Regulation Z is a federal regulation that applies to consumer credit transactions, including car loans. It is administered by the Consumer Financial Protection Bureau (CFPB) and is designed to protect consumers from unfair or deceptive credit practices.
In the context of car dealerships, Regulation Z requires that dealers disclose certain information to consumers, such as the annual percentage rate (APR) of a loan and the total amount financed. This information must be provided in a clear and conspicuous manner so that consumers can easily understand the terms of their loan. Additionally, dealers are prohibited from engaging in certain practices, such as steering consumers into higher-cost loans or charging them more than the disclosed APR.
As a car dealer, there are several steps you can take to check your compliance with Regulation Z:
- Provide accurate and clear disclosures: Make sure that all disclosures required by Regulation Z, such as the annual percentage rate (APR) and the total amount financed, are accurate and presented in a clear and conspicuous manner. This can include providing the information in writing, and ensuring that the disclosures are easy to understand.
- Train your staff: Train your sales staff and other employees on the requirements of Regulation Z and the proper way to provide disclosures to consumers. Make sure that all employees understand the importance of compliance and the potential consequences of non-compliance.
- Review your advertising: Review all of your advertising materials, including online ads, to ensure that they comply with Regulation Z. This includes not making misleading or inaccurate statements and not advertising a rate or term that is not available to all consumers.
- Keep records: Keep records of all disclosures and other communications with consumers, as well as any other documentation related to compliance with Regulation Z. This can include copies of loan documents, advertising materials, and training materials.
- Have regular Compliance Audits: Regularly review your dealership's operations and procedures to ensure compliance with Regulation Z. This may include self-audits, or hiring a third-party auditor or law firm to review your dealership's practices.
- Stay current with the regulations: Keep up-to-date with any changes or updates to Regulation Z and other regulations that may affect your dealership. This can include monitoring the CFPB's website or subscribing to alerts or newsletters. You can also hire a lawyer experienced in auto dealer laws to review your materials and practices.
It's also important to remember that Compliance with the regulations not only protects the consumers but also your dealership from penalties and fines that may result from non-compliance.
