February 2020 - Greater Cincinnati Automobile Dealers Association

DOD Grants Joint NADA/AFSA Petition to Withdraw Q&A 2 from December 2017 MLA Interpretive Rule

The U.S. Department of Defense (DOD) has granted a joint petition filed by the National Automobile Dealers Association (NADA) and the American Financial Services Association (AFSA) to withdraw Question and Answer (Q&A) 2 from a December 2017 Interpretive Rule that sought to define the scope of the motor vehicle financing exclusion to the Military Lending Act (MLA).

Q&A 2 interpreted the MLA in a way that effectively prevented auto dealers from making Guaranteed Asset Protection (GAP) Waiver coverage available to service members, who previously were able to voluntarily purchase GAP waiver to protect against the personal financial risk that arises when a vehicle is declared a total loss. As a result, DOD’s issuance of Q&A 2 unnecessarily exposed service members to significant liability by effectively eliminating their ability to adequately protect themselves from incurring financial losses in the event of the total loss of a vehicle.

In January 2018, NADA and AFSA jointly petitioned DOD to withdraw Q&A 2. Over the next 25 months, NADA and AFSA worked tirelessly to demonstrate to DOD that this interpretation: impermissibly narrowed the scope of the motor vehicle financing exclusion that Congress created when it enacted the MLA; was issued in an uninformed and procedurally-deficient manner; and was harming service members and undermining military readiness.

NADA and AFSA also explained that attempting to comply with the MLA as it relates to credit-related products was not economically feasible because one of the restrictions that applies to non-depository institutions like auto dealers was their inability to take a security interest in the vehicle collateral.  

In explaining its decision to withdraw Q&A 2, DOD stated that it “finds merit in [the security interest] concern and agrees additional analysis is warranted.” 

NADA President and CEO Peter Welch, and AFSA President and CEO Bill Himpler issued the following joint statement in response to DOD’s action: “This is a great victory for military service members and their families. It is critically important for members of the military to have the ability to purchase valuable credit-related products such as optional GAP Waiver protection when they finance the purchase of a new vehicle.” 

Hudson Cook Chairman Michael Benoit commented further: “Because the effect of the DOD withdrawal is a recognition that auto financing contracts that include credit-related products like GAP Waiver are within the scope of the motor vehicle financing exclusion, I expect that auto finance companies will again feel comfortable purchasing contracts from dealers that include GAP Waiver.”

REAL ID Act will begin affecting air travelers Oct. 1

What is the significance of October 1, 2020? After this date, federal travel restrictions requiring secure identification go into effect and the Transportation Safety Administration (TSA) will require a state issued Real-ID compliant drivers’ license or ID for passengers to board airplanes.

Congress passed the Real ID Act in 2005 in response to the 9/11 attacks to establish minimum security standards for state-issued drivers’ licenses and ID cards used as identification when either flying commercially or entering federal buildings. 

There are a few subtle differences between each state’s execution of their Real ID program. For a complete list of required documentation or for more information visit:

Upgrading to a compliant drivers’ license or ID is voluntary and requires furnishing only a few extra documents. There is no additional charge and drivers are only required to present the documents once during the process to receive future compliant IDs.

Somewhat alarmingly, since the issuance of Real-ID began 18 months ago in Ohio, only 27 percent of the drivers renewing their license have chosen to receive the compliant version. This low conversion rate, coupled with the fact that most of us have not had the opportunity to upgrade our drivers’ license because it is not yet due for renewal, is causing concern as we approach this deadline.  

If you are interested in upgrading your drivers’ license or ID before the deadline, whether you are due for a renewal or not, you will be required to provide documentation proving your name, date of birth and Social Security number in addition to two documents proving your residential address.

Acceptable documents include:
 
Identity documents
  • Original or certified copy of a birth certificate
  • Unexpired U.S. Passport
Social Security number documents
  • Social Security card
  • W-2 or 1099 form
Residency documents (the most commonly used)
  • Utility company bill (electric, telephone, water/sewer, cable, etc.) issued within one year
  • Credit card bill issued within one year
  • Vehicle registration

If there has been a name change due to adoption, marriage, divorce or any other reason, you will need to provide additional documentation to support the name change. This additional documentation may include, but is not limited to, a marriage license, court order or court decree.

