CATA News

Dealers periodically ask how long they need to keep certain documents or at what point can they be disposed of. The enclosed analysis, put together over 20 years ago by Crowe Chizek (now Crowe LLP), continues as an accurate and comprehensive analysis of these concerns, and continues to provide direction to our dealer members:

Records Retention Checklist

The Illinois Predatory Loan Prevention Act (PLPA) takes effect on August 1, 2022. Several key components of the Act are as follows:

1. All retail installment contracts or agreements must include a “separate disclosure” signed by the consumer substantially similar to the form provided herein. While “separate disclosure” is not defined, we recommend that the disclosure be made on a separate form.
2. The disclosure must be “clear and conspicuous.” While “clear and conspicuous” is not defined herein, other regulatory acts require that a “clear and conspicuous” disclosure be in at least 10-point type. We recommend that this disclosure be made accordingly.
3. The disclosure must be in English and in the same language as the retail installment agreement.
4. The PLPA APR is based on the expansive definition of APR of the Military Lending Act. As such, it includes all fees and charges [including Doc fees], including charges and fees for single premium credit insurance and other ancillary products sold in connection with a credit transaction, which might otherwise be excludable from the APR.

Below is a sample of the form that must be provided:

DISCLOSURE OF 36% RATE CAP

A retailer shall not contract for or receive charges exceeding a 36% annual percentage rate on the unpaid balance of the amount financed for a retail installment contract, as calculated under the Illinois Predatory Loan Prevention Act (PLPA APR).

Any retail installment contract with a PLPA APR over 36% is null and void, such that no person or entity shall have any right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the retail installment contract.

The annual percentage rate disclosed in any retail installment contract may be lower than the PLPA APR.

   ____________________________________

   Borrower Signature

   ____________________________________

   Co-Borrower Signature (If Applicable)

[From Automotive News] The National Automobile Dealers Association criticized as shaky the foundation for the Federal Trade Commission's new proposed dealership regulations. Among its counterpoints:

• The FTC said it received more than 100,000 auto-related complaints in 2021. NADA says there were 42 million new- and used-car sales last year.
• The FTC said motor vehicle roundtables in 2011 revealed consumer confusion with financing and people surprised not to get the advertised price. NADA said the FTC didn't take action then.
• The FTC said a 2017 qualitative study showed consumers felt confused about vehicle price, rushed through final documents and surprised about add-on charges. NADA said the introduction to an FTC report on that research states, "The data generated are not useful for forming quantitative or generalizable conclusions."
• The FTC said more than 50 FTC enforcement actions and 246 actions involving other law enforcement agencies justify the rule changes. NADA said just 3 of the FTC actions involved voluntary protection products, despite them being a major focus of the agency's new proposal, and 16 weren't against dealerships. As for the actions involving other law enforcement agencies, "a whole slew" of those weren't against dealers either, NADA said.
• The FTC said consumers will save 3 hours per transaction, which works out to a $30 billion-plus benefit to society over a decade. NADA said the FTC never explains how it came up with that 3-hour figure.

More information can be found in the July 18, 2022, Automotive News article.

The CATA is in the process of launching its all-new Website and membership portal. Designed to be more device friendly, informative, and helpful, the new www.CATA.info is also a portal for CATA member services. This portal will allow all CATA members to access forms, read news articles, register for events, and pay membership dues.

The new Website officially launched last week giving members a sneak peek at all the CATA has to offer. Over the next month, the CATA will transition all of its messaging and contact platforms to this single portal. During that time, the CATA will be updating contacts for every dealership and allied member. As part of this process, an email will be sent to the main contact at each member. This email will contain instructions on how to log into the portal and detail how each main contact can add other members of their organization to the membership. Doing so will grant access to the member section of the CATA Website, allow them to register for events, and pay membership dues.

Chicago’s minimum wage increased on Friday, July 1, when it rose above $15 per hour for the first time. There are some exceptions: For example, tipped employees must make a minimum of either $9.24 for large employers or $8.70 for medium-sized employers. Employers are required to make up the difference between tips received and the applicable minimum wage for employer size.

Cook County’s minimum wage also increased July 1, to $13.35 for nontipped workers and to $7.40 for tipped workers. The state minimum wage is $12 for nontipped workers 18 and over and $7.20 for tipped workers. It is set to increase Jan. 1, 2023, to $13 and $7.80, respectively.

