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Legal News/Legislation

7 revisions to FTC’s Buyers Guide

Thursday, Nov. 10, 2016, 02:58 PM
By Auto Remarketing Staff
WASHINGTON, D.C. - 

In a development relevant to dealerships of all sizes, the Federal Trade Commission on Thursday announced final amendments to its Used Car Rule.

The FTC sought public comments on a series of proposed changes to the rule  — formally known as the Used Motor Vehicle Trade Regulation Rule — that requires dealers to display a window sticker, or “Buyers Guide,” on used vehicles offered for sale.

The guide discloses whether the dealer is offering to sell a used vehicle “as is” (without a warranty), or with a warranty.

If the sale is with a warranty, the FTC explained the guide discloses the terms and conditions, including the duration of coverage, the percentage of total repair costs the dealer will pay and the vehicle systems the warranty covers. In states that do not permit “as is” used-vehicle sales, the regulator pointed out dealers must use an alternative guide that discloses whether the sale is with a warranty or with implied warranties only.

In December 2012, the FTC sought public comments on proposed changes to the Buyers Guide as part of its systematic review of all of the agency’s rules and guides. In response to comments received, the agency sought comments on additional proposed changes to the Used Car Rule and invited comments on alternative approaches that public commenters proposed for the vehicle history disclosure and the “As Is” statement.

As announced on Thursday, the FTC is revising the Buyers Guide by:

—Changing the description of an “As Is” sale.

—Placing boxes on the face of the Buyers Guide that dealers can check to indicate whether a vehicle is covered by a third-party warranty and whether a service contract may be available.

—Providing a box that dealers can check to indicate that an unexpired manufacturer’s warranty applies.

—Adding air bags and catalytic converters to the Buyers Guide’s list of major defects that may occur in used vehicles.

—Adding a statement that directs consumers to obtain a vehicle history report and to check for open recalls. The statement also instructs consumers to visit ftc.gov/usedcars for information on how to obtain a vehicle history report and visit safercar.gov to check for open safety recalls.

—Adding a statement, in Spanish, to the English-language Buyers Guide, and advising Spanish-speaking consumers to ask for the Buyers Guide in Spanish if the dealer is conducting the sale in Spanish.

—Providing a Spanish translation of the statement that dealers may use to obtain a consumer’s acknowledgement of receipt of the Buyers Guide.

FTC officials indicated the amended rule permits dealers to use their remaining stock of Buyers Guides for one year after the effective date of the amended rule.

For used dealers, the FTC offers what’s titled “A Dealer’s Guide to the Used Car Rule,” which can be downloaded here.

“Fillable” versions of the Buyers Guide in English and Spanish are available at FTC.gov.

The FTC vote to publish the Notice of Final Rule in the Federal Register was 3-0.

  • Read more about 7 revisions to FTC’s Buyers Guide

German authorities launch new investigation of VW

Monday, Nov. 07, 2016, 04:01 PM
By Auto Remarketing Staff
CARY, N.C. - 

Perhaps just when Volkswagen dealers thought happier customers might be arriving at their service drive and showrooms, OEM officials in Wolfsburg, Germany acknowledged that investigators in that country are conducting a new probe involving Hans Dieter Pötsch, the chair of VW’s supervisory board.

The subject of the investigation is alleged market manipulation, according to VW’s statement distributed on Sunday.

“Based on careful examination by internal and external legal experts, the company reaffirms its belief that the Volkswagen board of management duly fulfilled its disclosure obligation under German capital markets law,” the automaker said.

“The proceedings refer to the period during which Hans Dieter Pötsch served as the group chief financial officer. The company and Hans Dieter Pötsch will continue to give the inquiries by the public prosecutor’s office their full support,” the OEM went on to say.

The latest development arrived only a short time after Volkswagen gained approval from a wide array of federal agencies of a restitution plan involving some vehicles associated with “Dieselgate.”

Autotrader senior analyst Michelle Krebs offered an assessment that could be discouraging for VW dealers charged with handling vehicle owners who still might be irate with the company’s behavior.

“Revelations of new emissions cheating by Volkswagen sets the automaker back in restoring lost trust of current and potential customers,” Krebs said.

Kelley Blue Book analyst Michael Harley shared a similar reaction.