For those who do not have a compliant ID after Oct. 1, a U.S. Passport or passport card can be used as identification to board a flight. Of course, a passport will still be required for international travel.

Haven’t looked at your passport in a while? This may be a good time to check its expiration date as well.

If you reside in Ohio and have questions regarding this process, call GCADA’s Downtown Cincinnati License Bureau Agency at (513) 721-3271 or visit 138 East Court Street – Room 100. Ask for Chris, Judy or Crystal for answers to your Real ID questions. 

A debtor can’t always get something for nothing, even after receiving a bankruptcy discharge

By Shelley B. Fowler*

Bankruptcy laws exist to give debtors a fresh start. But that fresh start doesn’t always allow a debtor to walk away from all of his or her obligations scot-free, especially when a debtor has secured debts. A debtor’s receipt of a discharge in bankruptcy doesn’t necessarily mean that he or she doesn’t have to pay anything to a secured creditor, even for property that the debtor doesn’t want or that is essentially worthless.

A recent case involved a debtor who owned a car that was worth substantially less than the amount of the debt that the car secured. The debtor wanted the creditor to release its lien after he received a discharge so that he could sell the car for a nominal price. The creditor was willing to work with the debtor but wanted something for its lien release. The debtor apparently didn’t want to follow the creditor’s instructions for what he deemed was a worthless car and instead decided to sue.

Let’s see what happened.

Duane Bentley filed a Chapter 7 bankruptcy petition and stated his intent to surrender his 2001 Dodge Dakota, which secured a 2017 loan, to OneMain Financial Group, LLC. OneMain never repossessed the car, which was stored on Bentley’s ex-father-in-law’s property, and Bentley never paid the $8,000 balance owed to OneMain.

After Bentley received his discharge, he called OneMain requesting removal of its lien from the title to his car, which he claimed was “old,” “trash,” and “totaled” and worth only $150, so that he could sell it. On several occasions, OneMain advised Bentley and his ex-father-in-law that it could not release the lien without some payment and advised them to provide an offer from a salvage yard, or from either of them or another person, with a mechanic’s estimate of what was wrong with the car and what the repair costs would be so that it could evaluate the price offered.

Bentley and his ex-father-in-law never submitted any offers. Instead, Bentley sued OneMain for contempt for violating the discharge injunction by attempting to collect a discharged debt. Bentley claimed that OneMain refused to release its lien on his “valueless” car until he paid the full balance owed. OneMain released its lien, and the parties cross-moved for summary judgment. The U.S. Bankruptcy Court for the Eastern District of Kentucky granted OneMain’s motion and denied Bentley’s motion.

Relying on a First Circuit opinion that also involved a creditor’s refusal to release a lien on a vehicle after the vehicle’s owners obtained a Chapter 7 discharge, Bentley argued that OneMain’s actions were objectively coercive and frustrated his right to surrender the car – OneMain decided not to repossess the car because it was essentially worthless, yet it refused to release its lien without payment. The court found that the First Circuit’s opinion heavily relied on the fact that the creditor demanded full payment of the debt, but, in this case, OneMain proposed to resolve the matter for essentially scrap value, far less than the full amount owed, and gave Bentley several reasonable options to obtain a lien release. The court determined that the facts did not support Bentley’s claim of coercive conduct that would provide a basis for finding that OneMain violated the discharge injunction.

This case serves as a good example of how a secured creditor should communicate with a debtor after the debtor’s debt to the creditor has been discharged, where the debtor wants to get rid of the collateral but the creditor decides that it is not cost-effective to repossess and sell the property. If you find yourself in a similar situation as OneMain, read the court’s opinion for ways to reasonably negotiate with the debtor without running afoul of the discharge injunction.

In re Bentley, 2019 Bankr. LEXIS 3118 (Bankr. E.D. Ky. October 2, 2019).

*Shelley B. Fowler is a Managing Editor at CounselorLibrary.com, LLC. She can be reached at 410.865.5406 or by email at rfowler@hudco.com.

Employers must use a new I-9 Form for 2020

The federal government just released an updated Form I-9, and although you aren’t required to use the new version until May 1, 2020, best practices dictate that you should start using it immediately. It has been a few years since United States Citizenship and Immigration Services (USCIS) updated the Form I-9, which verifies the identity of new hires and ensures they are authorized to work in the United States.

