We constantly stress how important it is to know about, understand, and follow your state laws and regulations that govern vehicle advertising. That’s hard enough to do when the laws and regulations have been on the books for some time, but it is even harder to do when a state regulator proposes substantive changes, adopts those changes, and makes them effective one month after they were proposed – and the final rules are not published until after their effective date.
That’s exactly what happened in Oregon over the last several months. In December, the Oregon attorney general published proposed changes to OAR 137-020-0020, which declares as unfair or deceptive certain motor vehicle pricing and sales practices, and OAR 137- 020-0050, which declares as unfair or deceptive certain motor vehicle advertising practices. The AG later adopted the new rules and made them effective on January 1, but the final rules were not published until after the effective date.
Below are highlights of the changes. If you are a dealer with locations in Oregon, you must take the time now to read the new rules in depth, including significant changes to the Official Commentaries, to determine how they impact your business.
Changes to OAR 137-020-0020: Motor Vehicle.
Price and Sale Disclosure
Definition of “Advertisement”: The new rule expands the definition of advertisement by including statements or representations made by instant messaging or text messaging or appearing in any flyer, catalog, direct mail piece, or point-of-sale display. The new rule also clarifies that the term “advertisement” does not include oral or written communications relating to the negotiation of a specific transaction initiated by a consumer.
Dealer Title and Registration Document Preparation Service Fee: The new rule changes the term “Dealer Title and Registration Document Preparation Service Fee” to “document processing fee” and also changes the definition of the fee to “monies or other thing of value which a dealer charges to prepare, submit or prepare and submit documents pursuant to ORS 822.043.” The new rule also adds a section that if a dealer collect money from or charges a buyer a document processing fee, the dealer must prepare and submit all documents to complete the transaction as permitted by law.
Definition of “Clear and Conspicuous”: The amended definition of “clear and conspicuous” omits the term “close proximity” and replaces it with “direct proximity.” In addition, the amended definition makes clear that a representation is “clear and conspicuous” only if, among other things, it will be easily understood by the “average person,”instead of “the audience to whom it is directed,” the language in the old rule.
Offering Price: The Official Commentary to the section discussing what must be included in and what can be excluded from the offering price in an advertisement or a written or oral price quotation is expanded to include another example of a potential violation. A dealer may not add a fee for payment by personal check or certified bank check after the consumer accepts the dealer’s offer and agrees to buy the vehicle. However, if “pass through” swipe fees for a debit or credit card are permitted under a merchant account agreement, those swipe fees must be disclosed in advance and separately stated on the purchase order, lease agreement, and/or retail installment contract; a dealer may not add swipe fees to the offering price or negotiated price.
Referral Fees: Under the old rule, a referral fee of $100 or less did not need to be itemized on the purchase order, lease agreement, or retail installment contract. A new Official Commentary explains that the rule is intended to apply to payment of more than $100 to a single individual or business entity. Therefore, if two unrelated individuals refer a buyer to a specific dealership, each individual may receive a payment of $75, and the dealer does not need to itemize the payments. However, the dealer may not pay $75 to a dealership and $75 to the owner of the dealership without itemizing the $150 payment.
Disclosure of Material Nonconformities and Defects: The new rule adds that the dealer or broker must disclose that repairs have not been performed pursuant to a safety recall if the needed repairs can be identified through a VIN search. In addition, added to the Official Commentary is a statement that for used vehicles, even if the dealer states on the Buyers Guide that the dealer is not providing a warranty, the dealer must disclose material defects about which the dealer knew or should have known. For new vehicles, even if the dealer does not need to disclose damage and repairs, the dealer must disclose material defects about which the dealer knew or should have known.
Unlawful Spot Delivery: The new rule provides that no dealer or broker may spot deliver a vehicle unless the dealer or broker has a reasonable basis to believe that the dealer will either keep the retail installment contract or be able to sell the contract to a financial organization at the exact terms quoted to or agreed to by the consumer at the time of delivery.
Consignment Sales: The new rule provides that if a person takes a vehicle on consignment, the person may not falsely represent or imply to the consignor the amount that a potential buyer has offered to pay or falsely represent or imply to the potential buyer the amount that the consignor has agreed to accept.
Dealer Cost: The new rule prohibits a dealer from misrepresenting or failing to disclose the MSRP of a new vehicle and from stating or implying that the MSRP is the dealer’s cost.
Copy of Contract: The new rule requires a dealer to provide a vehicle buyer with a copy of all documents signed or initialed by the buyer that are material to the terms of the sale.
