CATA News

Many dealers nationwide have experienced significant disruptions in business and outages due to a cyber attack on CDK Global’s dealer management system. At this point, it is too early to say what exactly happened over the last 48 hours, but it is being termed a significant cyber attack. The company voluntarily shut down its core systems in a cautionary move and attempted to restore most of them yesterday afternoon. As of this morning many dealer systems were still not operational.

It is not yet clear as to the extent of the intrusion or what data may have been compromised so the scope and a requirement to respond is not yet clear.  At this time, CATA Allied Member Assured Partners is advising all impacted dealers to report the breach to their cyber liability carrier to ensure timely reporting and response to the breach.

There are several coverages in the cyber liability insurance form that may provide protection for dealers impacted by the breach. One being Dependent Business Income loss triggered by a dependent system failure. It is a Privacy Breach, Security Breach or Administrative Error that triggers this coverage, and it appears that CDK Global is an Outsourced Service Provider who has experienced a Security Breach. In most cases the time element waiting period to for a dependent business interruption claim has expired triggering potential loss and restitution of loss income due to the outage to the dealers effected. 

As the scope of the breach unfolds and it is determined what if any customer data has been compromised, Privacy laws may require notification to any affected parties. Most cyber liability forms provide coverage for notification. Current review of the CDK contract to determine whether CDK or the dealerships will be responsible for complying with notification in accordance with state and federal privacy laws.

Assured Partners also anticipates that this event will be a recordable incident under the FTC Safeguards Rule. The CATA and Assured Partners will have additional guidance on this as the scope of the claim unfolds in the coming days. If you have any questions, you can contact Chris Schrementi at Assured Partners.

As we communicated via email last week, the Illinois Governor and Democratic leaders recently approved a bill that would cap the current retail sales tax allowance dealers—and all Illinois retailers—receive at $1K per month or $12K annually. Currently, Illinois dealers receive 1.75% of the sales taxes as a reimbursement for collecting, administering and distributing the money to taxing bodies. CATA estimates this will result in a $60K loss in annual revenue for Illinois dealers, on average.

We’re committed to fighting on dealers’ behalf and are working diligently to try and help dealers recoup some (ideally all) of what would be lost, but we NEED YOUR HELP.

CATA introduced a new lobbying resource called Congress Plus a couple of weeks ago. It’s critical we have as many of our dealer members as possible join this platform. Key benefits include reaching local legislators in a concise and timely manner when issues like these arise. Dealers will be able to customize email templates and quickly press “send” to reach their local legislators. There is power in numbers, and the dealers deserve to be heard.

We urge you to take the time to sign on to Congress Plus; this will greatly help with grassroots lobbying efforts moving forward.

Sign up HERE for Congress Plus. (It takes only a few minutes!)

[From NADA] The House Financial Services and General Government Appropriations Subcommittee passed the fiscal year (FY) 2025 Financial Services and General Government (FSGG) appropriations bill, which included an NADA-backed provision that would stop the Federal Trade Commission (FTC) from implementing or enforcing the Vehicle Shopping Rule (or “CARS” Rule) until Sept. 30, 2025.

The Vehicle Shopping Rule is simply terrible for consumers. It will add massive amounts of time, complexity, paperwork and cost to car buying and shopping for tens of millions of Americans every year. (Issue Brief)

A recently updated study, based on the final rule, from the Center for Automotive Research (CAR) found that the Vehicle Shopping Rule will increase costs by $24.1 billion over 10 years, which consumers and small business dealers will have to absorb. Overall, the mandates of the rule would add at least an hour to the car buying process and cost consumers $1.3 billion per year in lost time.

The House Appropriations Committee is expected to consider this legislation next week. Additionally, NADA continues to challenge the rule in court.

Read the joint NADA, American International Automobile Dealers Association (AIADA) and National Association of Minority Automobile Dealers (NAMAD) letter of support for the FY 2025 FSGG appropriations bill.

The Illinois Motor Vehicle Code, 625 ILCS 5/5-101 provides the rules as to when a dealer’s insurance is primary or secondary with regard to test drives or service loaners.

