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Compliance
right to repair act
Are Dealers Ready for “Telematics Right to Repair?”

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"Right to Repair" Significantly Expanded In the November, 2020 election, voters in the Commonwealth of Massachusetts passed a ballot initiative, Question 1 , by an overwhelming margin (75% approved). Question 1 requires that OEM's make diagnostic data collected remotely -- through OEM telematics systems -- available to individual vehicle owners and to independent repair shops. The 2020 initiative expands on a "Right to Repair" initiative passed in 2013. The original initiative required OEM's to make diagnostic and repair data available to individual owners or independent repair shops. In 2013, this meant that OEM's had to provide data access to diagnostic repair tools.  In 2020, this requirement was expanded to include data collected remotely through telematics systems from vehicles that are on the road. The original "Right to Repair" was also first passed in Massachusetts, but in 2014, the Alliance of Auto Manufacturers signed a memorandum of understanding to support implementation in all 50 States and the District of Columbia. This move pre-empted "Right to Repair" initiatives in several other States that were similar to the one in Massachusetts. With the "Telematics Right to Repair" initiative of 2020, however, the Alliance is challenging the expansion of Right to Repair into data collected through telematics systems. The trial began on June 15 and is ongoing. If the Telematics expansion is allowed to proceed, however, dealers should be thinking about the implications to their service business, because this expansion might be much more significant than it at first appears. "Right to Repair" and the Connected Car On the surface, expansion of “Right to Repair” to include telematics may not seem like a big difference. But the difference has the potential to be enormous for service retention, which is why independent repair shops and service chains fought so hard for the Massachusetts initiative. With this change, customers will be enticed to set up an ongoing remote connection to their service provider of choice, putting that provider in the best position to capture and retain that customer.   Once this system is in place, a visit to the local quick lube shop, tire store, or parts store will change. As the customer wraps up an oil change, for example, the attendant will ask the customer to authorize the shop to monitor the vehicle’s diagnostics. This will allow the shop to see when the vehicle is in need of its next service and send out a text or email with a perfectly timed service reminder. Well-run shops will eventually analyze their base of connected customers to determine the optimal time to bring them in – both when the vehicle needs service and when the shop has available capacity. Service shops and chains that do this well will cement a closer relationship with their customers and increase repeat service loyalty.   Alternatively, customers may choose to authorize an intermediate service “broker” to monitor their diagnostics and manage their vehicle’s maintenance. The broker will then be in a position to act as the customer’s trusted advisor, and will route service jobs to the most competitive service provider. Dealers Should Prepare Now The Independent shops and service chains in Massachusetts clearly hope to use this new initiative to gain business from franchised dealers (or prevent current business from being lost to Dealers). In order to maintain and grow the dealers' share of the non-warranty repair and maintenance business, dealers will have to make excellent use of the telematics systems installed by their manufacturers.  Dealers start with a key advantage, which is the opportunity to start a connected service relationship with the customer from the moment the new or used vehicle is delivered. But not all dealers today do a great job activating these systems, and activation for some OEMs is very inconsistent. Dealers must be sure to activate OEM-provided systems and secure customer consent to share service and maintenance data. Dealers then have to do a great job of managing data notifications to quickly schedule customers for any needed service work. Dealers may also want to take advantage of aftermarket systems for their older inventory that lacks OEM-provided telematics. A service like Spireon’s Lojack is a good example of an effective aftermarket system. Dealers will have a very brief head start to fine-tune their use of connected car service notifications, and they will need to take full advantage. If you are a dealer considering connected service and service retention opportunities, please reach out to motormindz to hear more about how to “get” Connected.  