“With the recent court approval of its diesel scandal buyback offer, Volkswagen AG appeared to be on a path of healing. Unfortunately, the new emissions-cheating revelations that involve diesel- and gasoline-powered vehicles are fresh new wounds that will further damage the German automaker’s credibility and reputation.”

To sum up the latest news, Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book, mentioned the FBI director who has been in the headlines often leading up to the presidential election.

“Out of the frying pan and right back into the fire. It was just last month when it seemed Volkswagen was finally on the way to putting the emissions scandal behind it,” Nerad said. “Now new revelations point to the possibility that the scandal was even larger than we envisioned.  Where is James Comey to sort this all out?”

  • Read more about German authorities launch new investigation of VW

VW settlement takes ‘massive step forward’

Tuesday, Oct. 25, 2016, 04:19 PM
By Auto Remarketing Staff
CARY, N.C. - 

In what one industry observer called “a massive step forward” for the OEM and what’s commonly known as “Dieselgate,” Volkswagen Group of America announced on Tuesday that Judge Charles Breyer of the U.S. District Court for the Northern District of California has granted final approval to the $10 billion settlement order agreement between Volkswagen and private plaintiffs represented by a court-appointed Plaintiffs’ Steering Committee (PSC) to resolve civil claims regarding eligible Volkswagen and Audi 2.0L TDI vehicles in the United States.

Concurrently, Breyer also approved a consent decree between Volkswagen and the U.S. Department of Justice on behalf of the Environmental Protection Agency (EPA) and the State of California by and through the California Air Resources Board (CARB) and the California Attorney General; and a Consent Order between Volkswagen and the U.S. Federal Trade Commission.

All three agreements were previously announced back in July.

“Final approval of the 2.0L TDI settlement is an important milestone in our journey to making things right in the United States, and we appreciate the efforts of all parties involved in this process,” said Hinrich Woebcken, president and chief executive officer of Volkswagen Group of America.

“Volkswagen is committed to ensuring that the program is now carried out as seamlessly as possible for our affected customers and has devoted significant resources and personnel to making their experience a positive one,” Woebcken continued.

Woebcken added that Volkswagen remains focused on resolving other outstanding issues in the United States and continues to work towards an agreed resolution for customers with affected 3.0L TDI V6 diesel engines.

Industry reaction

Under the settlement, eligible vehicle owners have two choices:

1. They can sell back their vehicle to Volkswagen or terminate their lease without an early termination penalty.

2. Keep their vehicle and receive a free emissions modification, if approved by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB).

“This is a massive step forward in Volkswagen’s efforts to put its diesel emissions issue to bed,” Kelley Blue Book senior analyst Karl Brauer said. “The combination of customer repair/buyback options, plus the additional monetary compensation these owners will receive, should cover any losses TDI owners would have suffered from the cars’ drop in market value.

“Additional fines related to the advancement of clean energy, to counteract the air quality impact of these engines, further illustrates VW’s desire to address health and environmental concerns,” Brauer continued. “Resolution for its 3.0-liter diesel engines remains on VW’s ‘to do’ list, as do settlements with individual states and markets outside the United States, but the importance of getting past this threshold in the process can't be overstated.”

The vehicles associated with this settlement include:

2013-2015 VW Beetle

2010-2015 VW Golf          

2009-2015 VW Jetta           

2012-2015 VW Passat         

2010-2013; 2015 Audi A3

“At long last, Volkswagen seems to be coming to the end of this unfortunate episode in its history in the United States,” Kelley Blue Book executive editorial director and executive market analyst Jack Nerad.

“The bad news for VW is the settlement will put the Volkswagen name back in the news in an unfavorable light,” Nerad continued. “The good news is that U.S. consumers seem to have short memories when it comes to automotive issues, so VW should be well on its way to moving forward without a millstone around its neck.”

More guidance from federal regulators

FTC officials cheered Tuesday’s developments.

In a new blog post titled “Road Cleared for VW to Compensate Consumers,” FTC chairwoman Edith Ramirez said that the landmark settlement will enable 500,000 consumers across the country to sell back their tainted diesel-powered cars to Volkswagen.

“The $10 billion order secured by the FTC will make consumers whole by remedying the losses they suffered due to VW’s deceptive ‘Clean Diesel’ ad campaign,” Ramirez wrote.

