June 2012

1AB 1215 Takes Effect July 1st – Compliance Checklist

Assembly Bill 1215 (Blumenfield) of 2011 becomes operative July 1st. If you sent your staff to last year’s Legal and Regulatory Update Seminars, and this year’s AB 1215 Compliance/F&I Seminar, they should be up to speed on the new requirements. To ensure that your dealership is ready to go July 1st, you may want to have your team complete the following checklist.

July 1st 2012 AB 1215 Compliance Checklist

Electronic Registration Mandate
AB 1215 mandates all vehicles sold or leased by a new car dealer on or after July 1st must be registered electronically through the BPA Program, if the DMV allows the transaction to be processed electronically.

  • Apply and Enroll in the DMV’s Business Partner Automation (BPA) Program. Dealers who have not yet done so must contact a first line service provider vendor to apply for enrollment in the BPA program. Dealers can contact CVR to arrange for enrollment in the BPA Program by clicking here. Also, a dealer who fails to get the BPA application to DMV (via a service provider) for a July 1 approval can ultimately use a licensed and BPA-approved registration service provider in the interim.
  • Take Full Advantage of Your Service Provider Training. With electronic registration becoming mandatory, dealers must learn how to use their service provider’s system, and become aware of which transactions can be processed electronically.
  • Emphasize the Need for Speedy (and Accurate) Registration Processing. AB 1215 reduces the validity of driving using the temporary operating copy of a Report of Sale without plates from six months to 90 days. With this earlier “expiration date,” dealers should be sure to process registration transactions without delay.

Document Processing Charge
AB 1215 eliminates the $45 document preparation fee cap for leases and the $55 cap for sales and replaces it with an $80 “Document Processing Charge” for BPA-Enrolled Dealers and a $65 charge for non-BPA-Enrolled Dealers.

  • $80 for BPA-Enrolled Dealers. If you have been issued a BPA Permit by DMV, you may begin collecting an $80 Document Processing Charge beginning July 1st—even if you have not yet had a BPA system installed at your dealership.
  • $65 for Non-BPA-Enrolled Dealers. If you have not been issued a BPA Permit by DMV by July 1st, you may only collect a $65 Document Processing Charge until your permit has been issued.

Electronic Vehicle Registration or Transfer Charge
AB 1215 eliminates the Optional DMV Electronic Filing Fee and introduces an “Electronic Vehicle Registration or Transfer Charge.” This allows dealers to pass through actual amounts charged by their service provider for titling and registration services, the $4 DMV fee, and license plate processing and postage. Importantly, no other charges may be passed through.

  • Eliminate Programmed $29 Optional DMV Electronic Filing Fee. Any dealers currently enrolled in the BPA Program likely have a $29 Optional DMV Electronic Filing Fee programmed to print on Line 1.J of the contract. Unless your service provider plans to charge your dealership $29 (which may cause its own compliance concerns), be sure to eliminate this automatic programming.
  • Know Your Service Provider’s Per-Transaction Charge. All service providers should have established a standard per-transaction charge for their services. Know this amount, and be sure that this amount only includes charges for the services and fees discussed above. CNCDA recommends dealers go with CVR’s ELITE Program (plates managed by service provider), as the small extra charge (which you can pass through to your customer) is well worth the hassle of managing plates on-site. While dealers may pass through the actual amounts charged by their service provider for the services described above, in-house plate handling and postage is not recoverable.
  • Program Your DMS to Print the Service Provider Charge. Assuming your service provider’s per-transaction charge only includes charges for permissible services, this amount should be programmed to print on Line 1.J of the new 7/12 version of the Law Printing Form 553-CA (see “New Forms” discussion), under “Electronic Vehicle Registration or Transfer Charge (not a governmental fee). The name of your service provider should be printed on the “to whom paid line” (e.g., “CVR”).
  • Avoid Any Markup: While the former Optional DMV Electronic Filing Fee allowed dealers some limited profit for providing electronic registration services, the new law only allows for the charges discussed above to be passed through. Dealers should ensure that they do not collect more than they are charged by their service provider for the permissible services and fees.
  • Avoid Inflated Service Provider Fees. Competition among EVR service providers to sign-up new dealer customers has reached a pitched fever. Dealers should be leery of any service provider that offers to provide any type of kickback to get your business (e.g., an offer to pay quarterly “rebates” or an offer to bundle “free” KSR and/or NMVTIS reports with a subscription to use the service provider’s EVR product at an inflated rate). Non-EVR related expenses are supposed to be absorbed by dealers as part of the increased Document Processing Charge—packing such extras into the Electronic Filing Fee is likely to buy you a lawsuit!
  • Avoid Collecting the Charge if Registration will NOT be processed electronically. AB 1215 only allows the Electronic Vehicle Registration or Transfer Charge to be collected if the registration will be processed electronically. Dealers that will not be processing the registration electronically should not collect the charge. If your dealership mistakenly collects the charge, be sure to refund the customer as soon as possible.

