Description of objective of the amendment:
Require a dealer either:
(a) To cancel a purchase contract within 5 business days of its execution if the credit terms disclosed in the contract cannot be obtained for the customer or
(b) Be bound to delivery of the vehicle on those terms.
Description of existing policies relevant to the amendment:
This proposal relates to situations in which a purchaser is obligated to finance the vehicle purchase on the disclosed credit terms. The present rule language is unclear whether the dealer is obligated to make the disclosed terms available if the consumer fails to qualify for credit with the finance company to which the dealer intends to assign the loan. In some cases, dealers cannot commit to credit terms at the time the purchase contract is signed because the purchaser's eligibility is unknown.
Analysis of policy alternatives:
The Department has evaluated a request from the Wisconsin Automobile and Truck Dealers Association, and is proposing amending the rule to allow dealers to condition the availability of credit terms on the consumer being approved for credit on those terms. The proposal requires the dealer to cancel the contract in writing to the consumer within 5 days of signing the contract or the dealer will be obligated to provide credit on the disclosed terms. The contract must contain a provision requiring the dealer to give a consumer written notice of the cancellation within 5 days or the dealer cannot cancel the contract. The dealer also must make a good faith effort to obtain approval of the consumer's credit. The Department would define in the rule a “good faith effort to obtain financing.”
The dealer association proposed giving dealers 10 days to notify consumers when they fail to qualify for credit. However, the Department believes 5 days allows time for the dealer's administrative processes while not unduly delaying the consumer. The Department also believes the amendment should make clear that the dealer may not cancel the deal after delivering the vehicle if the consumer fails to qualify for credit.
PROPOSED AMENDMENT 16
SALES CONTRACTS SUBJECT TO FINANCING
Description of objective of the amendment:
WATDA has asked the Department to evaluate the possibility of reducing the time period a dealer must wait for a consumer to accept or reject proposed credit terms when the consumer has not yet signed a binding purchase contract. The Department has evaluated WATDA's request and proposes that dealers be allowed to cancel a purchase contract, in which credit terms were not originally offered and disclosed, if the purchaser fails to accept credit terms offered to them in writing after the contract is signed but before vehicle delivery. If the vehicle was not yet ready for delivery, consumers would have 10 business days to respond to a written offer and disclosure of credit terms, and could reject the credit terms and break the deal without penalty. If the specified delivery date had arrived and the vehicle was available for delivery, the consumer would have 5 business days after receiving written disclosure of credit terms to enter into a consumer credit agreement for purchase of the vehicle on the terms disclosed. If the consumer rejected the credit terms or did not respond in the allowed time, the dealer could cancel the contract with no penalty to either party.
Description of existing policies relevant to the amendment:
Currently, the contract is contingent on the purchaser finding financing he/she finds acceptable, no binding contract is created. At the time of delivery, the consumer reviews the credit terms the dealer can provide and may accept or reject the whole transaction without penalty. The current rule is unclear about whether a dealer can disclose available credit terms to the consumer after the contract is signed, but before delivery, in order to secure the consumer's decision to accept or reject a binding contract.
Analysis of policy alternatives:
The proposed alternative would more accurately reflect modern loan review processes that allow credit terms to be known soon after the contract is signed and often well before the vehicle is available for delivery. It would reduce the amount of time a dealer must hold a vehicle for a consumer who has not yet committed to a binding contract for the sale. One alternative would be to require that the proposed addendum, which is binding on the consumer if signed, include the warning in s. Trans 139.05 (2) (i) regarding the penalty for not accepting the vehicle. Another alternative would be to combine box A and box B of the Finance Transaction section of the purchase contract into one choice in which the dealer creates a binding contract by either disclosing known credit terms or disclosing an estimate that will not exceed an agreed upon amount. This alternative would benefit dealers by creating a binding contract sooner; however, it would harm consumers by eliminating an option they now have to make a tentative deal they may later reject without penalty if exact financing terms are not acceptable.
PROPOSED AMENDMENT 17
SALES CONTRACTS SUBJECT TO FINANCING
Description of objective of the amendment:
To clarify that a dealer may cancel a purchase contract by a date specified in the contract if the contract is subject to the consumer obtaining acceptable financing of the consumer's choice, and the consumer does not notify the dealer in writing that financing has been secured.
Description of existing policies relevant to the amendment:
This concept is already reflected in the standard purchase contract language, though not prescribed by the Department. The proposed change would codify the policy in the rule.
Analysis of policy alternatives:
The proposed change would codify current policy, and would allow dealers and consumers to limit the amount of time a vehicle would be tied up while a consumer tries to get a loan. The proposal limits dealership costs for interest and storage of vehicles that cannot be sold while awaiting a prospective purchaser's response about securing financing. One alternative would be to make no rule change. Making no rule change would allow vendors of the motor vehicle purchase contract to modify or eliminate the current policy by changing or removing the current contract provision from the form at will.
