Pub. 15 2016-2017 Issue 2

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 17 new jersey auto retailer W W W . N J C A R . O R G COMPLIANCE DEVELOPMENTS  continued on page 18 costs associated with carrying all of this idled inventory? Under the federal Motor Vehicle Safety Act and New Jersey law, manufacturers are required to reimburse dealers for all recall expenses. In the case of new vehicles, the federal lawmakes clear provision for dealer costs associated with a stop-sale order. However, neither federal lawnorNewJersey lawmakes specific provi- sion for these costs in the case of used vehicles. Nevertheless, despite the lack of a specific statutory remedy, dealerships should be protected by provisions in both State and federal lawrequiringmanufacturers to reimburse dealers for costs associated with a recall. Under the New Jersey Franchise Practices Act (FPA), themanufacturer is required to reimburse dealers for the cost of performing recall repairs. The FPA also says a dealer is entitled to reimbursement of “all reasonable costs incurredby the franchisee incomplyingwith the requirements imposed on the franchisee by the franchisor relating to a product recall.” Costs incurred by the dealership include consequential damages resulting from a recall and stop-sale, such as floor-plan interest, diminution in the value of vehicles, and lost business opportunities. Prohibiting the sale of used vehicles without providing for reimbursement for all costs, would also violate the Act’s general prohibition against any unreasonable actions required, or terms, or conditions imposed, by a manufacturer. Another major issue when it comes to recalled vehicles is potential liability under the Consumer Fraud Act (CFA). The CFA prohibits any misrepresentation in the sale of a vehicle, and requires a dealer to inform a buyer of any significant facts that a reasonable buyer would want to know. It seems pretty clear that the presence of an open recall wouldbe considereda“significant fact” that adealershipmust disclose. For this reason, NJ CAR strongly recommends thewritten disclosure of any open recalls affecting used vehicles. As a “best practice,” NJ CAR suggests that every dealer selling any used vehicle check the federal government website (www.safercar.gov) to determinewhether the vehicle is affected by a recall. Print the search results and provide them to the buyer. Dealerships are also advised to have the buyer sign a copy to be retained by the dealership, acknowledging that they have been advised of the recall status of the vehicle. None of this is to suggest that dealers can or should retail unsafemotor vehicles, or that dealers have no legal obligation to consumers in con- nectionwith the sale of a used vehicle subject to recall. For any vehicle subject to recall, a dealer should consider the nature of the open recall (safety versus non-safety) and determine for themselves whether the risk is so substantial that the vehicle should not be sold at all. Advertising Perils and Pitfalls The New Jersey Division of Consumer Affairs’ (DCA) advertising regulations date back to the late 1970s, before there was an Internet, social media, or text messaging. As a result, the old regulations make a poor fit with the newmedia, and this creates areaswhere dealerships can easily run afoul of the rules. One area of confusion surrounds “Internet pricing” and the posting of prices and advertisements. The advertising regulations require that