high risk
Dealer Risk Mitigation: Expectations & The Fountain of Youth

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My buddy, Tom, recently visited St. Augustine, Florida and he was kind enough to bring us souvenirs. No, my fiancé and I didn’t get t-shirts. We got something a heck of a lot better than that! We were gifted tiny tourist miracles from Ponce de Leon’s THE FOUNTAIN OF YOUTH! In personalized bottles! That’s life-changing, right? Well, I thought it was awesome until I flipped over the bottle and discovered it was “Made in China.” WAIT, WHAT? Then, we were sad. Our hopes and expectations of eternal youth – dashed. This was a kitschy, little reminder that things don’t always turn out as you want them to or as advertised. Sometimes things turn out worse than you thought and sometimes, though not as often, they turn out better.   And so, when you get a regulatory letter saying the dealership has made customer or advertising mistakes requiring immediate correction, often your expectations start with dread and large dollar signs. That eventuality could happen. However, with proper care and diligence, you can settle the issue(s) quickly. Most often, these regulatory issues start one of three ways:  A customer problem An employee issue Advertising violation(s) Be vigilant on these three (3) issues. They should be front and center in keeping you out of trouble. There are plenty of risk mitigation strategies to prevent problems, covered in a subsequent article. Risk mitigation is an ongoing, everyday practice that requires continuous improvement activity.  So, when you receive a letter, administrative action, lawsuit, subpoena, or a formal request for documents, from a regulator, read the paperwork with great care. Sometimes the magic is in the wording of the allegations. Please read it and set it aside for the moment. Building the Story Next, research the problem. Interview the parties involved. Take clear notes as the nuance of the story matters. If the alleged violation is customer or advertising-based, pull the file and review it carefully. Do all of the signatures in the file look consistent? Or may someone have forged a signature? Build the story of what actually happened by reconstructing the detail, step by step, and commit to recording this for yourself to have a chronological record of what happened. Be sure to include direct quotes from the witnesses in your chronology.  Now, refer back to the original allegations to determine what holes are left in the story. Try to unearth the details relating to those holes. Re-interview as needed. Taking good notes is critical! Effective Risk Mitigation Contact your risk mitigation expert and determine if the charge could be covered by your insurance policy. Consider this carefully. Depending on the dollars involved and the nature of the complaint, insurance company adjustors can make the matter more complex and time-consuming. This is an expansive question, so this will be a future article, as well.   Most “complaints” have deadlines. Just be aware of this and ensure you are responding promptly. At this point, I advocate contacting the regulator directly and having a friendly chat. Find out what he/she is looking for. If the problem was related to a consumer or employee, resolving it may be as simple as satisfying their concerns. If it is advertising-related, I can assure you it won’t be that simple. During that call, be positive, be professional, and assure him/her that you want to resolve the issue. Ask for permission to ask questions. Grab your chronology and ask questions to try to fill in the gaps where the allegations do not make any sense. Go slowly and listen carefully as the regulator may or may not have the correct information.  If the regulator has bad information where you can prove the allegation is incorrect, gently offer up one or two incongruous tidbits at that time. Depending on the rapport you have built, you can offer a third, though I would not offer more than that on a first call. The purpose here is to sow doubt about the veracity of the complaint. Don’t overdo it.  The most critical question you should ask is if you can reach out to the upset person(s) and try to satisfy their concerns directly. Most of the time, the answer to this question is a resounding “yes.” It’s important to ask the question. It shows respect and deference.  Then, agree on a time frame when you will get back with the regulator. Keep him/her posted on your progress. It’s better to over-communicate than under-communicate.  Solving the Issue By now, I am sure you are asking yourself, “when is he going to talk about getting the lawyer involved?” The attorney may not be necessary. This is a fact-specific question and I cannot generalize to give guidance on this. Then, satisfy the aggrieved parties’ concerns. However much it costs to fix the problem, I promise it will be less than letting the regulator devise a solution. Ask them to sign a Release of Claims, which should include language like this: “Customer acknowledges that he is COMPLETELY SATISFIED with ____________ (dealership) and with the resolution of his concerns.” Then, call your regulatory contact again and walk him/her through the dynamics of what happened with the upset person(s). Explain how you resolved the concerns. If a lack of proper business practices caused the problem, it’s usually okay to acknowledge it. Thank the regulator, and, if appropriate, let him know you will change your practices, so this doesn’t happen again. (Use a lot of discretion here as this may not be necessary, and you do not want to create a problem where there isn’t one.) Provide the written document to your contact so he can close his file. Phew! Great work! Conclusion Hopefully, your expectations of dread, gloom, and doom did not come to pass. What did you learn? Is it time to change your risk mitigation strategies? If this was stressful for you, consider taking the time to install new policies and procedures to prevent these problems before they occur. You can reduce your anticipated stress level for future problems by hiring someone who can help with these difficult situations.   Temper your expectations through continuous improvement activity. Risk mitigation is not a one-time thing but is an ongoing practice. It reduces the chances of regulatory interference and catastrophic losses. Consider changing your business processes to accommodate these loss prevention techniques. Then, I’ll meet you in St. Augustine, where we can sip Chinese water from the Fountain of Youth. 
