Firm Petitions State

April 17, 2020

Dealer XT, an auto dealer compliance firm, has created a petition to urge California Gov. Gavin Newsom to declare auto dealers as essential businesses.

In the online petition, Dealer XT asked Newsom to “expressly add” auto dealerships to the list of the essential businesses. It said the state’s position only lists auto repair and supply businesses as essential and is unclear and conflicts with other local government lists.

The petition states, “Automobile dealers are currently experiencing confusion about whether they can remain open as an ‘essential business’ as it relates to automobile sales. As an example, the Counties of Sacramento and Merced have specifically listed automobile dealer sales as ‘Essential Businesses’ while other counties have not. Some counties have now amended their orders to allow cars sales with certain restrictions.”

The petition shares stories of healthcare workers who, for various reason, were left without transportation because they could not buy a car. It also explains that most dealerships have small staffs and are able to social distance and protect customers. The petition adds, “Over the past few weeks, simple solutions have successfully been applied by many essential businesses across the state to provide a safe environment. Why not allow car dealerships to do the same?”

Total industrial production fell 5.4 percent in March, as the COVID-19 pandemic led many factories to suspend operations late in the month.

Manufacturing output fell 6.3 percent; most major industries posted decreases, with the largest decline registered by motor vehicles and parts. Total industrial production for manufacturing saw its largest declines since January 1946 and February 1946, respectively. The indexes for utilities and mining declined 3.9 percent and 2.0 percent, respectively. At 103.7 percent of its 2012 average, the level of total industrial production in March was 5.5 percent lower than a year earlier. Capacity utilization for the industrial sector decreased 4.3 percentage points to 72.7 percent in March, a rate that is 7.1 percentage points below its long-run (1972–2019) average.

The weakness in consumer durables was led by a drop of 27.2 percent in automotive products, while the decline for consumer energy products reflected decreases in both fuels and utilities. The production of business equipment decreased 8.6 percent, held down by a drop of 22.8 percent in transit equipment that reflected cutbacks in the output of both motor vehicles and civilian aircraft.

Manufacturing output dropped 6.3 percent in March and at an annual rate of 7.1 percent in the first quarter. In March, the index for durable manufacturing fell 9.1 percent; the most sizable decline among its components was in motor vehicles and parts, where output fell 28.0 percent.

Four Indianapolis-based used-car dealerships have paid $100,000 total in restitution after the Office of the Attorney General alleged they violated Indiana consumer and motor vehicle laws. 

In an amended complaint filed in July 2016, the office alleged that the dealerships – Circle City Auto Exchange Inc.; Circle City Auto Connection Inc.; Circle City Sales & Service Inc.; and Empire Auto Group Limited – violated the Indiana Deceptive Consumer Sales Act and the Indiana Salvage Motor Vehicles Act. The dealerships were accused of selling more than 200 used motor vehicles without obtaining the proper title brands required after the dealerships purchased the vehicles at salvage auctions after major accidents.

These vehicles were declared “total loss” by their previous owners’ insurance companies, but they did not contain a title brand of “salvage” or “rebuilt.” In Indiana, when a vehicle is determined to be a “total loss” after an accident, the insurance company or owner must apply to the Indiana Bureau of Motor Vehicles (BMV) for a “salvage” title. For a salvage vehicle to be eligible to be operated on Indiana roads, the owner must then apply for a “rebuilt” title, provide certain documents to the BMV and submit the vehicles to a police inspection.

After purchasing the vehicles from the salvage auction, the dealerships would apply to the Indiana BMV for clean titles, according to the complaint. This clean title designation significantly affected the perceived value of the vehicles, resulting in consumers paying more than the vehicles were worth, Attorney General Curtis Hill said.

Additionally, the dealerships did not properly rebuild those vehicles for use on Indiana roads in accordance with state law, the complaint alleged. The dealerships also misrepresented the mechanical quality, safety and performance of the vehicles, while charging consumers excessive prices for them, according to the complaint. A consent agreement in the case was approved in Marion County Superior Court. The court granted judgment against the dealerships for $100,000 in consumer restitution.