The FTC also issued a new consumer blog post titled “VW Buybacks and Lease Terminations to Begin,” which provides additional background information on the Volkswagen settlement order, along with detailed instructions for affected owners regarding how and where to file a claim, and the claim-processing timetable. It also tells consumers how and where they can pick up their buyback check, specifying that the money does not have to be used to buy a new Volkswagen.

Earlier this year, the FTC warned consumers about possible scams involving Volkswagen buybacks in a consumer blog post titled “VW Owners, Get the Facts.” At the same time, the FTC posted a business blog emphasizing that it would be unwise for anyone, including VW dealers, to make separate offers to the owners of affected vehicles.

  • Read more about VW settlement takes ‘massive step forward’

NHTSA releases guidance to boost vehicle cybersecurity

Monday, Oct. 24, 2016, 04:11 PM
By Auto Remarketing Staff
WASHINGTON, D.C. - 

With some models having as much connectivity as your smartphone, the National Highway Traffic Safety Administration (NHTSA) said it is taking a proactive approach to protecting vehicles from malicious cyber-attacks and unauthorized access by releasing proposed guidance for improving vehicle cybersecurity.

The agency within the Department of Transportation explained on Monday that the proposed cybersecurity guidance focuses on layered solutions to ensure vehicle systems are designed to take appropriate and safe actions, even when an attack is successful.

The guidance recommended risk-based prioritized identification and protection of critical vehicle controls and consumers' personal data.

Further, it suggested that companies should consider the full life-cycle of their vehicles and facilitate rapid response and recovery from cybersecurity incidents.

“Cybersecurity is a safety issue, and a top priority at the department,” Transportation Secretary Anthony Foxx said. “Our intention with today’s guidance is to provide best practices to help protect against breaches and other security failures.”

NHTSA noted that the guidance also highlighted the importance of making cybersecurity a top leadership priority for the automotive industry and suggested that companies should demonstrate it by allocating appropriate and dedicated resources, and enabling seamless and direct communication channels though organizational ranks related to vehicle cybersecurity matters.

"In the constantly changing environment of technology and cybersecurity, no single or static approach is sufficient,” NHTSA Administrator Mark Rosekind said. “Everyone involved must keep moving, adapting and improving to stay ahead of the bad guys.”

In addition to product development, the guidance pointed out best practices for researching, investigating, testing and validating cybersecurity measures. NHTSA recommended the industry self-audit and consider vulnerabilities and exploits that may impact their entire supply-chain of operations.

The agency also mentioned employee training to educate the entire automotive workforce on new cybersecurity practices and to share lessons learned with others.

Officials recapped the best practices guidance released on Monday is based on public feedback gathered by NHTSA, as well as the National Institute of Standards and Technology's (NIST) Framework for Improving Critical Infrastructure Cybersecurity. The proposed guidance follows actions by other entities on motor vehicle cybersecurity, including SAE J3061 Recommended Best Practice: Cybersecurity Guidebook for Cyber-Physical Vehicle Systems and the executive summary to the Automotive Cybersecurity Best Practices issued by the Auto-ISAC in, collaboration with the motor vehicle trade associations, in July 2016.

NHTSA’s guidance also suggests that organizations should consider and adopt all applicable industry best practices.

NHTSA is soliciting public comments on the proposed guidance for 30 days. People may submit feedback by visiting regulations.gov and searching for docket NHTSA-2016-0104.

  • Read more about NHTSA releases guidance to boost vehicle cybersecurity

CFPB charges Navy Federal CU with 4 debt collection infractions

Wednesday, Oct. 12, 2016, 02:54 PM
By Auto Remarketing Staff
WASHINGTON, D.C. - 

The latest enforcement action handed out by the Consumer Financial Protection Bureau was again focused on debt collection. This time, the action involved Navy Federal Credit Union.

The bureau specified four activities deemed to be improper debt collection actions that triggered a $28.5 million penalty. The CFPB charged Navy Federal Credit Union with these infractions:

1. Falsely threatened legal action and wage garnishment

Bureau officials said the credit union sent letters to members threatening to take legal action unless they made a payment. But in reality, the CFPB said the institution seldom took any such actions.