But with this recent announcement, you should take immediate steps to come into compliance or risk financial penalties.

Changes To The Form Are Minor, But Changes To The Instructions Are Important

The new version (which is dated October 21, 2019) brings only a very subtle change to the form itself. Specifically, USCIS revised the Country of Issuance field in Section 1 and the Issuing Authority field (when selecting a foreign passport) in Section 2 to add Eswatini and Macedonia, North, because those countries recently announced name changes.

However, this change is visible only when completing the fillable Form I-9 on a computer. In short, the paper version of the new I-9, except for the date in the lower left-hand corner, will look identical to the current version dated July 17, 2017.

As for changes to the form’s instructions, those are a bit more substantive:

  • Updated website addresses and other contact information – interestingly, the instructions no longer contain contact information for the Immigrant and Employee Rights Section of the Department of Justice.
  • Clarification as to who can act as an authorized representative on behalf of an employer. The instructions make clear that employers can designate “any person” to complete and sign Section 2 of the I-9 on the employer’s behalf. The instructions also make clear that the employer, not the authorized representative, is liable for any violations committed in connection with the I-9, “including any violations of the employer sanctions laws committed by” the authorized representative. The lesson here: while you may choose anyone to serve as an authorized representative, choose carefully and make sure they understand how to correctly fill out Section 2.
  • Instruction that employers who enter information in Section 2, List A should not enter N/A in Lists B and C (and vice versa).
  • Updates on the process for requesting paper Form I-9s (as an alternative to printing them from the USCIS website) and an updated Department of Homeland Security (DHS) Privacy Notice.

Best Practice: Begin Using New Form Immediately

Although you will be able to use this new version or continue using the previous Form I-9 through April 30, 2020, it makes sense to scrap the use of the July 17, 2017 version and begin using the updated version right away. You should recycle all older blank versions you already have printed, and instruct your hiring managers and human resources representatives to download the new Form I-9 for use with new hires from this point forward.

On May 1, 2020, all employers will be required to use the revised form, so it makes sense to avoid any delay and begin use of the new version immediately. It’s important to remember, however, you should not require current employees to fill out the new I-9 form. Rather, use the new Form I-9 only for new hires moving forward.

Consequences Of Non-Compliance Can Be Costly

Although the changes to the Form I-9 and its instructions are slight, failure to use the new form and comply by the May 1 deadline can result in large fines. I-9 audits have increased threefold in recent years (from 1,360 to 5,981 per year), while worksite investigations have increased even more dramatically (from 1,691 to 6,848 per year).   

Potential fines are also increasing – paperwork violation fines can now range between $230 to $2,292 per employee. Civil penalties for knowingly employing hiring or employing unauthorized workers currently range from $573 to $4,586 per employee for the first violation. Second- and third-violation civil penalties can range between $4,586 up to $22,972 per employee. Arrests and criminal convictions for knowingly hiring or employing unauthorized workers are on the rise as well.

Conclusion

It is unlikely that the Trump administration will slow down DHS’s employer-driven immigration compliance mechanisms. Based upon recent actions from the administration to increase enforcement and hire more ICE agents, along with statistics demonstrating significant increases in I-9 audits and worksite investigations, it is increasingly likely you could face enforcement actions in the form of ICE audits, workplace raids, and employee detention.

Accordingly, now is the time to review your I-9s and your compliance policies to minimize exposure should the government show up on your doorstep demanding to see your I-9s. We will continue to monitor the status of all immigration-related activity, including further executive actions, and ongoing and future litigation, and publish updates as additional actions are taken, or information is provided, by the federal immigration agencies, the White House, and the judicial system. Please ensure you are signed up for our legal alert system to receive updates about these and other developments.

If you have any questions about these developments or how they may affect your business, contact any member of our Global Immigration Practice Group or your regular Fisher Phillips attorney.

This alert provides an overview of a specific federal development. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.

 

GCADA continues its 27-year partnership with Cincinnati Children’s CCIC

Charlie Howard, GCADA executive vice president, (center right), presents a $75,000 donation to the Cincinnati Children’s Comprehensive Children’s Injury Center

The Greater Cincinnati Automobile Dealers Assn. (GCADA), members continued its 27-year partnership with Cincinnati Children’s by presenting a $75,000 donation to the Comprehensive Children’s Injury Center (CCIC) during the annual REV IT UP! VIP Preview Party for the 2020 Cincinnati Auto Expo. 