We start with the definition of “permitted user.” Under the law, a “permitted user” is a person who, with the permission of the new vehicle dealer or an employee of the new vehicle dealer, drives a vehicle owned and held for sale or lease by the new vehicle dealer which the person is considering to purchase or lease, in order to evaluate the performance, reliability, or condition of the vehicle [TEST DRIVE]. Additionally, “permitted user” also includes a person who, with the permission of the new vehicle dealer, drives a vehicle owned or held for sale or lease by the new vehicle dealer for loaner purposes while the user ‘s vehicle is being repaired or evaluated [SERVICE LOANER].

For service loaners, it is paramount that the dealer first evaluates the permitted user’s insurance. If the permitted user has a liability insurance policy that provides automobile liability insurance coverage of at least $100,000 for bodily injury to or the death of any person, $300,000 for bodily injury to or the death of any 2 or more persons in any one accident, and $50,000 for damage to property, then the permitted user’s insurer is the primary insurer and the dealer’s insurer is the secondary. If the permitted user does not have a liability insurance policy that provides automobile liability insurance coverage of at least $100,000 for bodily injury to or the death of any person, $300,000 for bodily injury to or the death of any 2 or more persons in any one accident, and $50,000 for damage to property, or does not have any insurance at all, then the dealer’s insurer is the primary insurer and the permitted user’s insurer is the secondary insurer. For test drives, the new vehicle dealer’s insurance is always primary (irrespective of the amount of the permitted users’ insurance), and the permitted user’s insurance is always secondary.

[From CATA Affiliate Member MichaelSilver] In the dynamic and fast-paced world of business, maintaining accurate and organized financial records is paramount. Whether you are a small startup or an established company, the importance of having your accounting/bookkeeping in order cannot be overstated. Effective accounting serves as the foundation for informed decision-making, regulatory compliance, and overall business growth. In this article, we will delve into the top five reasons why maintaining well-organized accounting is vital for the success of your business.

1. Informed Decision-Making – Accurate and up-to-date financial records provide you with a clear and comprehensive view of your company’s financial health. This enables you to make informed and strategic decisions, such as expanding operations, investing in new projects, or identifying areas for cost-cutting. Without organized accounting records, you might find yourself making decisions based on incomplete or inaccurate information, potentially leading to detrimental outcomes.
2. Financial Planning and Budgeting – Having your accounting in order is essential for effective financial planning and budgeting. Detailed records of income, expenses, and cash flow trends allow you to forecast future financial needs and allocate resources appropriately. With accurate data at your fingertips, you can set realistic financial goals, create well-informed budgets, and ensure your business stays on track to meet its objectives.
3. Tax Compliance and Reporting – Maintaining organized accounting records simplifies the process of tax compliance and reporting. Properly recorded financial transactions enable you to calculate accurate tax liabilities, claim eligible deductions, and meet filing deadlines. An organized system also helps you withstand potential audits, as you can easily provide supporting documentation for your financial activities. Failing to keep proper records can lead to costly penalties, legal issues, and unnecessary stress during tax season.
4. Business Growth and Funding Opportunities – When your accounting is in order, you are better positioned to secure funding and fuel business growth. Whether you are seeking a loan, attracting investors, or applying for grants, potential financiers will want to review your financial records to assess the viability of your business. Organized accounting instills confidence in stakeholders by showcasing your financial stability and transparency, making it more likely for you to secure the funding necessary to expand and thrive.
5. Efficient Resource Allocation – Well-maintained accounting facilitates efficient resource allocation by identifying areas of strength and weakness within your business. By analyzing financial data, you can pinpoint which aspects of your operations are driving profits and which ones are draining resources. This knowledge empowers you to optimize your business strategy, streamline processes, and reallocate funds to maximize efficiency and profitability.

