May 2007

Gasoline prices have steadily increased to over the $3 a gallon mark as tourists prepare for the summer vacation season and Congress continues to address a number of legislative initiatives that may impact our industry.

President Bush is asking Congress for changes to the tax code that will raise revenue without raising taxes, commonly being referred to as closing the "tax gap".  The Administration wants to go after the 'hidden income' of persons conducting or engaging in business who do not report or pay taxes on the income. To those of us in the motor vehicle industry who have dealt with Curbstoners for years, this sounds all too familiar, as it appears Curbstoning has now gone global.  The focus is mainly on credit card transactions at this time, and it is estimated the change could generate approximately 10.7 billion dollars in tax revenue over the next decade.

While on the topic of finances, the House is currently addressing legislation pertaining to Industrial Loan Companies.  House Financial Services Chairman Barney Frank said at a Committee hearing he expects the House to pass H.R. 698, a Bill that would prevent commercial businesses from owning industrial loan companies, which are regulated on the state level.

David Quam, the Director of Federal Relations for the National Governors Association, appeared before a Subcommittee of the Committee on Homeland Security and Government Affairs, to address the administrative realities of the Real ID Act.  Mr. Quam recommended that, in addition to allowing adequate time for the Act’s implementation, they allow for transition to electronic verification, recognition of state innovations that meet the objectives of the Act and provide adequate federal funding to implement the law’s mandates.

Legislators have also been trying to arouse support for a Bill to crack down on price gouging at the gasoline pump.  Oil companies are going on the offense to oppose any such measure claiming that it would worsen the impact of oil and gasoline shortages in emergency conditions. 

Current negotiations regarding Corporate Average Fuel Economy standards are being delayed due to a dispute over certain vehicle classifications.  The present dispute centers around the viewpoint of several Senators who want light trucks included with passenger vehicles to meet the Mileage Per Gallon standards, while others wish to classify them separately for CAFE purposes.

Federal Regulatory Developments

The FTC has approved the filing of comments by the Bureau of Competition and others regarding Connecticut Senate Bill 1136 which regulates wholesale and retail gasoline prices within the State and would mandate that retailers sell “gasoline based on the actual prices it paid” while explicitly forbidding retailers from raising the retail price “in anticipation of market based price increases” and prohibit zone pricing, amongst other things.

Other Activity Of Interest

The EPA is looking into California's request to set its own fuel economy standards for cars and trucks, as Congress pressures the Agency to write new rules for vehicles.  California and 10 other states have passed their own global warming regulations for cars and trucks, the state still needs a waiver from the EPA to put its laws into effect.

Case of the Month

Our case of the month involves a fact pattern that is probably familiar to most of you in the industry.  It involves the advertisement of a car on the Internet, the use of out-of-date paperwork in the deal, confusing practices in the F & I department along with various issues such as not knowing the difference between a service contract and a limited warranty or what menu-selling F&I products really means to your dealership. 

Each of these activities could lead to a violation of various federal and state laws including state UDAP statutes.  If this were the case then the consumer would be entitled to, at a minimum, rescission of the transaction and be awarded attorney fees or perhaps recover multiple damages.  In this type of situation a class action lawsuit may not be far behind.  Perhaps even more disturbing to you is the fact that a discussion about these activities should not focus on the negative, but the positive.  A dealership that has an understanding of each of these areas can expect reduced legal exposure, improved customer satisfaction and increased profitability.  

Who does the case involve and what is the outcome?  The case involves every motor vehicle dealership today and the outcome depends upon you.  Problems or profitability, it is up to you.  To help make sure profitability is in store for your dealership, be sure to check out the sessions from the 2007 NIADA Annual Convention held June 13-16 in Nashville, Tennessee.  Among the many sessions worth viewing, a number are related to this issue including:  F&I: Profit Center Or Problem Area – The Choice Is Yours!, Selling Over The Internet: Is It Somewhere Over The Rainbow? and “Who Says Compliance is Easy? Me!”.

To view the May 2007 NIADA Legal, Legislative & Regulatory Report in its entirety, visit www.niada.tv.