PROPOSED AMENDMENT 18
AMENDMENT DUE TO TAX CHANGES
Description of objective of the amendment:
To allow dealers to change the purchase contract if federal, state or local taxes change.
Description of existing policies relevant to the amendment:
Current rule language allows dealers to change the contract price of a vehicle if the state or federal tax rate changes, but not if a local tax rate changes or if the tax amount changes for another reason, such as the creation of a new tax.
Analysis of policy alternatives:
The change would codify current Department policy of allowing dealers to adjust the contract price in response to tax changes that result from a local tax rate change or the creation of a new tax, such as the Brewer Stadium tax, and new county sales taxes.
PROPOSED AMENDMENT 19
DISCLOSURE OF VEHICLE DAMAGE
Description of objective of the amendment:
Exclude audio equipment and molding damage when calculating whether a new vehicle has been damaged to the extent of more than 6% of its value when that equipment is replaced with identical manufacturer's original equipment.
Description of existing policies relevant to the amendment:
Current law requires dealers to disclose to customers that a new vehicle has been damaged and required repairs amounting to 6% or more of the MSRP. Damaged glass, tires and bumpers, when replaced by identical manufacturer's original equipment, are currently excluded from the calculation because these items are particularly vulnerable to damage during transit, dealership testing, or as a result of vandalism.
Current law also requires manufacturers to disclose to dealers any damage to a vehicle exceeding 6% of the MSRP between the time of manufacture and the time of delivery, but excludes from that calculation damage to glass, tires, bumpers, fenders, moldings, audio equipment, instrument panels, hoods and deck lids, when replaced with identical manufacturer's original equipment.
Analysis of policy alternatives:
The Department has evaluated WATDA's request for this change, and proposes that the consumer disclosure requirement of s. Trans 139.05 (6) be made more consistent with the provision in s. 218.01 (2d) (a), Stats., that permits dealers to reject delivery of vehicles that arrive with certain damage. This change would allow dealers in more situations to sell vehicles without disclosing to the consumer minor damage that has been corrected with original manufacturer's equipment--damage which, if disclosed, could potentially affect a vehicle's value. The proposal would continue to require that any damaged items excluded from the 6% calculation be replaced with identical manufacturer's original equipment.
The Department could require disclosure of all repairs made to vehicles, continue the current policy requiring dealers to disclose repairs that exceed 6% of the vehicle's MSRP, adjust the percentage level to some other number, or exempt certain items from the calculation. Disclosing all repairs would provide consumers with the most knowledge about the vehicle they are buying, but might lower profit margins for dealers on vehicles that are stigmatized by having minor damage repaired, even when the vehicles have been returned to their original state through replacement of identical manufacturer's original equipment.
Allowing damage to moldings and audio equipment to be excluded from the calculation would allow dealers to sell more new vehicles free of the stigma of being repaired vehicles.
PROPOSED AMENDMENT 20
USED VEHICLE DISCLOSURES
Description of objective of the amendment:
Clarify that a dealer may complete a purchase contract for a vehicle without inspecting and disclosing it if the vehicle is exempt by rule from inspection and disclosure.
Description of existing policies relevant to the amendment:
Section Trans 139.04 (6) (c) exempts certain vehicles, for example, unrepaired salvage, from inspection and disclosure required under s. Trans 139.04 (6) (a) and (b). However, s. Trans 139.05 (11) does not make clear that a purchase contract can be written for a vehicle that has not been inspected and disclosed when the vehicle is exempt from inspection and disclosure.
Analysis of policy alternatives:
This is a technical, non-substantive change that restates existing policy. No policy change will result.
PROPOSED AMENDMENT 21
CONSISTENT USE OF TERMS THROUGHOUT RULE
Description of objective of the amendment:
To eliminate use of the term “service agreement” in the rule and to use “service contract” throughout instead. (Current rule uses both terms for this kind of contract.)
Description of existing policies relevant to the amendment:
None. This change is simply a language revision that is being made for consistency.
Analysis of policy alternatives:
No policy change will result from this language change.
PROPOSED AMENDMENT 22
REIMPOSE WARRANTY DISCLOSURE REQUIREMENTS ON PURCHASE CONTRACTS
Description of objective of the amendment:
In the Department's last amendments to ch. Trans 139, a number of disclosure requirements with regard to warranty information potentially pertinent to consumers were removed from the required purchase contract, as was the provision that clearly provided dealers are financially responsible for providing warranty coverage to a customer if they misinform the customer about the existence or nature of a warranty and the customer is damaged as a result.
Misinformation regarding warranties has resurfaced as a significant problem since the purchase contract disclosure requirements were loosened in 1996. The Department therefore proposes to reintroduce the consumer protections repealed in the 1996 rulemaking.
Description of existing policies relevant to the amendment:
With or without this amendment, dealers are liable for misrepresenting warranty information to consumers and face potential license suspension or revocation for such actions. Because the abandonment of purchase contract disclosures has led to increased complaints about warranty misrepresentations, it would appear that the Department's 1996 decision to repeal the disclosure requirement was in error.
