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Inside this issue
How Dealers Can Keep Their Ads Safe From FTC's Hammer
Opinion: When 'Disparate Impact' Bites Back
Rep. Hensarling Still Pushing CFPB on Alleged Auto-Loan Discrimination
Tesla's Direct-Sales Push Raises Auto Dealers' Hackles
Dealers, Captives Battle in Statehouses
Now Comes Hard Part for G.M.: The Repairs
Throughput Tumbles at VW, Infiniti
William Clay Ford Helped Steer Automaker Into Modern Era
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
How Dealers Can Keep Their Ads Safe From FTC's Hammer

Dealers tired of competing with unscrupulous retailers pitching too-good-to-be-true bargains are cheering the Federal Trade Commission's recent crackdown on deceptive dealer ads. But compliance experts warn that all dealers should take a hard look at their own marketing efforts and their vendors' actions because the FTC remains on the prowl. Agency investigators can bring enforcement actions quickly, even without a formal complaint from consumers. "The FTC has people trolling the Internet, looking at newspapers, going into social media sites," Randy Henrick, associate general counsel for Dealertrack Inc., said in a February Webinar with dealers about the FTC's crackdown. "They're affirmatively looking for stuff that they think is bad so they can regulate by enforcement." Among the practices in the FTC's cross hairs: ads that misrepresent vehicle prices, monthly payments and lease drive-off costs; improperly advertised lease details and financing terms; and bogus sweepstakes designed to get customers into the showroom. Paul Metrey, chief regulatory counsel for the National Automobile Dealers Association, issued a statement urging dealers to be cautious when hiring advertising vendors and to make sure an attorney reviews ads before publication.
Source: Automotive News

Editor's note: NADA University's upcoming webinar, "Comply with Federal Advertising Requirements," will provide participants the opportunity to hear directly from a panel of FTC attorneys on key requirements and restrictions related to dealership advertising. The 75-minute webinar, which will be moderated by NADA's Chief Regulatory Counsel Paul Metrey, is available to dealership employees, dealership compliance professionals, and persons who provide advertising services to dealerships. It will be held at 1 p.m. ET, Wednesday, March 19. To register, click here.
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Opinion: When 'Disparate Impact' Bites Back
By Ronald L. Rubin, a partner at Hunton & Williams LLP

Is the Consumer Financial Protection Bureau guilty of the same discrimination it polices in the lending world?

The Consumer Financial Protection Bureau just got a painful lesson in the "disparate impact" theory of discrimination. American Banker magazine reported on March 6 that the CFPB's employee performance-review process is plagued by exactly the kind of disparate-impact statistics that the agency uses to prove discrimination in the industries it regulates. For example, according to confidential CFPB data obtained by the magazine, 20.7% of the agency's white employees received the highest performance rating compared with 10.5% of African-American employees and 9.1% of Hispanic employees. The reviews are taken into account for pay raises and bonuses. Under the controversial legal doctrine of disparate impact—which ultimately may be limited or discarded by the Supreme Court—policies and practices that have a disproportionately adverse effect on protected classes (minorities, women, etc.) can be declared legally discriminatory without evidence of intentional discrimination.

It seems inconceivable that CFPB's management could be discriminating against its workers. But disparate-impact statistics equal discrimination. Or at least that's what the CFPB tells the businesses it regulates. The lesson the CFPB should learn from its own disparate-impact experience: Statistics are complicated. Numbers don't lie, but people often misinterpret them. Effect does not necessarily equal cause. Are the CFPB's managers discriminating based on race, despite the agency's best intentions? Were the statistical disparities caused by cronyism, elitism or some other problem? A thorough inquiry should be conducted, and CFPB Director Richard Cordray has already ordered one. The more important question is whether the bureau will reconsider its commitment to the disparate-impact doctrine after witnessing its flaws firsthand.
Source: The Wall Street Journal
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Rep. Hensarling Still Pushing CFPB on Alleged Auto-Loan Discrimination

Texas Republican says agency has stymied repeated requests for more information

House Financial Services Chairman Jeb Hensarling (R-Texas) is continuing to press the Consumer Financial Protection Bureau for evidence of alleged discrimination in the auto-lending market, saying the agency has stymied repeated requests from Congress for more information about its work in the sector. Mr. Hensarling, in a Friday letter to CFPB Director Richard Cordray, said the bureau has refused to provide requested details on the methods and analysis used to determine if lending discrimination occurred against minorities or women. He said if the bureau doesn't provide information by a March 13 deadline, the committee will consider taking steps to force the agency to respond, such as issuing subpoenas. In the letter, Mr. Hensarling said almost a year has passed since committee members first sought information on the CFPB's auto-lending policies. The bureau has been reviewing auto lending through dealer-affiliated firms, a practice known as indirect lending that is used by about 80% of car buyers. "By refusing to disclose this information, the bureau has deliberately deprived indirect auto lenders of any meaningful way to tailor their company's lending practices and compliance systems so as to mitigate or eliminate the fair lending risk the bureau asserts to be present," the letter said.
Source: The Wall Street Journal

Editor's note: To view the letter, click here. 

