish, must use the Spanish version.  Required to be in use by February 11, 2013 ◦ FTC Notice noted dealers can use their "remaining stocks" but no formal permission was given. ◦ Dealers cannot rely on this note if audited!

6.  Changes made to reflect new legislation & regulations: ◦ Sales & Use Tax now 4% ◦ Retail Sales Tax increase to 5.3%  NOVA & Hampton Roads Higher Rate of 6% ◦ $64 Additional Registration Fee for Alternative Fuel Vehicles  Pro-Rated When Tags are Transferred ◦ Spanish Translation of Buyers Guide Disclosure

7.  Dispute Resolution Provisions ◦ Mediation Followed by Arbitration  Why Mediate? ◦ Very Effective & Much Lower Cost vs. Litigation ◦ Most Disputes Involve Communication Issues ◦ Work Towards a Mutual Resolution vs. Judgment ◦ Fosters Good Will ◦ Confidential and Non-Public  Where do you find a mediator? ◦ Virginia Mediation Network  If not resolved in mediation, arbitrate!

8.  Arbitration ◦ May be more efficient & less costly than litigation ◦ Greatest Benefit = Conducted in Private  Dealer Operations/Practices Not Part of a Public Record  Potential Customers are not Present ◦ Arbitrator’s award is legally enforceable with no right of appeal and limited review ◦ CFPB Looking to Eliminate Consumer Arbitration

9.  Various Revisions are being made to the Retail Installment Sales Contract forms to ensure compliance & tighten them up  Rule of 78’s Version Issue ◦ Use is Legal but Discouraged - Simple Interest the Norm ◦ Rule of 78’s is an antiquated way to calculate finance charge when customer pays off balance early  Consumer obligated to pay principal plus full amount of interest that will accrue over the entire term of the contract ◦ Use of Computer Programs to Generate RISC and Calculate Interest Eliminates Need for Rule of 78’s

10.  Consumer Attorneys: “Prepayment Penalty” ◦ “Buy Here, Pay Here” Dealers are Targets  Congress Outlawed if Term Longer than 61 Months  CFPB Targeting Dealer Finance Practices  Outlawed in 17 states, but not VA – yet!

11. Questions M. Christina Floyd, Esq. 757-213-6973 or chris@hrgclaw.com