It shouldn’t surprise you that the motor vehicle is heavily regulated. The Federal and State governments regularly audit dealers, especially regarding credit. In this article, we’ll discuss how to keep your auto contracts in compliance and the easiest way to find all the necessary forms you’ll need.
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Compliance for Automotive Businesses
While government compliance is something everyone has to navigate, it isn’t always easy to traverse, so let’s talk about the required government forms for automotive businesses. The most common government-required forms for auto businesses are (1) the truth in lending disclosures, (2) the odometer disclosures, and (3) credit disclosures. You’ll notice the term disclosures in each of the items listed– this refers to the information on a retail installment, sales contract, any credit forms, or credit turndown notices that are typically seen in a box at the end of the paperwork. Here is what might be included in this box for each type of disclosure list:
(1) Truth in Lending Disclosures: this is a written document that states disclosures about important terms of lending before a consumer is legally bound to pay a loan to an auto dealer. A standard lending disclosure typically includes (but is not limited to):
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- Annual Percentage Rate
- Amount Financed
- Total of Payments
(2) Odometer Disclosures: this is a written document that states the accurate mileage on a vehicle’s odometer at the time of transfer from the seller to the buyer. A standard odometer disclosure typically includes (but is not limited to):
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- The seller’s name and contact information
- The buyer’s name and contact information
- The date the odometer is certified
- The vehicle’s year, make, model number
- The Vehicle Identification Number (VIN)
- The accurate mileage at the time of the date of odometer certification
(3) Credit Disclosures: this is a written disclosure about the cost of credit that must be presented in a clear, easy-to-read-and-compare format. A standard credit disclosure typically includes (but is not limited to):
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- Annual Percentage Rate
- Variable-rate calculation
- Balance computation method
- Minimum finance charge
- Charge card repayment
- Grace period
- Fees
What’s most important is that these forms are signed by the customer. In the event of a government investigation, whether that’s the federal government or the Secretary of State’s office, these forms are critical because they show the customer is aware and understands the terms of the contract(s). In the event of an investigation, government agencies are going to dive into the dealer’s files first, especially the customer files to make sure the proper forms are signed by the customer.
Where to Find Compliance Forms
If a dealer has management software, these forms can typically be found on the preexisting forms in the system. Such forms are also available online. For the state of Georgia, you can find all forms on the DOR’s website. Similarly, each state generally has the same setup; just visit your state’s website and search for the types of disclosures we’ve discussed.
Why Disclosures Are Critical
When a customer signs a disclosure, the customer is acknowledging receipt of the form and that they understand the information on the form. Simply having an unsigned form in the file doesn’t protect you or the customer– in this case, unsigned disclosures can open you up to fines, lawsuits, and never-ending legal battles and fees. Government-required forms, especially disclosures, are required for a reason: they are a form of protection for everyone involved in the transaction. They may be a pain and it may add additional paperwork to a deal, but it’s necessary.
Need Support With Contract Disclosures?
If you want to make sure you are crossing your Ts and dotting your Is when it comes to automotive disclosures, book a strategy session with us today! We’ll help you navigate disclosures every step of the way to ensure you are successful.
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