Harmful Dealership Advertising: The Lollipop 1 Model

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Would you ever give a little child a lollipop and then take it back? Outrageous, right? This causes upset, hurt feelings, destroys trust, and creates anger.   You create this same dynamic with customers when you advertise deceptively, whether it is intentional or not. In these cases, consumer protection laws often triple damages and will require you to pay for the customer's attorney's fees when the lawsuit is filed. This means a $50,000 vehicle could easily climb to a $150,000+ resolution. I've seen it, and it happens. It's ugly.  Here is a recent tale of woe. My fiancé and I were looking for a luxury SUV for her. We narrowed it down to one sleek model, which we will hereinafter call the Lollipop 1 Model. (This is to protect the guilty.) The payment on the web advertisement on the dealer's website clearly showed $679/month for 36 months for this particular vehicle. So that we don't get too deep into the weeds, I will focus on this issue only, although other advertising trigger terms were problematic.  I called the dealership and identified myself as an automotive compliance consultant and I was interested in the Lollipop 1 for $679/month. Could I buy the one advertised on the website for $679? After some back and forth, Katherine in the DBC dictated that I could NOT buy this one, but they could GET me one for $679 with less equipment on it (aka a "base model.") Further, they did not have one in stock, and I would have to "factory order" it. This was definitely not mentioned in the original ad disclaimer. I pushed back and said the website asserted I could buy THIS one for $679/month. The DBC rep said that she would get back to me on Monday. Unsurprisingly, she did not call me back. No one likes to deal with a "problem." On Thursday of that week, I emailed once again and then called the GM, the owner's son. (Let's call him "Austin.") Austin said that he had checked with their lawyer. Hold on, there Austin, your lawyer? As a dealer, why would you call your lawyer on such a simple issue... Okay, what did the lawyer say? Austin reported the lawyer (allegedly) said that the ad was "okay" because it was being pushed by the manufacturer and the dealer could sell us a Lollipop 1 for the $679 (the base model).  Let's break this down: Even if the disclaimer had said the $679 was for the base model of the Lollipop 1, and even if it had clearly stated the sale would be a factory order, it is still a bait and switch advertising violation and triggers Unfair and Deceptive Acts & Practices (UDAP) laws. As a dealer, you cannot show pictures of one vehicle and then disclaim your way out of it. That is false advertising. A few days later, this dealer changed their websites. I understand factory special lease terms change at the beginning of the month. Got it. The original stock number I had looked at was gone, and a substantially similar vehicle had popped up with a payment of $689 for 36 months with the other terms being the same. Weeks later, the second vehicle lease deal morphed into a significantly higher payment of $1086.25.   The manufacturers' disclaimer read, "Monthly lease payment based on MSRP of $61,795 and destination charges less a suggested dealer contribution resulting in a capitalized cost of $54,989. Excludes tax, title, license, options, and dealer fees." So, the Lollipop 1 payment of $689 comes "plus options."   There are at least three (3) problems here:   First, the dealer showed photos (though factory photos) of a vehicle that a consumer could not purchase for the advertised amount.   Second, the manufacturer was pairing this disclaimer language with all of the dealer's inventory as it "pushes" that language to the dealers' website.   Third, nothing was mentioned about the factory ordering. It's false advertising through and through, no matter how you look at it. Someone at your dealership or a responsible professional third party (but not someone in the sales department!) should be monitoring your website on a monthly basis, without deviation. If not, you will find surprises on your desks from either lawyers or regulators when this occurs.   Austin's dealership has a good reputation. They are professional and courteous and owned by a lawyer. However, the fact remains you manage what you monitor. If you do not have a designated person or qualified outside party to review this information each month, you are causing yourself a problem. Even a high-quality dealership like Austin's create problems for themselves. Consider an enterprise risk operational review to help you manage unconsidered issues. When you end up with a customer and their lawyer in your office, complaining of false advertising, bring some lollipops. You'll need to give one to everyone in the room as there will be many nerves to soothe, especially yours.
