SELLING OVER THE INTERNET: IS IT SOMEWHERE OVER THE RAINBOW?

Keith Whann

The Car Counselor

Whenever you think about conducting business on the Internet, always ask yourself: 

What am I doing?  Where am I doing it?  How am I doing it? Who am I doing it with?

WHAT AM I DOING?

Advertising vehicles.  Marketing the dealership.  Establishing a customer relationship. Generating showroom traffic. Qualifying a customer.  Selling a vehicle.

FTC CONDUCTS WEBSITE LEGAL COMPLIANCE SURVEY

An FTC survey of 200 websites found that most companies provide helpful information over the internet, but that the sites lacked important disclosure information such as refund policies, cancellation terms and warranty information.

WHAT DOES THE TERM “ADVERTISEMENT” MEAN?

The term “advertisement” means a commercial message in any medium that promotes a product, service or transaction.

Newspaper, television & radio.

Dealership signage and displays.

Writing and signage on motor vehicles.

Information contained in a website.

All advertising is subject to The Truth in Lending Act and State UDAP Statutes.

STATE UDAP STATUTE ADVERTISING LAWS

All material limitations and/or exclusions must be disclosed.

Disclosures should be clear and conspicuous.

In close proximity to the words stating the offer

Using an asterisk, in and of itself, is not in close proximity.

Disclosures should be set forth such that they are easily legible, sufficiently specific, and leave no reasonable probability of being misunderstood.

Advertisements should avoid any type, style, size, layout or illustration that may obscure any fact or create, in the reasonable consumer’s mind, an erroneous impression concerning any aspect of the transaction.

All advertising claims made must be substantiated.

FEDERAL REGULATION Z: THE TRUTH IN LENDING ACT

Triggering terms - if an advertisement promoting closed-end credit (installment loans) contains any of the following triggering terms, three specific disclosures must also be included in the advertisement:

                  The amount of the down payment.

                  The amount of any payment.

                  The number of payments.

                  The period of repayment.

                  The amount of any finance charge.

Required disclosures - if any of the triggering terms are used in a closed-end credit advertisement, then the following three disclosures must also be included in that advertisement:

                  The amount or percentage of the down payment.

                  The terms of repayment.

                  The “annual percentage rate”, using that term spelled out in full.  If the annual percentage rate may be increased after consummation of the credit transaction,         then that fact must also be disclosed.

Other things to consider: The FTC Used Car Rule, Magnuson-Moss Warranty Act, Pre-Sale Availability of Warranties Rule, Fair Credit Reporting Act and Privacy Laws.

WHERE ARE YOU DOING IT?

At the dealership.  Over the Internet.  Somewhere else.

ACTIVITY REQUIRING A DEALER’S LICENSE

No person shall:  Engage in the business of displaying or selling at retail motor vehicles or assume to engage in such business, unless the person is licensed as a motor vehicle dealer under the Motor Vehicle Code, or is a salesperson licensed under the Code and employed by a licensed motor vehicle dealer.

ACTIVITY THAT MUST OCCUR AT A DEALER’S LICENSED LOCATION

No motor vehicle dealer shall sell, display, offer for sale, or deal in motor vehicles at any place except an established place of business that is used exclusively for the purpose of selling, displaying, offering for sale, or dealing in motor vehicles…

ACTIVITY THAT IS PROHIBITED BY A DEALER

No motor vehicle dealer licensed under this chapter shall do any of the following:

Pay any commission or compensation to any person in connection with the sale of a motor vehicle unless that person is licensed as a salesperson in the employ of the dealer.

HOW ARE YOU DOING IT?

We complete paperwork. We do things over the phone.  We do things in cyberspace and on our website.  We do a combination of things.  It depends.

LEGAL DEVELOPMENTS IN ELECTRONIC COMMERCE

The Electronic Signature in Global and National Commerce Act (ESIGN) was signed June 30, 2000 and the “e-signature” portion took effect October 1, 2000.  Agreements signed with digital signatures or electronic codes will have the same legal effect as traditional paper documents if certain requirements are met.  It does not override State Motor Vehicle Code regulations regarding the licensing of motor vehicle dealers or the sale of motor vehicles. 

STATE MOTOR VEHICLE CODE RETAIL SALES CONTRACT REQUIREMENTS

Every retail and wholesale sale of a motor vehicle shall be preceded by a written contract that shall contain all of the agreements of the parties and shall be signed by the buyer and the seller.  The seller, upon execution of the contract and before the delivery of the vehicle, shall deliver to the buyer a copy of the contract ...

STATE UDAP STATUTE ADVERTISEMENT & SALE OF MOTOR VEHICLES RULE

It shall be a deceptive and unfair act and practice for a dealer, in connection with the advertisement or sale of a motor vehicle to:  Fail to integrate into any written sales contract, all material statements, oral or written, made prior to obtaining the customer’s signature on the written contract with the dealer.

STATE RETAIL INSTALLMENT SALES CONTRACT REQUIREMENTS

Every retail installment sale shall be evidenced by an instrument in writing.  A copy of said instrument shall be delivered to the retail buyer by the retail seller at the time of its execution… The written instrument shall contain all of the agreements of the parties, and shall set forth specifically all items and matters required by this Act.

WHO ARE YOU DOING IT WITH?

Dealership, Internet Provider and Consumer: Three separate parties that have different rights, responsibilities and obligations depending upon the relationship.

There is an Agreement between the dealership and the Internet provider.

There may be an Agreement between the Internet provider and the consumer.

There is an Agreement between the dealership and the consumer (the “car deal”!).

CHECK THESE OUT WHEN YOU GET BACK TO YOUR DEALERSHIP.

www.KeithWhann.com - the Toolbox, Problem Solved! and Car Counselor sections.

www.NIADA.tv - Video and audio presentations on a wide range of topics.

www.NIADA.com - various articles on related subjects in Used Car Dealer Magazine.

www.IndependentDealer.com - information on this topic and related subjects along with links to regulatory agencies.