The CFPB found that the credit union’s message to consumers of “pay or be sued” was inaccurate about 97 percent of the time, even among consumers who did not make a payment in response to the letters. The bureau asserted the credit union’s representatives also called members with similar verbal threats of legal action. And the credit union threatened to garnish wages when it had no intention or authority to do so.

2. Falsely threatened to contact commanding officers to pressure servicemembers to repay

The regulator indicated the credit union sent letters to dozens of servicemembers threatening that the credit union would contact their commanding officers if they did not promptly make a payment. The CFPB added that the credit union’s representatives also communicated these threats by telephone.

For members of the military, officials explained consumer credit problems can result in disciplinary proceedings or lead to revocation of a security clearance. They added the credit union was not authorized and did not intend to contact the servicemembers’ chains of command about the debts it was attempting to collect.

3. Misrepresented credit consequences of falling behind on a loan

The CFPB indicated the credit union sent about 68,000 letters to members misrepresenting the credit consequences of falling behind on a Navy Federal Credit Union loan. Many of the letters said that consumers would find it “difficult, if not impossible” to obtain additional credit because they were behind on their loan. But the credit union had no basis for that claim, as it did not review consumer credit files before sending the letters.

The regulator went on to mention the credit union also misrepresented its influence on a consumer’s credit rating, implying that it could raise or lower the rating or affect a consumer’s access to credit. As a furnisher, the credit union could supply information to the credit reporting companies but it could not determine a consumer’s credit score.

4. Illegally froze members’ access to their accounts

Bureau officials also mentioned the credit union froze electronic account access and disabled electronic services for about 700,000 accounts after consumers became delinquent on a Navy Federal Credit Union credit product. This meant delinquency on a loan could shut down a consumer’s debit card, ATM, and online access to the consumer’s checking account.

The only account actions consumers could take online would be to make payments on delinquent or overdrawn accounts, according to the CFPB.

According to the CFPB’s news release, Navy Federal Credit Union is correcting its debt collection practices and will pay roughly $23 million in redress to victims along with a civil money penalty of $5.5 million.

“Navy Federal Credit Union misled its members about its debt collection practices and froze consumers out from their own accounts,” CFPB director Richard Cordray said. “Financial institutions have a right to collect money that is due to them, but they must comply with federal laws as they do so.”

  • Read more about CFPB charges Navy Federal CU with 4 debt collection infractions

CARS hosting free webinar about potential of replevins

Wednesday, Oct. 05, 2016, 02:27 PM
By Auto Remarketing Staff
RALEIGH, N.C. - 

Consolidated Asset Recovery Systems (CARS) — again the sponsor of this year’s Re3 Executive of the Year Award to be handed out at Used Car Week — is hosting a free one-hour webinar to dive deeper into the topic of legal options when repossession fails.

In conjunction with Pamela Dotson, corporate counsel for LCS Financial Services Corp. and managing attorney of Stawiarski & Associates, CARS will examine the possibilities of leveraging a replevin and its potential benefits.

The free session, titled “When Repos Don’t Work…What’s Next?”, is set for 1 p.m. ET on Oct. 19.

Dotson plans to explain the differences between a replevin and repossession and when each tactic should be utilized. She also intends to mention the costs associated with these actions.

Dotson is licensed to practice in Colorado and in the U.S. District and U.S. Bankruptcy Courts for the District of Colorado. She spent seven years litigating credit card, mortgage, student loan, auto deficiency, auto replevin and insurance subrogation cases prior to joining LCS Financial in 2014. 

Registration for this webinar can be completed here.

  • Read more about CARS hosting free webinar about potential of replevins

Evaluating VW’s $1.2 billion offer to heal dealer relationships

Monday, Oct. 03, 2016, 04:50 PM
By Nick Zulovich
Staff Writer
CARY, N.C. - 

Late last week, Volkswagen Group of America finalized an agreement to resolve the claims of VW-branded franchised dealers in the United States relating to vehicles involved in “Dieselgate” and other matters asserted concerning the value of their franchise.

Under the proposed agreement, Volkswagen has agreed to make a maximum total of $1.208 billion in cash payments to eligible dealers and to provide additional benefits to resolve alleged past, current and future claims of losses in franchise value. The parties announced an agreement in principle on Aug. 25.

Auto Remarketing asked two top industry observers to assess the gravity of this move on Monday when Autotrader and Kelley Blue Book hosted its monthly conference call with the media.