Empire Auto Group Limited is the only one of the four dealerships that is still in operation.

Auto dealer trade groups are celebrating a move by the Department of Defense to amend its interpretive rule for the Military Lending Act (MLA).

The MLA, as implemented by the department, limits the military annual percentage rate (MAPR) that a creditor may charge to a maximum of 36 percent, requires certain disclosures, and provides other substantive consumer protections on “consumer credit” extended to Service members and their families.

On July 22, 2015, the department amended its regulation primarily for the purpose of extending the protections of the MLA to a broader range of closed-end and open-end credit products (the July 2015 Final Rule). On Aug. 26, 2016, the department issued the first set of interpretations of that regulation in the form of questions and answers. On Dec. 14, 2017, the department issued a second set of interpretations of that regulation in the form of amended questions and answers. The department is now withdrawing the amended question and answer number 2 (Q&A#2), published in the Dec. 14, 2017 Interpretive Rule, which discussed when credit is extended for the purpose of purchasing a motor vehicle or personal property and the creditor simultaneously extends credit in an amount greater than the purchase price of the motor vehicle or personal property. In withdrawing this amended question and answer, the department is reverting back to the original Q&A # 2 published in the Aug. 26, 2016 Interpretive Rule. This will allow the department to conduct additional analysis on the matter.

The National Independent Automobile Dealers Association put out a release explaining that the compliance risk and concerns surrounding perfection of security interests if GAP was included in a covered transaction led many dealers and finance companies to stop offering these products to individuals covered by the MLA.

“The removal of this rule is a huge win for the military community and the auto dealers who serve their transportation and automotive finance needs,” NIADA CEO Steve Jordan said. “Further, NIADA is thrilled that revoking Q&A #2 signals a continued interest in disavowing inherited bad policy in favor of reasonability and fair thought by the agencies that have operational oversight of the automotive industry.”

NIADA was joined by the National Automobile Dealers Association and American Financial Services Association is applauding the decision.

Working to protect people around the country from fraud involving used cars, Arizona state investigators have broken up a major criminal operation based in the state’s East Valley that illegally produced tens of thousands of titles for vehicles being sold in 42 states.

The Arizona Department of Transportation and Department of Revenue reported that, with seven arrests made on Feb. 19,
“this is by far the largest operation broken up since Gov. Doug Ducey signed legislation in 2018 creating the Arizona Curbstone Enforcement Joint Task Force.”

The task force combines the resources of ADOT’s Office of Inspector General, Arizona Department of Revenue and Arizona Independent Automobile Dealers Association.

The case involves a scheme in which individuals allegedly subscribed to one of several websites identified by investigators to obtain wholesale and retail dealer license credentials from the suspects, rather than the state, for a monthly fee, usually in the hundreds of dollars. These credentials allowed about 1,500 individuals to attend and bid on vehicles at wholesale auctions in their states, according to investigators. Scott Bandy, James Johnson, Oscar Valenzuela, James Edward Fialko and Lon Isaiah Chaneyfield were named in the criminal complaint.

The state reported the operation also altered vehicle titles from these subscribers for about $100 per title to make it appear as though the individuals bought the vehicles from one of the suspects’ 31 operations with dealer licenses. More than 31,000 titles were processed this way over the past couple of years, and many of the vehicles involved were never in Arizona.

The operation has generated around $7 million fraudulently over the past couple of years. ADOT detectives and Department of Revenue investigators, joined by special agents with the Arizona Attorney General’s Office, served search warrants at six locations, including homes in Chandler and Gilbert and at a storefront in Mesa, arresting the suspects and searching for further evidence. Each suspect is facing multiple charges, including the felonies of fraudulent schemes and artifices, money laundering and tax evasion.

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