In the ever-evolving landscape of business, developing and maintaining organized accounting and accounting systems is a fundamental practice that lays the groundwork for success. From making informed decisions and planning for the future to ensuring tax compliance and seizing growth opportunities, the benefits of having your financial records in order are manifold. Partnering with our Client Accounting/Advisory Services (CAS) team can provide you with the expertise and support needed to establish and maintain a robust accounting system, enabling you to focus on what you do best – growing your business. Remember, organized accounting isn’t just a task; it’s an investment in the longevity and prosperity of your enterprise.

[From the BBB] The BBB is increasingly seeing banner advertisements on dealer websites containing finance offers with either no Truth in Lending (TILA) disclosures, as required by Rule 475.610, or disclosures that are so small on the computer screen as to be unreadable and, therefore, unavailable to consumers. In contrast, most lease offers on banner ads do have the disclosures required by rule 475.710. There are exceptions to that, however.

Truth in Lending disclosures are not only required in Illinois but in every state under Regulation Z of the Truth in Lending Act and must be set out in a clear and conspicuous manner. To the extent these banner ads are provided by third parties assisting dealers around the country, as well as in Illinois, there is this federal law to consider. It is surprising that TILA disclosures are so widely disregarded for this reason.  We often see third party advertisers being unfamiliar with Illinois rules but not federal law.

Rule 475.610 provides as follows:

Section 475.610  Credit Sales Advertising Disclosures

 It is an unfair or deceptive act to advertise "closed-end credit" terms in the advertisement, offer of sale, or sale of any motor vehicle if the advertisement contains any one of following five "triggering terms": amount or percentage of down payment; number of payments; period of repayment; amount of any payment (expressed as percentage or dollar amount); or amount of any finance charge, without clearly and conspicuously disclosing:

(Source:  Amended at 25 Ill. Reg. 4819, effective March 20, 2001)

Dealers can violate this rule by offering finance triggering terms, such as payment amounts or number of months, and failing to provide the disclosures required by part (a) of the rule on website banners as well as pop-ups or failing to provide them clearly and conspicuously.

Clear and conspicuous is a widely used legal standard.  It is defined as follows in section 475.110. 

"Clear and conspicuous " (including the terms "clearly" and "conspicuously") means that the statement, representation or term being conveyed is in close proximity to the statement, representation or term it clarifies, modifies, or explains, or to which it otherwise relates; readily noticeable; reasonably understandable by the person(s) to whom it is directed; and not contradictory to any terms it purports to clarify, modify or explain.

A statement, representation or term is not clear and conspicuous unless it shall:

For printed, written, typed or graphic advertisements:

Dealers can take note that, in the context of banner ads, clear and conspicuous means “be of sufficient prominence in terms of print, size and color contrast, compared to the rest of the advertisement so as to be readily noticeable to the persons to whom it (the banner ad) is directed.

Type size 10 point or larger is deemed to be readily noticeable.

The BBB has written many letters to dealers on this issue.   We hope this article alerts dealers to monitor their banner ads for finance offers and make sure the mandatory disclosures are included in a type size that is readable.

The BBB also continues to monitor the dealer marketplace in an effort to ensure that a level playing field exists for all dealers.  We encourage dealers to continue to advise the BBB of issues they see as well. 

This week the Illinois House passed HB4951 and all amendments, including Senate Floor Amendment 2. This provision of the bill prohibits interchange fees to be levied upon sales tax or gratuities for electronic payment transactions.

When will this go into effect?

Amendment 2 of HB4951 is scheduled to go into effect July 1, 2025.

What does this mean for my dealership?

At this moment and for the near future, nothing changes.

Next year, depending on your current processor’s capabilities, you may need to purchase new equipment to accommodate the change in law. Compliance with this change in the law is mandatory. Penalties for non-compliance may be $1,000 per occurrence.

This is an excellent example of how important it is to select a processor that is an industry leader in technology and sufficiently resourced to address the legal requirements of each State. Cost Advisor is an exclusive agent of Fiserv, the largest processor of financial transactions in the world. Our team is already taking steps to address this change and will have compliant solutions in place for our merchants by the effective date.

After this goes into effect, what can I expect?

For more detailed information, you can refer to the full legislative text on the Illinois General Assembly website at https://www.ilga.gov. Or you can contact CATA Associate Member Bill Brudenell of Cost Advisor at 847-505-9210 for more information.