“This cash settlement is certainly going to go a long way to keep the franchised dealer body feeling like they’re being heard and taken care of by Volkswagen after all of this emissions fallout,” Kelley Blue Book senior analyst Alec Gutierrez.

“First and foremost what Volkswagen has done right — or as best they can anyways — to keep the franchised dealers happy is to take care of the consumers with the initial package they offered, which included extended warranties and cash payments, let alone the buyout settlement that’s still coming along,” Gutierrez continued.

“I think Volkswagen’s done all they can, given the gravity of the situation. Maintaining a strong relationship with that dealer body is priority No. 1 for sure,” he went on to say.

The proposed agreement was filed this past Friday by the dealers’ counsel with the United States District Court for the Northern District of California. The automaker pointed out the move is subject to the approval of Judge Charles Breyer, who presides over the federal Multi-District Litigation (MDL) proceedings related to the diesel matter.

By its terms, OEM officials emphasized the agreement is not intended to apply to or affect Volkswagen’s obligations under the laws or regulations of any jurisdiction outside the United States, where the legal and factual circumstances relating to TDI vehicles differ.

According to VW’s announcement, the automaker has 652 franchised dealerships in its network.

Perhaps part of the dealers’ concern about their franchise value is softening consumer interest in VW vehicles since the controversy surfaced. The latest KBB.com site data shows VW traffic is down nearly 3.5 percent from last quarter and down nearly 16 percent year-over-year.

The settlement offer might be seen as VW recognizing what dealers are enduring.

“I would just say that there’s no relationship more important to Volkswagen right now than its one with dealers because they are on the front line for taking care of the current buyer base as well as any kind of future base. They need to really work that relationship and support the dealers. There’s just nothing more important for them right now,” Autotrader senior analyst Michelle Krebs said.

“They’re on the verge of unveiling some very important new products like the midsize SUV,” Krebs continued. “If they want to grow back here, they’ve got to do it through their dealers.”

  • Read more about Evaluating VW’s $1.2 billion offer to heal dealer relationships

FTC seeks comments about 2 rules associated with collections

Wednesday, Sep. 21, 2016, 09:35 AM
By Auto Remarketing Staff
WASHINGTON, D.C. - 

The Federal Trade Commission is seeking public comment associated with a pair of statutes often connected with collections, repossessions and recoveries.

First, the FTC wants the public to share thoughts on its Disposal Rule, a rule that implements part of the Fair and Accurate Credit Transactions Act of 2003 (FACTA).

Officials recapped that the Disposal Rule, formally known as the Disposal of Consumer Report Information and Records Rule, requires certain persons who have consumer report information for a business purpose to properly dispose of it by taking reasonable measures to protect it from unauthorized access.

“As part of its systematic review of all current FTC rules and guides, the FTC is seeking public comment on the economic impact and benefits of the rule, possible conflicts with state, local or other federal laws, and its effect on any technological or other industry changes,” the regulator said.

“The agency also seeks comment on whether the definition of 'consumer information' should be expanded to include aggregate information or information that can be reasonably linked to an individual,” the FTC added.

Comments on its Disposal Rule must be received by Nov. 21, according to the agency.

The FTC is also seeking public comment on its rules for protecting consumer information under the Gramm-Leach-Bliley Act. Specifically, the FTC said that it seeks comment on a number of questions about the Safeguards Rule, which requires financial institutions to develop, deploy and maintain a thorough information security program for handling consumer information.

The regulator is asking for comments about the Safeguards Rule to be submitted by Nov. 7.

For more details, go to ftc.gov.

  • Read more about FTC seeks comments about 2 rules associated with collections

How ‘cheating’ inside & outside of auto industry is bringing swift actions

Friday, Sep. 09, 2016, 04:24 PM
By Auto Remarketing Staff
CARY, N.C. - 

Autotrader senior analyst Michelle Krebs scanned several recent headlines, which included a Volkswagen engineer pleading guilty for his role in a conspiracy to cheat U.S. emissions tests as well as Wells Fargo agreeing to a record fine from the Consumer Financial Protection Bureau. Krebs then arrived at a succinct conclusion.

“The feds are cracking down hard on companies for cheating of all kinds as of late,” she said in a message to media outlets, including Auto Remarketing. 

