Pub. 15 2016-2017 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 2 , 2 0 1 6 16 new jersey auto retailer A utomotiveRetailerscopewithadizzyingarray of State and federal laws and regulations. There are State consumer protection laws, State and federal anti-discrimination rules, Fair Credit Reporting Act requirements, the Privacy, Safeguards and Red Flag Rules, the Used Car rules, FTC and State Advertising regulations — the list goes on and on. One of the most critical areas for compliance is the sales process itself. All of the regulations governing a dealership come into play during this process. This article will provide a selected overview of some compliance areas that frequently cause problems. Keep in mind; a full explanation of all compliance requirements would literally fill a book (or two, or three). The Consumer Fraud Act The first requirement for sales compliance is honesty. Lying or in- tentionally misleading someone, also known as fraud, has always been actionable. It’s not enough to refrain from telling lies, the law also imposes a duty to disclose information that a “reasonable buyer” would want to know. This obligation is imposed by New Jersey’s Consumer Fraud Act (CFA). The CFA penalizes a number of acts and practices that fall far short of actual dishonesty or fraud. TheNew Jersey SupremeCourt has explained that theCFA“is no longer aimed solely at shifty, fast-talking and deceptive merchants,” and there can be a violation “even when a merchant acts in good faith.” (Cox v. Sears Roebuck, 138 N.J. 2, 16 (1994).) The majority of CFA claims against dealerships involve a failure to disclose, so it’s important to know the disclosure threshold. There are a lot of misconceptions about the standard. Many believe there is a dollar amount that triggers disclosure, others believe it is “frame damage.” The truth is that, under New Jersey law, the disclosure trig- ger is basically a hair-trigger. You are required to disclose anything “significant,”which is defined as anything a reasonable personwould want to know in considering whether to buy at that particular price. This is a very low standard. If you have to ask the question, it pretty much means you should disclose. Beyond cases of clear failure to disclose an important fact, the CFA also imposes a vague obligation of “fair dealing.” TheNewJersey Su- preme Court has described the required standard of conduct as “good faith, honesty in fact and observance of fair dealing.” (Cox, supra, 138 N.J. at 18.) This means, for example, that if you know that the buyer is Compliance Pitfalls During the Sales Process BY PATRICK COX, ESQ.