Military Lending Act Developments and More from the NADC Conference
You don’t need a law degree to run an automobile dealership, but these days, it certainly helps. Dealers and lenders throughout the United States have to comply with a greater number of laws than ever before, state and federal regulatory environments are changing constantly, and technology seems to be making things more complex.
That’s why events like the National Association of Dealer Counsel’s Member Conference are so important. Last month, I attended the NADC’s 14th annual conference, where I had the chance to speak with members of the auto lending industry and take in some truly informative presentations. If you have questions about the Military Lending Act, Telephone Consumer Protection Act, workplace harassment, or another legal topic currently impacting your business, read on:
What’s Going on With the Military Lending Act
One of the biggest updates from this year’s NADC Member Conference concerned the Military Lending Act, which isn’t surprising given how much confusion has surrounded the law over the past few months.
First, some background: about a decade ago, Congress passed the MLA to protect members of the US military (and their families) from predatory lending practices. The law only applied to a handful of narrow categories of consumer credit at first, and expanded significantly in 2013 and 2015.
Still, auto lenders remained largely exempt—until 2017, when the Department of Defense issued an interpretative memorandum that stated, for the first time, that the MLA could cover a credit transaction intended to finance the purchase of a motor vehicle. Basically, products such as Guaranteed Auto Protection insurance coverage could be calculated under the total military annual percentage rate, which is capped at 36%. Under this interpretation, members of the military wouldn’t be able to purchase GAP, because it would run afoul of the MAPR ceiling.
State law compounded this issue for many dealers, as 14 states prohibit discrimination against members of the military. In other words, one law says you can’t sell certain products to military personnel while another law says you can’t treat military personnel differently.
Oy. What’s an auto lender to do? Well, some have simply assumed the risk of breaking federal law and hope finance institutions will continue to buy their paper nonetheless. Some have risked breaking state law by refusing to sell GAP to military customers. Others have decided to stop selling GAP altogether, leaving a major revenue source on the table.
Clearly, none of these approaches is ideal, which is why the National Automobile Dealers Association raised the matter with DoD policy makers. The Department basically said, “we understand your concerns, but you need to file a petition, and maybe we can pretend this whole thing never happened.” So, NADA got together with American Financial Services Association (because these issues affect all small dollar lenders, too) to file a petition.
And that’s where things stand now: the MLA is giving dealers and lenders headaches, and putting everyone (consumers included) in a tough spot, but there’s a resolution on the horizon. Expect some more action—and naturally, more coverage on our blog.
Other Important Legal Updates
The MLA was far from the only topic—legal or otherwise—to generate impassioned discussion at the 2018 NADC Member Conference. The automotive industry may be among the fastest-changing spaces today, with dealers facing questions about everything from their relationships with manufacturers to the layout of their facilities to the way they ensure positive organizational cultures for their employees. Significant topics included…
The repercussions of self-driving cars:
Recent news about autonomous vehicles has largely focused on their perceived dangers, but given the fact that more than 3,000 people die in human-caused accidents on the road every day, it’s hard not to see some element of fearmongering in this coverage. Instead, dealers are thinking about practical business questions that are no less profound: If a consumer doesn’t drive their car, or need to keep it parked in a certain location, is it really “their” car? Will we be moving away from ownership and toward a subscription model in auto sales?
Renewed focus on the Telephone Consumer Protection Act:
Robocalls are no longer just your phone-illiterate uncle’s problem. Spam in the form of unwanted calls and text messages has reached an all-time high, and Congress appears to be ramping up its efforts to enforce the TCPA. Any dealer that uses autodialers should be on alert, as TCPA violations are low-hanging fruit for regulatory entities.
Sexual harassment and gender protections:
I had the pleasure of having dinner with Shirley Wang, Managing Shareholder at Davis Wang PLC, whose legal practice centers on employment law. Shirley represents and counsels businesses on all kinds of labor and employment law matters. She’s seen firsthand how the #MeToo and #TimesUp movements have transformed the ways employers and courts address sexual harassment and other forms of workplace discrimination. Comparing our notes was an illuminating experience. Between tone at the top, effective management training, consistency between policies and actual practices, and an organization’s capability to hold people accountable, we spoke about how the same elements of effective harassment prevention program also improve a company’s position during litigation. We also discussed California’s changing laws around gender equality and restrooms—e.g. if there’s a single use restroom, it should be available to all genders—and how these updates may signal change nationwide.
As usual, these are just the highlights. If you’d like to discuss your dealership’s legal questions and challenges with a compliance expert—or if we met at this year’s NADC Member Conference and you’d like to reconnect—contact us.