Under the ordinance workers under 18 must be paid at least $12 an hour, up from $11 an hour last year. Another exception is for young employees — those 24 or younger — of religious corporations or organizations. They must be paid at least $12 an hour.

Scheduled changes were also made to the city’s Fair Workweek Ordinance, which requires employers in certain industries to give employees advance notice of their schedules and pay them for last-minute changes. Starting Friday, July 1, the umbrella of workers covered under the ordinance will expand and employers will be required to give those employees a few days’ additional notice of their schedules.

More information can be found here.

As auto prices surge, agency launches rulemaking to protect consumers’ pocketbooks and level the playing field for honest dealers. The Federal Trade Commission has proposed a rule to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience. As auto prices surge, the Commission is seeking to eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted junk charges. The proposed rule would protect consumers and honest dealers by making the car-buying process clearer and more competitive. It would also allow the Commission to recover money when consumers are misled or charged without their consent.

“As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

The FTC is taking his step toward establishing a set of guidelines that would provide consumers with key protections against dealers who unlawfully charge junk fees without their consent or engage in bait-and-switch advertising. In the Notice of Proposed Rulemaking announced today, the Commission is seeking comment on proposed measures that would:

• Ban bait-and-switch claims: The proposal would prohibit dealers from making a number of deceptive advertising claims to lure in prospective car buyers. This deal deception can include the cost of a vehicle or the terms of financing, the cost of any add-on products or services, whether financing terms are for a lease, the availability of any discounts or rebates, the actual availability of the vehicles being advertised, and whether a financing deal has been finalized, among other areas. Once in the door or on the hook, consumers face the fallout of false promises that don't pan out.
• Ban fraudulent junk fees: The proposal would prohibit dealers from charging consumers junk fees for fraudulent add-on products and services that provide no benefit to the consumer (including “nitrogen filled” tires that contain no more nitrogen than normal air).
• Ban surprise junk fees: The proposal would prohibit dealers from charging consumers for an add-on without their clear, written consent and would require dealers to inform consumers about the price of the car without any of optional add-ons.
• Require full upfront disclosure of costs and conditions: The proposal would require dealers to make key disclosures to consumers, including providing a true “offering price” for a vehicle that would be full price a consumer would pay, excluding only taxes and government fees. It would also require dealers to make disclosures about optional add-on fees, including their price and the fact that they are not required as a condition of purchasing or leasing the vehicle, along with disclosures to consumers with key information about financing terms.

The notice includes questions for public comment to inform the Commission’s decision-making on the proposal. These include questions about provisions in the proposed rule and whether other provisions should or should not be included in the rule, as well as questions related to the costs and benefits to consumers and auto dealers of the proposed rule. In addition, the notice includes a preliminary regulatory analysis estimating that the net economic benefit of the rule would be more than $29 billion over ten years. After the Commission reviews the comments received, it will decide whether to proceed with issuance of a final rule.

The Illinois EPA has finalized revisions to the 35 Ill. Adm. Code 275, the Electric Vehicle Rebate Program rules. The first application window opened on July 1, 2022.

Illinois residents purchasing a new or used all-electric passenger vehicle or all-electric motorcycle from an Illinois licensed dealer are eligible for the rebate. Applicants that certify as low income are given priority in disbursement of the rebates.

Applicants must apply during a rebate cycle window and within 90 days of purchase of the vehicle. The application and instructions are available on the Illinois EPA’s Electric Vehicle Rebate Program webpage.

Eligibility requirements for an EV rebate in Illinois include, but are not limited to:

• The vehicle must be purchased from a dealer licensed by the Illinois Secretary of State.
• Rented or leased vehicles do not qualify for the rebate.
• Individuals must reside in Illinois at time of vehicle purchase and rebate application.
• The vehicle cannot have been the subject of a previous EV rebate under this new program in Illinois.
• The rebate amount cannot exceed the purchase price of the vehicle.
• The purchaser must retain ownership of the vehicle and continue to reside in Illinois for a minimum of 12 consecutive months immediately after the vehicle purchase date.
• Individuals must apply for the rebate within 90-days after the vehicle purchase date.
• Only one rebate will be issued to a purchaser in any 10-year period.

Applicants will need to submit the following along with the information contained in the rebate application:

• A copy of the bill of sale, purchase invoice, or purchase agreement from an Illinois dealership.
• Documentation of proof of purchase, such as a copy of a canceled check, an invoice or bill showing that the applicable amount has been paid or that no remaining balance exists, or vehicle loan documents.
• A copy of Illinois vehicle registration.
• For applicants with a social security number, an IRS W-9 Form that includes the name, mailing address, and social security number. For all other applicants, an IRS W-8 Form that includes the name, mailing address, and taxpayer identification number.

