Pub. 17 2018-2019 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 I S S U E N O . 3 , 2 0 1 8 12 new jersey auto retailer when the deal paperwork contains no trace of a broker or the broker is in the wind having no license or brick and mortar presence to tie him down, the regulator will focus on the dealer, alone, to make a customer whole. Furthermore, New Jersey Motor Vehicle Commission reg- ulations clearly prohibit any part of a sale or lease process, from negotiation through delivery, to occur off a dealer’s licensed premises. Transactions involving brokers could conceivably violate these regulations. More important, de- pending on the circumstances, doing routine business with an unlicensed entity that a retailer knows is violating the law may place the retailer’s own dealer license at risk. Regarding vehicle financing, banks demand full disclosure of the terms and conditions of a sale agreement before accepting assignment of a loan. Lenders also expect proper execution and authentication of all documentation under- lying the deal. To the extent that underlying documenta- tion is improperly executed and authenticated, or payments to third-parties, such as brokers, or other material infor- mation is not accurately disclosed to a lender, it could be considered fraud on the lender and serve as a basis for a loan to be returned. Finally, franchised retailers who offer financing are subject to myriad federal financial regulations controlling the privacy of customer information. Brokers routinely collect customer information through their websites and forward it to retailers in furtherance of brokered deals. Brokers’ disregard of these regulations could easily result in a pri- vacy breach that harms customers. If so, the breach could conceivably be ascribed to a retailer receiving customer information from the broker depending on the nature of the relationship between the broker and retailer. Is It Worth The Risk? New Jersey’s licensed new car and truck retailers are re- quired to meet strict standards to qualify for and maintain their franchisee status and related ability to sell, lease and finance new motor vehicles. They are required to meet rig- orous financial, facility, and customer satisfaction standards to qualify as authorized sales and service representatives of their franchisor-manufacturer. In other words, franchised dealers have “skin in the game” through their massive capital investments in their businesses. Unlicensed brokers, on the other hand, bear no resemblance to a franchised dealership and could (and often do) disappear overnight. Yet, they have figured out a way to exploit the power imbalance between manufacturers and franchisees, sabotage trans- actions in which they have no lawful seat at the table and siphon off the small amount of profit remaining on new car sales. Given franchised retailers’ immense investments in their enterprises, it seems absurd that this is possible. How- ever, until the above-described race to the bottom in the new car marketplace that has nourished brokering ceases, or until the State commences targeted enforcement actions against brokers, it seems that this practice will persist with continued risk to both franchised retailers and consumers alike. Anthony Anastasio is the Director of Legal & Regulatory Affairs at NJ CAR. He can be reached at 609.883.5056, x350 or aanastasio@ njcar.org.