According to a press release from the Department of Justice, Volkswagen engineer James Robert Liang pleaded guilty on Friday for his role in a nearly 10-year conspiracy to defraud U.S. regulators and the automaker’s U.S. customers by implementing software specifically designed to cheat U.S. emissions tests in hundreds of thousands of Volkswagen “clean diesel” vehicles.

Justice Department officials said Liang’s plea agreement provides that he will cooperate with the government in its ongoing investigation.

Liang, of Newbury Park, Calif., pleaded guilty today to one count of conspiracy to defraud the United States, to commit wire fraud and to violate the Clean Air Act. He was indicted under seal on June 1 by a federal grand jury, and the indictment was unsealed on Friday. 

According to the plea agreement, from 1983 until May 2008, Liang was an employee of VW, working in its diesel development department in Wolfsburg, Germany.  Liang admitted that beginning in about 2006, he and his co-conspirators started to design a new “EA 189” diesel engine for sale in the United States  According to Liang’s admissions, when he and his co-conspirators realized that they could not design a diesel engine that would meet the stricter U.S. emissions standards, they designed and implemented software to recognize whether a vehicle was undergoing standard U.S. emissions testing on a dynamometer or being driven on the road under normal driving conditions (the defeat device), in order to cheat the emissions tests. 

Officials said Liang admitted that he used the defeat device while working on the EA 189 and assisted in making the defeat device work. In May 2008, Liang moved to the United States to assist in the launch of VW’s new “clean diesel” vehicles in the U.S. market, according to the plea agreement. While working at VW’s testing facility in Oxnard, Calif., he has held the title of leader of diesel competence.

According to the plea agreement, employees of VW and its U.S. subsidiary met with the EPA and the California Air Resources Board (CARB) to seek the certifications required to sell each model year of its vehicles to U.S. customers. Liang admitted that during some of these meetings, which he personally attended, his co-conspirators misrepresented that VW diesel vehicles complied with U.S. emissions standards and hid the existence of the defeat device from U.S. regulators.

Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book’s KBB.com, asked a question after seeing the Justice Department’s announcement.

“The guilty plea by Volkswagen engineer James Liang begs the question: will there be other indictments in the case? By his own testimony, Liang didn’t work alone, so there is a strong possibility of other indictments and possibly a conspiracy indictment that could affect a much broader swath of VW engineers and management,” Nerad said.

“The question remains how high on the executive chain the investigation will discover wrongdoing,” he continued. “At the same time, this scandal has evolved into criminal proceedings, the car-buying public has demonstrated few changes in behavior toward the Volkswagen brand in the United States. 

“Given the short memory of the buying public, the scandal is unlikely to have far-reaching effects on VW sales, but for the moment it is a major distraction,” Nerad continued.

Meanwhile a couple of days earlier, the CFPB handed out a $100 million penalty to Wells Fargo for activities not related to auto financing — rather, what the regulator deemed to be “widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.”

Spurred by sales targets and compensation incentives, the bureau said employees boosted sales figures by “covertly” opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges.

Krebs summarized the events this way:

“(The) plea by a Volkswagen engineer involved with the diesel emissions cheating scandal — unlikely the last plea we’ll see from this debacle — comes on the heels of Wells Fargo firing 5,300 employees for setting up phony bank accounts and the revelation that Fiat Chrysler executive Reid Bigland is being investigated for possibly cheating on sales reports,” she said.

“These events should serve as a warning to all companies to make sure they are operating on the up-and-up, because the feds are showing no mercy,” Krebs went on to say.

  • Read more about How ‘cheating’ inside & outside of auto industry is bringing swift actions

VW reaches agreement to settle dealer litigation

Thursday, Aug. 25, 2016, 03:08 PM
By Nick Zulovich
Staff Writer
HERNDON, Va. - 

Volkswagen Group of America previously made arrangements for restitution with owners of vehicles involved with “Dieselgate.” On Thursday, the automaker released its plans to rectify the situation with its franchised dealerships.

Volkswagen announced it has reached an agreement in principle to resolve the claims of VW-branded franchise dealers in the United States relating to TDI vehicles affected by the diesel matter and other matters asserted concerning the value of the franchise.

