Good advice that applies to legal writing too…
In a few short years mobile phones have become ubiquitous in both our personal and professional lives. Modern smartphones allow businesses to communicate rapidly with consumers and help employees work together effectively. Mobile phones on the market today can send and receive emails, upload media to social sites like Facebook and YouTube, and capture high quality images and video, among other capabilities. As more and more employees use cell phones, whether they use personal devices or ones issued by your business, it is imperative that your processes address how employees are permitted to use these devices. Here are a few issues to consider regarding employees and cell phone usage at your business:
Distracted Driving: Many states, such as New York and New Jersey, penalize drivers who are caught operating a motor vehicle while communicating via text messaging. These prohibitions are generally aimed at preventing “distracted driving.” Your business may incur liability if employees injure others or damages property while operating one of your dealership’s vehicles and text messaging. OSHA may fine your business if an employee is injured in this manner based on your dealership’s obligation to provide a workplace free of serious hazards. In order to mitigate potential liability from personal injury lawsuits and OSHA fines arising from distracted driving, your employee handbook should clearly communicate your dealership’s policies against distracted driving.
Sensitive Data: Mobile phones used in conjunction with business activities are covered under federal and state laws that address privacy and fraud prevention, like the Safeguards Rule of the Gramm-Leach-Bliley Act and the Red Flags Rule. If your employees receive nonpublic personal information on mobile phones, your compliance processes must include how you safeguard this information and what steps your business takes to monitor employee use of this information. Laws such as the Safeguards Rule and the Red Flags Rule require businesses to conduct ongoing evaluations of processes and implement changes when they find shortcomings. Do not forget to include mobile phones in your review of your compliance efforts.
Personal vs. Private Use: There are several issues that involve employees’ use of mobile phones that blur personal and private use. For example, does your business provide mobile phones or do you allow employees to BYOD (Bring Your Own Device)? If you provide mobile phones, are employees allowed to use them for personal reasons? Do you have ways to remotely lock and erase data contained on mobile phones should employees lose them? Are employees permitted to use their personal mobile phones to act on your company’s behalf, such as posting content to the dealership’s social media websites or answering leads? Do you allow employees to receive consumers’ nonpublic personal information on their personal mobile phones? Do employees use mobile phones to conduct business on behalf of your dealership while “off the clock?” Each of these questions present issues that your business should address in your employee handbook.
No matter how sound its processes may be, it is not unusual for a typical dealership to generate customer complaints during the course of business. Each department of a dealership is like a miniature business and some departments, such as the service department, involve hundreds, if not thousands, of transactions with customers each month. Many dealers seek to resolve complaints by offering customers some form of consideration for their troubles, whether the consideration takes the form of discounts for future visits or merchandise. Whenever you offer customers something in order to satisfy their complaints, you should consider asking them to sign a general release. If you do not, consumers may be undeterred from suing you even if you gave them something in order to resolve the complaint. While general releases cannot stop consumers from initiating lawsuits, they usually discourage plaintiffs’ lawyers from agreeing to take the case and may help resolve any lawsuit quickly and in the dealership’s favor should the consumer chose to file a lawsuit.
Here are a few tips for creating and using effective general releases:
- Keep It Simple: An effective general release does not need to be several pages long. Depending on the circumstances involved in the complaint, the body of the general release may only be a paragraph long and, with signatures, contained on one sheet. Along with length, your general release should be clearly written in plain language that is easy for people outside the legal profession to understand.
- Clearly Identify the Particulars: Your general release should clearly identify the parties to the release, the date of the release, the nature of the customer’s complaint, and what the dealer provided to the customer to resolve the complaint. If your dealership provided merchandise, future discounts, money, or anything else to the consumer, the general release should clearly state what the customer received and in what quantities and amounts.
- Provide Something New to the Customer: In order for a general release to be effective, you must provide something beyond what your dealership and the customer agreed upon. For example, suppose your dealership delivered a vehicle to a customer and later had to rescind the deal. If the customer provided a down payment, he or she is entitled to receive the down payment upon rescission. If you draft a general release to indemnify your dealership and the return of the down payment is the only thing the customer received, the general release is probably unenforceable for want of consideration, a key component to any contract. So, in the example above, the dealer should consider giving the consumer something else that the dealership does not have to provide as part of the original transaction.
- Create Effective General Release Processes: You should create processes that help you identify when general releases are used and retain them in a secure location. Since these documents may be used in litigation, you should be aware when your employees ask customers to sign them. Also, you should consider keeping the general releases in a secure area and in a filing system that makes their retrieval, by customer, easy. No matter how effective a general release may be, it will not be of much help if you cannot find it.
Recently some auto dealers I know informed me that lenders are becoming more aggressive with exercising repurchase provisions of indirect finance master agreements. These demands are usually triggered when a consumer defaults on a loan and the lender, citing a breach of a warranty or representation in the indirect finance master agreement proceeds to compel the dealer to repurchase the contract. What’s troublesome is that many of these agreements do not obligate the lender to return the collateral to the dealer, thereby leaving the dealer with a bad loan and no vehicle. Of course, the lender’s interpretation of the indirect finance master agreement is not dispositive of whether your dealership indeed caused a breach. You should carefully review the demand for repurchase and the facts surrounding the deal to determine your rights and your best method to respond. Be prepared to challenge demands that you believe are inappropriate and do not let such demands from lenders go unanswered. Here are some common claims a financial institution will make and what you can do about them.
- The dealership accepted an impermissible form of down payment: Indirect finance master agreements typically contain provisions that relate to the forms of down payments that are impermissible. For example, while some lenders allow consumers to use credit cards to make down payments, others do not. Just because a lender has accepted credit card payments in the past does not mean your dealership is off the hook. Your processes should include what forms of down payment are acceptable and what your staff should do if they inadvertently accept an impermissible form of down payment.
- The deal contains a promissory note or a hold check for the down payment: Read the indirect finance master agreement. Depending on the language of your agreement, the hold check or promissory note should not be an issue if you collected the balance due before you assigned the retail installment sale contract to the finance company.
- The signature or signatures on the retail installment sale contract are forgeries: Don’t blindly accept the financial institutions assertion that the contract contains forged signatures, even if the financial institution claims it has an affidavit of forgery. Consumers may state that their signatures were forged if they are unhappy about the agreement to make the purchase. If you think you can prove otherwise, challenge the assertion.
- The business did not perfect the lien in time before the consumer declared bankruptcy: Under federal law, a dealer has 30 days from the time the consumer takes possession of the vehicle or vessel to perfect the lien and protect the financial institution’s security in case the consumer declares bankruptcy. Under many state laws, the business perfects the lien when the paperwork is processed and filed, not when the state’s DMV finally notes the lien. Check your state’s laws to see which interpretation applies.
- The trade-in allowance greatly exceeds the trade-in’s actual cash value: While adjusting trade values to mask negative equity has been impermissible for nearly a decade, many dealers still use trade-in allowances as a means to discount the sale price of the vehicle. Lenders may challenge dealers when situations occur where the trade-in allowance greatly exceeds the actual cash value of the vehicle as reflected in the dealership’s accounting records. If there are reasons why the actual cash value changed after taking the vehicle on trade, you should document the adjustments and reasons for them in your records. You should consider other means by which to modify the sale price of the vehicle being sold instead of relying upon trade-in allowances to close deals.
Financial institutions may try to compel your business to repurchase the loan of a consumer that defaults on his or her obligation. If the financial institution has placed a demand to repurchase a loan, you should understand your rights under the law before agreeing to the demands.