New Forms

  • New 7/12 Versions of LAW 553-CA and 553-CA-ARB Forms. With the former “document preparation fee” becoming the “document processing charge” and the former “optional DMV electronic filing fee” becoming the “Electronic Vehicle Registration or Transfer Charge,” the standard conditional sale contract required change. These changes, among others, can be found on the 7/12 versions of LAW forms 553-CA and 553-ARB. CNCDA will provide a Dealer Alert providing explanation and instructions for completing the changed portions of these forms.
  • New Pre-Contract Disclosure Form. Since the conditional sale contract must be changed to reflect AB 1215’s terminology changes, existing pre-contract disclosure forms (also known as Optional Goods and Services Disclosure forms) must also be replaced. Dealers should use form LAWCA-PCD from the Reynolds and Reynolds F&I Forms Library to ensure a seamless integration with the revised Form 553-CA.
  • New Lease Agreements. Each finance company uses its own lease agreement. With terminology changing July 1st, existing lease agreements should be revised to reflect these changes. Be sure to consult with your finance companies about their new lease forms.
    • NOTE: If you work with a finance company that has not updated their lease agreements for July 1st, please contact CNCDA at (916) 441-2599 to let us know, and also do the following:
    • Avoid entering any amounts on pre-printed lines for the Document Preparation Fee or Optional DMV Electronic Filing Fee; and
    • Consult with your finance company on acceptable language to be used on blank lines in the “Itemization of Amounts to be Paid at Lease Signing” and “Itemization of Gross Capitalized Cost” sections (e.g., “Document Processing Charge (Not a Governmental Fee)” and “Electronic Vehicle Registration or Transfer Charge (Not a Governmental Fee)”)

Report of Sale Revisions
With the validity of temporary operating copies of DMV Report of Sale forms reduced from six months to 90 days, the DMV’s existing Report of Sales reflecting the old state of affairs will no longer be valid. Only Report of Sale forms with a revision date of 11/2011 or later may be used beginning July 1st (although DMV allows dealers to use the new forms today).

The DMV has instructed dealers to do all of the following:

  • Write a letter on company letterhead recording all serial numbers for ROS with revision dates earlier than 11/2011;
  • Destroy all old ROS forms (by shredding or otherwise making unusable);
  • On the letter listing the old ROS serial numbers, have two dealership employees sign, date, and confirm in writing that the listed ROS forms have been destroyed; and
  • Retain the signed letter on-site, and have it readily available for DMV inspection (do not send the letter to the DMV).

If your dealership has already exhausted its supply of new and used Report of Sale forms, no additional action is necessary. If this is the case, and a DMV inspector asks for your letter describing the newly-destroyed Report of Sale serial numbers, simply inform them that your supply was exhausted prior to July 1st.

NMVTIS Vehicle Title History Report
Beginning July 1st, AB 1215 requires dealers to obtain a NMVTIS Vehicle Title History Report from an approved NMVTIS Vendor prior to displaying or offering a used vehicle for sale. If the report shows that the vehicle has been title-branded, or has been declared a junk or salvage vehicle, the dealer must post a 4” x 5.5” red warning label next to the Used Car Buyer’s Guide, and provide the purchaser of the vehicle with a copy of the report upon request prior to sale.

  • Sign Up with a NMVTIS Vendor. Dealers should immediately begin shopping for a NMVTIS history report vendor that offers a product that best matches their business model and needs. Most vendors offer traditional webpage-based platforms. CVR offers NMVTIS reports through its DMVLink KSR Printout service—allowing dealers to check a vehicle’s NMVTIS history when checking its registration history through the DMV’s KSR Inquiry program. Dealers interested in CVR’s program can contact CVR here to learn more—just mention your interest in NMVTIS.
  • Obtain NMVTIS Reports for Existing Used Vehicle Inventory. Approximately two weeks prior to July 1st, dealers should obtain NMVTIS reports for all used vehicles in inventory to identify any vehicles on their lots with negative title history. Most NMVTIS providers allow dealers to upload a batch of VINs in a single transaction, which will facilitate this process.
  • Decide Whether to Wholesale or Retail Affected Vehicles. Upon identifying used vehicles in your inventory that have been title-branded or declared junk or salvage vehicles, dealers should determine whether to wholesale the vehicles or to offer the vehicles for retail sale.
  • Post Required Notice on Affected Vehicles. By July 1st, dealers must post the required notice on any vehicles displayed or offered for retail sale.
  • Keep Reports in Vehicle Records. Since your NMVTIS provider may not provide permanent online access to NMVTIS reports, dealers should keep a version of the report in a manner that they may control. For all used vehicles in inventory (regardless of whether the notice-posting requirement is triggered), dealers should keep a printed version of the NMVTIS report with the vehicle’s paper inventory/service records (and in the subsequent deal jacket), and an electronic copy in any electronic inventory records (if applicable).
  • Be Prepared to Provide Report Upon Customer Request. While the law only mandates that dealers provide copies of the NMVTIS report to the eventual purchaser of an affected vehicle (prior to contract execution), CNCDA recommends that the NMVTIS report be made available to any prospective purchaser of any vehicle (whether or not the vehicle is subject to the posting requirement).

Feel free to call CNCDA with any questions at (916) 441-2599.

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