[SESCO client alert] The first challenge to the Department of Labor’s overtime rule has landed, but what the U.S. District Court for the Eastern District of Texas will do with it and how any decision will affect businesses remains up in the air.  As this litigation develops, businesses must still prepare for the upcoming July 1, 2024, salary threshold increase.

Thirteen industry associations and businesses jointly filed a federal lawsuit challenging the Department of Labor’s (“DOL”) newly updated overtime exemption rule. In the lawsuit, plaintiffs assert the DOL unlawfully overstepped its authority by passing the new overtime rule. The plaintiffs liken the new rule to the 2016 Obama-era overtime rule, struck down by a federal court on grounds the increased salary thresholds effectively created a de facto salary-only test.

There is also a separate legal challenge pending in the US Court of Appeals for the Fifth Circuit against the Trump-era overtime rule, which argues that the DOL doesn’t have the authority to consider a worker’s earnings at all when determining whether they are exempt from overtime. 

The newly filed lawsuit acknowledges that if the Fifth Circuit were to find that the DOL cannot use salary levels as part of the overtime exemption test, then the rule should also be blocked.

Recommendations

Although the lawsuit has asked for expedited consideration, employers should continue to operate under the assumption that the DOL’s overtime rule will go into effect starting July 1, 2024. To prepare for the upcoming salary threshold changes, employers should:

On May 28, 2024, Hanley Dawson III, 80, of Ketchum, Idaho, passed away at Eisenhower Hospital in Rancho Mirage, California with his wife of 58 years Catherine (Swanson) and four children by his bedside.

Dawson was born in Detroit, Michigan June 1, 1943, and met his beloved, Cathie, his freshman year at Regis College in Denver, Colorado. She attended sister school Loretto Heights College. The two married in 1965 and lived in Detroit, Michigan before moving to Chicago, Illinois in 1971 to open Hanley Dawson Cadillac in downtown Chicago with his father, Hanley Jr. In 1976, Hanley III branched out on his own and started The Patrick Dealer Group, which today is one of Chicago’s premiere luxury auto groups.

In addition to being a successful entrepreneur, Hanley was a devoted Catholic and supporter of Jesuit education. He served on the Board of Trustees of Regis College and the Board of Trustees at Loyola Academy in Wilmette, Illinois, where his two sons and three grandchildren graduated and two currently attend. His philanthropic spirit spread to the Wood River Valley in Ketchum, Idaho where he and Cathie retired twelve years ago after spending time there since 1972. He led the fundraising campaign to build the new Our Lady of the Snows church in 2007 and served on the finance committee for many years. He was a longtime supporter and board member of St. Luke’s Hospital in the Wood River Valley and volunteered and donated to The Hunger Coalition.

More than anything, Hanley loved his family and friends and cherished every opportunity to golf, duck hunt, ski and travel with the people he loved.

He is survived by his wife Cathie, his children Megan Edwards (Chris), Hanley IV (Bridget), Liz Prior, Patrick (Tami) and his grandchildren, Alex, Emilie, Duke, Sarah, Charlie, Mimi and Alton.

A Celebration of Life will be held in July in Sun Valley, Idaho. As Hanley prioritized finding joy in life and sharing it with others, the family asks that you do the same – go out and do something that brings you real joy and share with friends and family around you.

In lieu of flowers consider a donation to St Luke’s Wood River Foundation.

[From CATA Approved Partner ACV Auctions] There's no getting around it: the auto industry has been on quite a ride over the past few years. US auto dealers face a myriad of challenges that require adept navigation and strategic planning. As we move into the back half of 2024, several key issues have emerged or continue to plague dealers, demanding attention and innovative solutions. Let's explore five top challenges facing US auto dealers and strategies to overcome them.

No matter the issues that rear their head, one thing will always remain true: Auto Dealers are survivors who will always find creative solutions to power past challenges. By implementing innovative solutions and embracing digital transformation, dealers can navigate these challenges successfully and emerge stronger in an evolving market landscape.