More than 600 guests GCADA members, associate members and vendors enjoyed an evening of Good Ole Rock ‘n Roll with the Buzz Bin band and rock ‘n roll themed food stations. 

GCADA and Cincinnati Children’s will continue their 27-year partnership advocating child passenger safety during Child Passenger Safety Month in September.

CLICK HERE to learn more about the CCIC. 

– GCADA –

 

Online Reviews Become a Focus of the FTC

Who doesn’t love an online review?

My family rarely buys anything of consequence without checking the reviews first. Online reviews allow us to get the skinny on anything and everything. 

In fact, my husband even reads reviews of our favorite restaurants periodically to ensure that some terrible incident hasn’t occurred between our frequent visits. Insert the eye roll emoji here.

As much as I love online reviews, I admit that they sometimes induce decision paralysis and can be an incredible time suck. For that reason, I attempt to limit my dependence on them and take them with a grain of salt. The Federal Trade Commission’s Bureau of Consumer Protection views online reviews with caution, too.

Section 5(a) of the FTC Act provides that “unfair or deceptive acts or practices in or affecting commerce … are … declared unlawful.” The FTC routinely enforces Section 5(a) in the advertising space and pays particular attention to endorsements and testimonials. The FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” set forth general principles to help advertisers ensure that their advertising does not violate Section 5(a).

In October, the FTC announced settlements of two complaints challenging deceptive online marketing tactics. One of those complaints charged skincare company Sunday Riley Modern Skincare, LLC, and its CEO with misleading consumers by allegedly using fake product reviews posted by its employees on a well-known retail website. The FTC’s release on the settlements states:

Posting deceptive or inaccurate information online pollutes the e-commerce marketplace and prevents consumers from making informed purchasing decisions. With these two actions, the FTC makes it clear that it will take enforcement action against this type of illegal behavior.

Tough words and a clear warning from the FTC.

According to the FTC’s complaint, Sunday Riley, the CEO and namesake of the Texas-based company, allegedly instructed employees (in writing using company email, no less) to create fake accounts, post positive reviews, and dislike negative reviews at online retailer Sephora. When Sephora caught on to the tactic and removed the offending reviews, the company started using a VPN to keep Sephora from knowing which reviews came from Sunday Riley-affiliated IP addresses. Insert the big eyes emoji here.

The FTC’s complaint charges both Sunday Riley the company and Sunday Riley the CEO with two violations of the FTC Act: 1) making false or misleading claims that the fake reviews reflected the opinions of ordinary users of the products; and 2) deceptively failing to disclose that the reviews were written by Ms. Riley or her employees.

As a recent Sunday Riley devotee and a follower of all things deceptive advertising-related, I was stunned. My two hobbies – skin care and advertising law – were combined into one article on BuzzFeed. I don’t know which revelation was worse – that my newest favorite skincare line might not be as good as I thought or that advertisers are still not getting this right after the FTC’s efforts to lay down the law. Sunday Riley (both the company and the CEO) surely will not err this way again. I am confident that the lesson was learned and that their advertising compliance will be as good as their skincare products going forward. Plus, the FTC will be watching them ever so closely in the future, according to the consent order.

The lesson du jour here is simple: Tell the truth and be absolutely transparent when it comes to reviews, endorsements, and testimonials. Have you paid someone to talk up your dealership on his or her podcast? Great. Make sure the podcast listeners know that you paid for that person’s services. Do you allow your employees to post comments or reviews online about the benefits of service contracts? Fine. Make them disclose that they work for your dealership. Most importantly, believe the FTC when it says that it will not tolerate online advertising shenanigans.

Here’s one final thought: Make your marketing department and ad agency aware of this FTC action. Better yet, send them this article, the FTC’s press release and complaint, and the consent order, along with a copy of the FTC guides. Then, incorporate the FTC’s guidance into your marketing and social media policies and procedures if it is not already there. Insert the smiling jazz hands emoji here.

*Andrea S. Cottrell is an associate in the Texas office of Hudson Cook, LLP. She can be reached at 682.350.9152 or by email at acottrell@hudco.com.