Related Story:


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Tesla's Direct-Sales Push Raises Auto Dealers' Hackles

To hear Ohio car dealers tell it, the sleek Tesla Motors Inc. showroom that opened last year in a Columbus mall is a threat to a bedrock U.S. institution. These businesses are pressing lawsuits that would stop Tesla’s showroom and a second in Cincinnati from letting people order customized Model S electric cars right from the factory. They argue that Tesla’s direct sales violate state automotive franchise rules. After failing in a previous attempt last year, the group also backs legislation pending in a Senate committee to force Tesla to use franchise dealers if it wants to open more sales points in the Buckeye State. Car-sellers in states including New York, Minnesota and Georgia have also sought in the past year to block Tesla from directly retailing its models. Texas dealers successfully backed a law setting the nation’s toughest restrictions on Tesla, and Virginia and Arizona also imposed limits on its retail activities.

Tesla faces two lawsuits in Ohio: One in Franklin County Common Pleas, where a magistrate has recommended dismissal for lack of standing, and the dealers have objected. Dealers also filed an original action in the 10th District Court of Appeals that is pending. The sides are set to meet March 11 to see whether compromise is possible regarding the legislation pending in the Senate committee. A similar dealer-backed bill has been introduced in New York’s Assembly. Last week, Washington passed legislation tightening the state’s franchise rules while exempting Tesla, allowing the company to continue selling directly there.
Source: Bloomberg

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Dealers, Captives Battle in Statehouses

At issue: Pressure to sell branded F&I products

A battle is heating up in several state capitals as dealer associations face off against carmakers and their captive finance companies over proposed state laws governing the sale of F&I products such as extended service contracts and guaranteed asset protection. "We're essentially interested in maintaining open competition in the marketplace for all of those products," said Ted Smith, president of the Florida Automobile Dealers Association. The details vary state by state. But state dealer groups say they are trying to get laws passed that would limit the ability of automakers and captives to pressure dealerships to sell F&I products backed by the factory or a preferred vendor and to stop selling products sold by independent F&I administrators. "This is something that could be utilized more often by these companies, and that's a problem," Smith said.
Source: Automotive News
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Now Comes Hard Part for G.M.: The Repairs

Less than a month after General Motors announced it would recall 1.6 million cars because of a defective ignition switch, the automaker now faces an arduous task: fixing the cars. The process, particularly for older vehicles like the ones G.M. is recalling, is time-consuming and requires many steps, from designing the new parts, testing them to make sure they solve the problem, finding and informing owners, and actually completing the repairs. It will not be until early April, G.M. said, that the repairs will begin. On Friday, G.M. started sending out the first recall letters to registered owners, telling them that a fix was coming. For the older cars being recalled by G.M., simply getting the parts made is a challenge for the automaker. The recall covers six models: 2005-7 Chevrolet Cobalts; the 2007 Pontiac G5; 2003-7 Saturn Ions; 2006-7 Chevrolet HHRs; 2006-7 Pontiac Solstices; and the 2007 Saturn Sky.

While the recall is an expense for G.M., the automaker would not say how much it would cost. And though the repairs will be done free, it is at least an inconvenience for owners, who need to make an appointment and take their car in for repair. William C. Fox, who owns Honda, Toyota, Subaru, Chevrolet and Chrysler dealerships around Syracuse, N.Y., said that a few of the people who brought in cars would be “orphan owners,” because the cars are Pontiacs, which are no longer made. Getting the parts, he said, is an issue in every recall. He is currently conducting a recall of Toyotas with defective heated seats.
Source: The New York Times
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Throughput Tumbles at VW, Infiniti

Dealership, franchise numbers rose in 2014

Volkswagen and Infiniti, in aggressive quests to gain sales and market share, added franchises last year, each raising the franchise count by 4 percent. But their U.S. sales fell, so average sales per franchise, or throughput, tumbled. The VW brand's sales slid 7 percent, and sales per franchise dropped 10 percent. Infiniti's sales dipped 3 percent, slicing its throughput by 5 percent. Overall U.S. new-vehicle sales rose 8 percent in 2013, while the number of new-vehicle franchises was up by less than 1 percent. Throughput matters, says Tom Libby, an auto analyst with IHS Automotive. "When your throughput is higher, your profits are higher, your dealers are happier," says Libby. "They're spending money on the facility and they're hiring people so your whole retail network is stronger."
Source: Automotive News
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William Clay Ford Helped Steer Automaker Into Modern Era

William Clay Ford, owner of the Detroit Lions, celebrated philanthropist and the last surviving grandson of Henry Ford who helped steer the company into a modern design era, died Sunday morning of pneumonia. He was 88. “My father was a great business leader and humanitarian who dedicated his life to the company and the community,” said Bill Ford Jr., one of Ford's four children and executive chairman of the automaker and vice chairman of the Lions.
Source: Detroit Free Press
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More Articles
 
Quotable

"By refusing to disclose this information, the [CFPB] has deliberately deprived indirect auto lenders of any meaningful way to tailor their company's lending practices and compliance systems so as to mitigate or eliminate the fair lending risk the bureau asserts to be present."

   
--- House Financial Services Chairman Jeb Hensarling (R-Texas), in a recent letter to the CFPB requesting details on the methods and analysis used to determine if lending discrimination occurred, The Wall Street Journal, March 7 

  

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