The company said it has agreed to make cash payments and provide additional benefits to the dealers to resolve alleged past, current and future claims of losses in franchise value. Volkswagen and the dealers’ counsel will now work to finalize details of the proposed settlement, including how to apportion payments to dealers in the appropriate manner.

OEM officials indicated details of the agreement in principle are still under discussion and are expected to be finalized at the end of September. They pointed out any proposed agreement will become effective only after approval by the court, and the parties have agreed to keep further terms confidential as they work to finalize the agreement.

Under the agreement, Volkswagen added that it will consent to the certification — for settlement purposes only — of a class of VW-branded franchise dealers in the United States as of an agreed-upon date.

“We believe this agreement in principle with Volkswagen dealers is a very important step in our commitment to making things right for all our stakeholders in the United States,” said Hinrich Woebcken, chief executive officer of the North American Region for Volkswagen.

“Our dealers are our partners and we value their ongoing loyalty and passion for the Volkswagen brand,” Woebcken continued. “This agreement, when finalized, will strengthen the foundation for our future together and further emphasize our commitment both to our partners and the U.S. market.”

Early indications are that VW dealers welcomed the OEM’s move.

“Our clients recognized the best solution would be one that not only allows them to recoup lost franchise value and continue to employ thousands of American workers, but one that also charts a strong course for the recovery of the Volkswagen brand in the United States,” said Steve Berman, managing partner of the dealers’ counsel Hagens Berman.

“Now that there is a path forward for dealers, they can continue to work proactively to take great care of their customers, who are also VW customers.” Berman added.

Analyst reaction to VW offer

Kelley Blue Book senior analyst Rebecca Lindland sympathized with VW dealers that have been caught in the conflict between the automaker and federal regulators.

“The dealers are VW's front line in this matter, so getting them compensated is critical,” Lindland said. “Not only do they represent the company to the owners, they're also impacted financially since they're hamstrung on what products they can sell.

“So this is a very important settlement, and hopefully it will be enough to keep dealers and their employees afloat until this entire matter is resolved,” she continued.

Kelley Blue Book analyst Akshay Anand elaborated about what could be another positive step to smoothing over the entire situation.

“Reaching an agreement with dealers is yet another step in fixing the ‘Dieselgate’ mess,” Anand said.

“As time passes, news and buzz about the scandal seems to be waning, which is great for VW,” Anand went on to say. “There is still much more to be done, but over time, it seems Volkswagen may be able to move on and get back to focusing on what truly matters — building cars.”

Matt DeLorenzo, managing editor of Kelley Blue Book’s KBB.com, chimed in about what the agreement means for consumers.

“This really has no direct impact on owners of VW diesels, since it’s a compensation plan for the dealers who have been unable to sell 2015 models on the ground,” DeLorenzo said. “Unless or until there is a fix, the cars that have not been certified by government can’t be sold.”

FTC’s warning about false claims to vehicle owners

And speaking of those potential customers, the Federal Trade Commission and the National Automobile Dealers Association are collaborating on a webinar for dealers “not to make false claims” about the involved units.

The FTC recently asked NADA to provide its members with material that cautions sellers of certain VW and Audi diesel vehicles (including dealers of other brands) not to make false claims regarding the recent proposed consent orders concerning those vehicles that the Volkswagen has entered into with the FTC, other governmental agencies, and owners and lessees of the vehicles. 

The FTC spelled out several concerns through a post on its business blog. The regulator indicated other companies have been reaching out to owners with alternate offers, which have included:

—Falsely implying that the offer is part of the pending $10 billion settlement

—Falsely telling owners they have to spend compensation under the settlement on a new VW or Audi

—Using “Act now!” tactics to lock owners into a separate deal before owners have the full picture of what they stand to gain as part of the $10 billion settlement.

“It’s unwise for anyone — including independently owned VW dealers — to make separate offers,” the FTC said. “The ultimate choice is the owner’s, of course. Our advice to them is to investigate their options before making a decision.”

Details of the proposed settlements are available at VWCourtSettlement.com. 

In order to enhance dealers’ understanding of both the VW buyback program that is part of the proposed settlement and the one set forth by the FTC, NADA has arranged for the FTC to present information on these topics in an NADA University Online webinar that will take place on Sept. 8 beginning at 1 p.m. EDT.

Dealers and their representatives can go here to register.

  • Read more about VW reaches agreement to settle dealer litigation
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