Don't You Agree? Fundamental Questions Answered Regarding Dealership Compliance

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"I don't have to agree, but I do have to comply," said an old employee and friend of mine named "Hank." He said it with a wry smile whenever he didn't agree with something I asked him to do. Then, he would do it because I asked him. And he would chuckle to himself. So who really wants to comply?  No one, including your dog, when you tell him/her to "sit" or "stay." As humans, we find it distasteful to "comply" with what someone else tells us. However, lack of compliance will cost you in dollars, in publicity, and even in reputation.   While it may not be your favorite, a lack of compliance program will put you in the crosshairs. How can you get in trouble? Good question. Let's start with the biggest problem first. If something criminal happens in your store, and you don't know about it, pleading "unaware" or "ignorant" of the situation is an ineffective defense. Chapter 8 of the Annotated 2018 United States Sentencing Guidelines states clearly: "This chapter is designed so that the sanctions imposed upon organizations and their agents, taken together, will provide just punishment, adequate deterrence,  and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct." It continues: "The two factors that mitigate the ultimate punishment of an organization are: (i) the existence of an effective compliance and ethics program; and (ii) self-reporting, cooperation, or acceptance of responsibility." So, if you would like to avoid serious problems, you should have a robust compliance program and, according to the Consumer Financial Protection Bureau (CFPB), a Compliance Management System. Furthermore: "These guidelines offer incentives to organizations to reduce and ultimately eliminate criminal conduct by providing a structural foundation from which an organization may self-police its own conduct through an effective compliance and ethics program."  How do you provide a structural foundation?  First, you must decide you are committed to implementing a robust compliance program and stick with it. It's a paradigm shift that would likely change some of the operations of the dealership. Embrace the change.  There are seven components of a robust compliance program: These seven (7) are clearly important. The dealer/owner(s) must participate here, or the whole program falls apart, and nothing is achieved. Alternatively, third parties can handle these functions if the dealership does not want to take on the time commitment or the responsibility. Bottom line? Someone has to do the work of compliance, or you open yourself up to liability.   Do You Know Your Penalties? Here are additional examples: IRS/FinCEN Form 8300. This is the cash reporting requirement for notifying the IRS of any payments in excess of $10,000 cash (though there is tremendous nuance to this law). The IRS website says: "A person may be subject to criminal penalties" for - Willfully failing to file a Form 8300, Willfully filing a false or fraudulent Form 8300, Stopping, or trying to stop, a Form 8300 from being filed, or Setting up, helping to set up, or trying to set up a transaction in a way that would make it seem unnecessary to file Form 8300." Penalties depend on total revenue but are "not to exceed $3,339,000 per calendar year." And criminal penalties include "imprisonment (for) up to five years, plus the costs of prosecution." Make sure you include various forms of cash and count it as cash: travelers checks, cashier's checks, or bank checks with no lien recorded. These can all be considered "cash" in the eyes of the IRS. How does the Fair Credit Reporting Act impact dealers?  Let's just focus on one item within this complex law. Are you sending a denial letter to every person in the dealership whose credit you pull? You are supposed to send a letter stating the dealership itself is not extending credit to the borrower and there is a third party who is providing financing. There is safe harbor language you are to use according to the code. "Safe harbor" refers to the exact phraseology that the law requires you use. Omission of this language is a serious "no no." Penalties for willful or negligent non-compliance may include actual damages, punitive damages, and plaintiff's attorney's fees.   Hank was right. You don't have to agree, but unless you want to open your checkbook, you do have to comply.