Changes to OAR 137-020-0050: Motor Vehicle Advertising
Trade-in Value: The new rule provides that an advertisement for the sale or lease of a motor vehicle that claims that a seller will value a trade-in at a specific amount, within a range of specified amounts, at a guaranteed minimum amount, or as a multiple of or an increase in trade-in allowance is unfair or deceptive unless the ad (1) references a value cited in a motor vehicle price guide trade publication that is nationally recognized and distributed, is not published by the seller, and is readily accessible by the public; (2) clearly and conspicuously discloses the name of the publication being referenced; (3) clearly and conspicuously includes the following disclaimer: “THE VALUE OF USED MOTOR VEHICLES VARIES WITH MILEAGE, USAGE, INCLUDED ACCESSORIES AND CONDITION. BOOK VALUES SHOULD BE CONSIDERED ESTIMATES ONLY.”; and (4) references the value cited for the geographic region in which the vehicle is being offered for sale, if the publisher of the publication publishes and distributes separate issues for specific geographic regions.
Dealer Rebates: The Official Commentary is amended to clarify that the rule on dealer rebates does not prohibit associations comprised of multiple competing dealers from offering a promotion that customers of any dealership in the association can receive if any amounts the dealers pay to the association are in no way correlated to the promotion being offered by the association.
Clear and Conspicuous/Complete Offer: The Official Commentary is amended to provide that in order for material information to be “clear and conspicuous,” it must be in “direct proximity,” rather than in “close proximity,” to the information it defines or clarifies.
Limited Offers: Added to the Official Commentary is a statement that if an offer to extend credit or financing is limited based on factors other than credit history, such as past employment, current wages, or a minimum down payment amount, those factors must be disclosed in direct proximity to the offer.
Reference Pricing: If an advertisement represents that a vehicle is reduced in price from the dealer’s former price, the new rule states that the ad must, for used vehicles, among other things, list a value cited in a motor vehicle price guide trade publication that is nationally recognized and distributed, is not published by the seller, and is readily accessible by the public, and the value is based upon the year, mileage, condition, and accessories of the advertised vehicle. Limited Rebate Offers: The new rule adds that any alternate price listed in addition to the offering price in an advertisement must be one that is reasonably possible for some members of the general public to obtain.
Misleading Reasons for Sale: The new rule clarifies that a dealer is not prohibited from disclosing that a vehicle is a rental return; however, the vehicle cannot be represented to be anything more than a vehicle being sold in the dealer’s normal course of business.
Deceptive Format or Layout: Added to the Official Commentary is a statement that disclaimers may not cure otherwise deceptive messages or practices. Offering Price: The advertised price or monthly payment cannot be calculated by reducing the offering price by the amount of a down payment, minimum trade-in, deposit, or other payment to be made by the buyer, unless, as added by the new rule, a financial organization is making the offer, payment by the buyer is required to meet the terms of the particular offer, and the identity of the financial organization making the offer is clearly and conspicuously disclosed.
False Credit Advertisements: Added to existing examples of false credit advertising is a prohibition against stating in an advertisement that the dealership will assist in improving or can improve the consumer’s credit record, credit history, or credit rating, unless this fact is true. The new Official Commentary provides that the sale of a retail installment contract to a financial organization does not constitute assisting a consumer in improving his credit record; if the financial organization reports payments to a consumer reporting agency, the consumer’s credit record may be improved, but only if the consumer makes payments on time.
Consignment Sales: The new rule adds that an advertisement may not falsely represent that the vehicle is being sold by an individual owner when a dealer is selling the vehicle on consignment.
Lease Advertisement Disclosures: Under the new rule, a lease advertisement must disclose taxes. The Official Commentary adds that if the county in which the dealer is located requires residents to pay a tax, the dealer must include the estimated tax calculation. The dealer should disclose to which residents the offering price applies and that customers in other counties may pay a different amount. The new rule also removes the old requirement to disclose the monthly payment without the deduction of the cash or trade equity if the advertised monthly lease payment requires the consumer to pay a cash amount or have a trade equity at the inception of the lease of more than 10% of the MSRP.
Just because I discuss the little details of new advertising rules in Oregon does not mean that dealers in other states can ignore the big picture. States are continually revamping and adding to their advertising rules. If you don’t have a lawyer retained to tell you of such changes, make sure you are on the list to receive updates from your state regulator that has jurisdiction over motor vehicle advertising, your state auto dealer association, and any other source you can identify that might have knowledge of potential changes in advertising rules. Knowing in advance what changes are likely to be made will help you comply with the sometimes unreasonably short deadlines that regulators impose.