More information can be found here: https://www2.illinois.gov/epa/topics/ceja/Pages/Electric-Vehicle-Rebates.aspx.

John Eggert of Hardt, Stern, and Kayne has called attention to an amendment to the Illinois Motor Vehicle Retail Installment Sales Act dealing with predatory lending that is scheduled to become effective on August 1, 2022. That amendment will require that on and after August 1, 2022, dealers, in connection with retail installment contracts, will need to deliver a clear and conspicuous Rate Cap Disclosure form to the customer, have that form signed, and retain the signed copy in the deal file. The retailer must provide this separate disclosure in English and in the same language as the retail installment contract. It is advised that you copy this language on to your dealership letterhead and provide it to the customer at the time of sale.

The approved language and form for the Rate Cap Disclosure is as follows:

DISCLOSURE OF 36% RATE CAP

A retailer shall not contract for or receive charges exceeding a 36% annual percentage rate on the unpaid balance of the amount financed for a retail installment contract, as calculated under the Illinois Predatory Loan Prevention Act (PLPA APR).

Any retail installment contract with a PLPA APR over 36% is null and void, such that no person or entity shall have any right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the retail installment contract.

The annual percentage rate disclosed in any retail installment contract may be lower than the PLPA APR.

____________________________________

Borrower Signature

____________________________________

Co-Borrower Signature (If Applicable)

The Better Business Bureau would like to caution dealers on reducing their advertised EV prices by the amount of the Illinois EV Rebate Program which is $4000 for all electric vehicles that are not motorcycles. Motorcycles have a $1500 rebate under the program. The program became effective July 1, 2022.

While these State of Illinois rebates save qualifying consumers money on the purchase of EVs, that savings is not connected to the dealer nor the manufacturer and is not an immediate savings. Consumers must apply for the rebate within 90 days of the purchase of the EV and must qualify for it by meeting certain specific standards. Documentation is required to prove the date of the purchase as July 1, 2022, or later.

Dealers who deduct the Illinois EV rebate amount from prices will run afoul of the Illinois Motor Vehicle Advertising Regulations which state that only tax, title, license, and a documentary service fee may be deducted from advertised prices. Rule 475.310.

The Rules allow for the deduction of manufacturer rebates from advertised prices only when the rebates are available to all consumers. Manufacturer rebates available only to certain qualifying consumers may not be deducted from advertised prices. Rule 475.530.

While Rules 475.310 and 530 authorize certain amounts to be excluded from advertised prices, the rebates provided by the Illinois EV Rebate Program are not included in these amounts. The program is a State of Illinois program with no connection to manufacturer offers.

The BBB will monitor EV advertised prices to ensure that consumers understand the actual EV price when they purchase such vehicles. Savings to qualifying consumers occur well after they purchase EVs. The Illinois EV Rebate Program has no impact on the prices consumers will pay at the time of purchase.

The BBB is also aware of the negative competitive impact that will occur if dealers reduce their prices by the amount of the Illinois EV Rebate. The BBB wants to ensure that all dealers who sell EVs are selling in a fair marketplace and will take all appropriate steps to make that happen.

Pete L. Georges, peacefully passed away at home surrounded by friends and family at the age of 90 on Tuesday, June 28, 2022 in Oak Brook, Illinois. Pete began a lifelong career in the automobile business at Esserman Dodge in Chicago. He would go on to work at Merit Chevrolet on 73rd & Stony Island, purchase Ferrell-Hicks Chevrolet on 57th & Ashland with a fellow coworker, and finally buy his own dealership, Pete Georges Chevrolet, on the corner of 95th & Cicero in Oak Lawn, where he'd ultimately retire in 2000.

Visitation will be held at the Conboy-Westchester Funeral Home, 10501 W. Cermak Rd., Westchester on Friday, July 8, 2022, from 3 p.m. to 8 p.m. All shall meet Saturday, July 9 at Holy Apostles Greek Orthodox Church, 2501 S. Wolf Rd. in Westchester, for a 10 a.m. funeral service followed by entombment at Chapel Hill Gardens West Cemetery. Contributions in memory of Pete can be made to St. Jude Children's Research Hospital.