Why Conduct an On-site Compliance Audit in Your Car Dealership?

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Before we start exploring the reasons why every car dealer must conduct an on-site compliance audit in his car dealership, let us form an overview of its fundamental concept and notches of significance. There are federal guidelines that govern each department of a car dealership; for example, there is a Used Car Rule for the sales department and CAN-SPAM Act for the BDC department. It is mission-critical to adhere to these guidelines in order to improve customer experience and reduce liability associated with fines and penalties.  Compliance is majorly receiving the limelight of the automobile industry For the past few years, compliance is receiving a major share of the limelight from the automobile retail industry and for all the wrong reasons. For quite some time now, car dealers across the country are already suffering from a bruised reputation and to top it off, since car dealerships are sales organizations, compliance is oftentimes, not a priority. Multiple factors are responsible for driving the owner to get an on-site compliance audit for his car dealership- firstly, without a compliance audit, you can land yourself in serious legal trouble for violating the standard compliance practices and protocols. Secondly, the audits will help you uncover the problems that have been lying latent for long and resultantly reduce risks and upgrade internal control. And lastly, you can regain your peace of mind knowing that you are complying with the code of ethics and policies targeted towards all the departments and employees.  Ensures that the employees are properly trained  Compliance training is key to success. An on-site audit will determine if your dealership has an effective onboarding for new hires and regular training for existing employees. Auditors will be able to see what type of training is being conducted, its frequency, and if it is documented.   Reduces vulnerability  Like we have already mentioned, an on-site audit is the principal component of the comprehensive compliance program and has been delineated to cover all the crucial departments of a car dealership because getting it done in any other way might increase the vulnerability of the dealership and consequently, decrease its profitability. Furthermore, an on-site audit is effective because before fulfilling the prerequisites of compliance, the auditors are allowed to interview their employees and analyze their policies and procedures as well as check deal jackets.  Improves customer experience Once all the stages of the audit are covered, you will be served with a report that includes the necessary policies for the dealership henceforth onwards, procedures and the best practices according to the legal clauses pertaining to it. Therefore, an on-site audit does far more than simply tightening the straps of compliance; it helps to uncover non-compliant behavior and improve customer experience. 
