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THE ULTIMATE COMPLIANCE CHECKLISTSteve Levine, Chief Legal Officer General Considerations____Are you properly organized under the law (corporation or LLC) to insulate yourself from personal liability?____Have you set up a related finance company (“RFC”) for legal and accounting benefits?____Have you obtained all licenses for your dealership and RFC to enter into the transactions you intend to enter into, such as retail installment contracts, side notes, financing of repairs, or loans?____If you have an RFC, is it licensed to hold and service the accounts?____Have you given thought to obtaining Errors and Omissions Insurance Coverage to avoid “bet the company” risk?Don’t Open Your Doors Unless You…____Have a qualified lawyer and accountant with relevant industry experience on speed dial;____Appoint a qualified Compliance Officer;____ Appoint a qualified Privacy Officer;____Have identified qualified technology providers such as Dealer Management Software providers and other tools to efficiently run the business;____Know how each of the following impacts your business: GLB, TILA, ECOA, FCRA, FTC, CFPB, OFAC, and UDAP;____Have Confidentiality Agreements with all Vendors with access to premises and personally identifiable customer information such as cleaning crew and IT administrators;____Have a qualified lawyer review any advertising, including website and social media;____Establish a hiring process which includes a job application that offers protection, approved questions for interviews, and strategy to hire subject matter experts;____Develop employment contracts with confidentiality and non-solicitation provisions and accurate job descriptions with acknowledgement by employee;____Create an Employee Manual, which includes policies to follow, relevant laws, a policy on document and information security, and code of conduct, at a minimum;____Determine your “Red Flag” obligations and how you will safeguard customer information;____Determine how you will create a secure area for storage of both paper and computer based information and restrict access.____Establish a policy for accepting both cash and credit card information and know how you will report cash transactions over $ 10K (IRS form 8300).____If you will be reporting to credit reporting agencies, know how to safely and accurately report your account information;____Learn your relevant state regulator’s “do’s and don’ts”;____Know your record retention obligations and have a plan to comply;____Know how you will comply with Service Member’s Civil Relief Act requirements.Originating the Transaction – The Preliminaries____Make sure your credit application is up to date with FCRA and ECOA requirements and contains permission for text, cell phone and email contact throughout the life of the account;____Understand the legal obligations under FCRA and ECOA regarding adverse action and make sure letters are up to date, correct reasons are provided, and employees are consistent in their logic and use;____Understand whether your business model triggers a “risk based pricing” notice;____Make sure Buyer’s Guides are located on every vehicle available for sale and obligations under Used Car Rule are understood;____Compliant and effective Credit Underwriting and Fair Lending policy.Originating the Transaction – “We’ve Got a Deal”____Originating practices must be consistent with floor plan covenants;____Have each and every form that will be presented to a customer examined by a compliance lawyer;____Have a compliance lawyer bless each and every fee you wish to charge;____Make sure your RISC form (lease, loan, etc.) is up to date and DMS programming matches the form. Examples include but are not limited to rebate method, treatment of interest, payment hierarchy and application, and late fees and NSF fees;____How will initial and annual privacy policy be delivered? ____Use a robust “spot delivery” form, if allowed by state law;____ If using a “we owe” form, make sure it is accurate and specific;____Use GPS/starter interrupt disclosure forms and make sure they are consistent with rest of deal package;____Use an arbitration clause, either in the transaction document or separately;____Know whether you are in a “single document” state;____If offering various F&I products, consider “menu” selling;____Use training and policy manuals to make sure that all sales and F&I personnel understand importance of transparency, disclosure, and consistency in consumer dealings;Servicing and Collecting of Accounts____ Have a compliance attorney review every form letter or other communication;____Adopt and implement a Collections/Servicing Manual and consistent collections training materials;____Learn relevant state and federal collection laws and what dealers get sued for in your community;____Restrict employees’ ability to draft collection letters, texts and emails;____Provide customers with several different payment portals (IVR, text, ACH) to gain efficiency and cut down on conflict;____Adopt and implement a Complaint Management Policy and process to resolve customer complaints and document the process;____Have a process for accurately providing payoff quotes and consider privacy implications;____Be sure collectors know the rules about communicating with third parties;____Policies for releasing titles and possibly providing original documentation must be in compliance with state laws;____Be aware of consumer bankruptcy issues, such as the automatic stay, the differences between Ch. 7 and 13; “cram down” rules in your jurisdiction, reaffirmation agreements, specialized servicing issues, etc;____Know how your DMS identifies bankruptcy accounts and tracks trustee or reaffirmation payments;____Know your obligations under the Service Members Civil Relief Act (SCRA), including when it applies, who can exercise its benefits, and how the DMS handles interest rate/payment reductions;Know the Rules of Repossession____ Have rigorous contracts with any third-party repossession agents and make sure they are sufficiently bonded and insured to insulate you from liability;____Verify your own errors and omissions policy will protect you from wrongful acts of agents;____Have an objective criteria setting forth criteria for repossession of accounts;____Know local customs for notifying police, definition of “breach of peace”, storing of vehicle and charging for personal belongings;____Know if there is a right to cure requirement prior to repossession.____Make sure you haven’t waived your right to repossess by accepting late payments on a regular basis;____If forced to utilize judicial repossession, do a cost-benefit analysis up front, beware of counter-claims and know if local law requires you to obtain judgment;____Beware of wide range of Article 9 of Uniform Commercial Code issues and consider:Post repossession notice and notice of intent to sell letters have very specific state law requirements and must be consistent with business practices;Know difference between “public” vs. “private” auction, and are your business practices reflected in your letter (i.e. dealer only auctions are not “public” in most jurisdictions);Leaving vehicle on your lot to resell is not a public auction and even such private sale can be attacked;Should you take advantage of “strict foreclosure”, when available, and what rights are lost?Make sure surplus and deficiency letters are accurately calculated and are consistent with actual business practices.Know your form 1099-C obligations and when to provide.How to report to credit bureaus and hidden causes of action.Please send additional checklist suggestions to Steve.Levine@CONTINUE YOUR COMPLIANCE JOURNEY AND CONTACT US FOR:TRAINING;POLICY AND PROCEDURE REVIEW;DEAL JACKET REVIEW;BEST PRACTICES AND STRATEGY;DEMONSTRABLE COMPLIANCE MANAGEMENT SYSTEM;COMPLAINT MANAGEMENT;AND MORE.OUTSOURCE YOUR COMPLIANCEGET BACK TO BUSINESS! ................
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