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| You Auto Know ® - Newsletter |
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April, 2006: Paperwork/Sales Contracts and Retention of Documents |
Scenario: Mr. Smith comes into the dealership seeking to purchase a used vehicle. After test driving a few vehicles, he decides to purchase one that is still under factory warranty. He knows, via the mileage and year of the vehicle, plus the representations of the salesperson, that there is still the balance of the factory warranty attached to the vehicle. However, eight months later, you receive a copy of a complaint filed by Mr. Smith alleging you violated the “FTC Buyer’s Guide” rule as promulgated at CFR §455, and the Ohio Consumer Sales Practices Act. You review the paperwork and discover that there is no FTC Buyer’s Guide in the sales file. What are the possible liabilities of the dealership?
The most important point that sales personnel and service people fail to realize is once a sales order and/or repair order is executed by the dealership and consumer, it becomes a legal, binding contract enforceable by either the dealership or the consumer. Sales people have a tendency to view a sales order as nothing more than a piece of scrap paper since they write and re-write offers so many times. However, they must be aware that the document is a legal, binding contract.
There are disclosures placed on Buyer’s Orders for specific purposes. The majority of the purposes are to comply with various Ohio and Federal laws. Even after all the years of discussing this problem, dealerships either fail to display the FTC Buyer’s Guide on used cars and/or fail to have the consumer execute the Buyer’s Guide pursuant to CFR §455. It must be executed at the required signature line on the document. Although it may only be a technical violation, signing the document on the front as opposed to the specific signature line on the form is cause for a claim of rescission of the agreement. Additionally, even if it is what seems to be merely a “technical” violation (after all, in our scenario, Mr. Smith knew he had the balance of a factory warranty), even a technical violation entitles Mr. Smith’s attorney to his fees!
It is absolutely imperative that dealerships review the paperwork prior to a consumer executing the documentation and taking delivery of the vehicle.
When the consumer signs the Federal and Ohio odometer disclosure forms, why is it necessary to mark the mileage “accurate” or “not accurate” on the front of the Buyer’s Order? Because Ohio law dictates that the selling dealer perform this disclosure. Why is it necessary to have the consumer sign on the signature line of the Buyer’s Guide instead of on the front? Because Federal law specifically states that the consumer has to sign where indicated on the document. Further, it is imperative that your sales personnel actually go out and look at the mileage on the odometer of the vehicle being sold and the vehicle being traded-in. Lawsuits have been filed where the sales person assumed that the mileage on a new vehicle was minimal when, in fact, there were 100 miles on the odometer; the sales person records 40 miles on the odometer statement. Although the damages in a case such as this are negligible, the fact of the matter is that it is a technical violation of the law where attorney’s fees and damages can be awarded to the Plaintiff.
Remember, even it is “just” a technical violation, a lawsuit can still be filed. YOU MUST IMPRESS UPON YOUR SALES/SERVICE PERSONNEL AND MANAGERS THAT THE PAPERWORK HAS TO BE PROPERLY FILLED OUT AND EXECUTED. Further, your computer printer must be properly set up, placing the appropriate “X” in the appropriate boxes and properly filling out the information. It is incumbent on you to have your computers and printer properly programmed.
Moreover, it is absolutely imperative that the dealership RETAIN all of the final transaction documents and repair orders. Last year, we defended a dealership in a lawsuit where it did not retain all of the documents. Further, some of the documents that were retained did not line up with the pre-printed financing form. The jury found for the plaintiff and though the actual damages were minimal, the plaintiff’s attorney’s award was not.
The bottom line is that proper attention to detail by your personnel would go a long way in protecting you from these types of complaints.
As always, these are highlights of the law and are not to be construed as containing the entire law.
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Copyright © 2005 Robert A. Poklar
Having been a Chevrolet dealer, Robert A. Poklar's business background and experience in the automotive industry aid him in his representation of numerous Ohio automotive dealerships. He also represents after-market service companies, trade organizations, dealers advertising associations and corporations. Pursuant to certain ethical standards, this may be construed as advertising. |
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