Know the Different Types of Workplace Harassment, Part 2

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In Part 1, the author discussed workplace harassment based on sex, gender identity, and sexual orientation. This month, she examines harassment based on race, disability, age, religion, and national origin. To the first part of this article, go here . Race-, Ethnicity-, Religion-, or National Origin–Based Harassment What it is: The Equal Employment Opportunity Committee (EEOC) specifies that “Title VII of the Civil Rights Act of 1964 prohibits workplace discrimination based on religion, national origin, race, [or] color,” and that “[t]he law’s prohibitions include harassment or any other employment action based on any of the following: Affiliation: Harassing or otherwise discriminating because an individual is affiliated with a particular religious or ethnic group. Physical or cultural traits and clothing: Harassing or otherwise discriminating because of physical, cultural, or linguistic characteristics, such as accent or dress associated with a particular religion, ethnicity, or country of origin. Perception: Harassing or otherwise discriminating because of the perception or belief that a person is a member of a particular racial, national origin, or religious group whether or not that perception is correct. Association: Harassing or otherwise discriminating because of an individual’s association with a person or organization of a particular religion or ethnicity.” What it looks like: Verbal abuse, including the use of racial slurs and derogatory language; mockery of an individual’s accent or spoken language; pressure to “fit in” through cultural assimilation (e.g., goading a Muslim employee into eating pork); and so on. How often it occurs: While the EEOC states that “race-based and ethnicity-based harassment are significantly understudied,” the Commission suggests that between 40% and 70% of survey respondents have experienced it. A further “69% of respondents reported witnessing at least one ethnically-harassing behavior in the last two years at work and 36% of respondents who reported that they had not experienced direct harassment indicated that they had knowledge about the harassment of other co-workers.” On the topic of religion-motivated harassment, however, the EEOC claims that it was “not able to identify empirical data based on probability or convenience samples on the prevalence of such harassment.” Disability-Based Harassment What it is: Per the EEOC: “It is illegal to harass an applicant or employee because he has a disability, had a disability in the past, or is believed to have a physical or mental impairment that is not transitory (lasting or expected to last six months or less) and minor (even if he does not have such an impairment).” As with all forms of harassment, disability-based harassment does not necessarily include “simple teasing, offhand comments, or isolated incidents that aren’t very serious,” but becomes illegal “when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted).” What it looks like: Use of derogatory language such as “cripple” or “retard”; mockery of an individual’s speech impediment, posture, gait, disfigurement, or other linguistic or physical characteristic; tampering with disability equipment (e.g., a wheelchair); theft of equipment or medication; jokes made at the expense of a visually or hearing-impaired individual — with or without their knowledge; and so on. How often it occurs: According to the EEOC, “Evidence on the prevalence of disability-based harassment in the workplace was even harder to find than studies of racial and ethnic harassment. In a survey based on a convenience sample of one university’s faculty and staff, 20% of respondents with disabilities reported experiencing harassment or unfair treatment at work because of their disability. In addition, 6% of all respondents reported having observed harassment or similar unfair treatment of a coworker with a disability. In a similar study, conducted at a different university, 14% of respondents with disabilities reported experiencing harassment or similar unfair treatment at work because of their disability, and 5% of all respondents reported having observed harassment or similar unfair treatment of coworkers with disabilities.” Additionally, “[i]n the most recent analysis, the odds of a person with behavioral disabilities (anxiety disorder, depression, bipolar disorder, and other psychiatric impairments) filing a harassment charge were close to 1.5 times greater than the odds of a person with another type of disability filing a harassment charge.” Age-Based Harassment What it is: Harassment based on an individual’s age. The Age Discrimination in Employment Act (ADEA) protects employees and job applicants aged 40 and over from age-related discrimination, and by extension, this kind of harassment. The law applies to employers with at least 20 employees, employment agencies, government organizations (on the federal, state, and local levels), and labor organizations with at least 25 members. What it looks like: Use of derogatory language (such as “old man,” “grandpa,” or “grandma”); mean-spirited jokes, comments, or gestures; offensive caricatures; exclusion from events or activities on the assumption that the individual is too “slow” or “frail” to participate; pressure to retire; and so on. How often it occurs: The EEOC reports that it identified two surveys on age-based harassment in the workplace, conducted by AARP: “In a survey based on a convenience sample of workers older than 50, 8% of respondents reported having been exposed to unwelcome comments about their age. When the same question was asked in a survey based on a convenience sample of workers older than 50 in New York City, close to 25% reported that they or a family member had been subjected to unwelcome comments about their age in the workplace.” It’s up to all of us to stop harassment. Creating a safe and productive workplace that’s free from harassment requires more than just sending your employees through training and displaying the harassment policy in the breakroom. A solid harassment prevention initiative educates, reinforces, and demonstrates your dealership’s commitment to maintaining a safe and productive workplace. Kynzie Sims is Complí’s legal content product manager, and an attorney and Certified Compliance and Ethics Professional with experience in HR, employment law, and software compliance platforms. To learn how to stop harassment in the workplace, visit Complí at www.compli.com .