OAR 137-020-0020: Motor Vehicle Price and Sales Disclosure

(1) Purpose: The purpose of this rule is to declare as unfair or deceptive in trade or commerce certain motor vehicle pricing and sales practices. Nothing in this rule, or the administrative rules to which it applies, modifies or diminishes the applicability of exemptions or limitations on enforcement of the Oregon Unlawful Trade Practices Act, including, but not limited to, those specified in ORS 646.605 and 646.612. (2) Definitions: For purposes of this rule, the following definitions shall apply: (a) "Advertisement," including the terms "advertise" and "advertising," means any oral, written, pictorial or graphic notice given in a manner designed to attract public attention and includes, but is not limited to, public broadcasts, mailings, publications, internet sites, other internet applications, email, facsimiles and published notices. It includes, but is not limited to, any statement or representation made in a newspaper, magazine, or other publication; made on radio, television or internet; made by instant messaging or text messaging; appearing in any notice, handbill, sign, billboard, banner, poster, display, circular, pamphlet, flyer, catalog, letter, direct mail piece, or other printed material; or contained in any window sticker, price tag, or other point-of-sale display. Advertisement does not include oral or written communications relating to the negotiation of a specific transaction initiated by a consumer; (b) "Advertiser" means the person on whose behalf any advertising material is published and includes the advertising agent (if any) used by the advertiser; (c) "Advertising agent" means any person who produces, promotes or assists in the sale, production, or placement of any advertisement or participates in a sales event directly or through its employees or agents, on behalf of any person; (d) An "average" person, viewer or listener means a person other than one allied with or employed by the motor vehicle industry; (e) "Broker" means a motor vehicle broker as defined by ORS 822.047; (f) "Buy-down rate" means a financing rate which, due to a dealer's payment of finance charges to a third party, is below the prevailing market financing rate; (g) "Buy-rate" means the lowest interest rate quoted to a dealer or broker by a financial organization for which a consumer qualifies, based upon the consumer's credit history; (h) "Capitalized cost" means the amount the offeror places on a vehicle as the vehicle's value for the purpose of offering the vehicle for lease to the public, not including any capitalized cost reductions or taxes, title, license fees, lease acquisition, Department of Environmental Quality fees, document processing fee, insurance premiums, warranty charges, and any other product, service, or amount amortized in the lease. The capitalized cost for the purpose of this definition is the equivalent of the "offering price" for the purchase of a motor vehicle in a sales transaction; (i) "Capitalized cost reduction" means the total amount of any rebate, cash payment, net trade-in allowance or non-cash credit that reduces the capitalized cost; (j) "Clear and conspicuous," including the terms "clearly" and "conspicuously," means that a message, statement, information, representation or term is conveyed in a manner that is readily noticeable, will be easily understood by the average person, and is in a meaningful sequence. In order for a message to be considered "clear and conspicuous," it shall, at a minimum: (A) Not contradict or substantially alter any terms it purports to clarify, to explain or to which it otherwise relates; (B) Be in direct proximity to the message, statement, information, representation or term it clarifies, modifies or explains, or to which it otherwise relates; (C) Use abbreviations or terms only if they are commonly understood by the average person or approved by federal or state law; (D) In the case of radio advertising: (i) Include the information required to be disclosed by law and all disclaimers, conditions and limitations shall be spoken with sufficient deliberateness, clarity, speed and volume so as to be audible and understandable by the average radio listener; (ii) Not be obscured by sounds which interfere with or distract from the disclosure; and (iii) Provide all necessary information regarding leases. Any information required in radio advertising by the Federal Consumer Leasing Act and Oregon law and administrative rules shall be deemed to be clear and conspicuous if the advertisement complies with 15 USC sec. 1667c(c) and also discloses the capitalized cost of the lease. (E) In the case of television advertising: (i) Include the information required to be disclosed by law and shall be completely disclosed audibly, visually, or using a combination thereof; (ii) If a visual message, be presented unobscured by other images and in a size and time sufficient to allow an average viewer to read with reasonable ease; (iii) If an audible message, be presented with sufficient deliberateness, clarity, and volume so as to be understood by the average television listener unobscured by other sounds which interfere with or distract from the disclosure; (iv) Have as a minimum height for required superimposed written copy ("super") in a television advertisement or advertisements in any other audio-visual medium: (I) For Standard Definition Television — no less than 22 video scanlines for capital and lower case letters together, or no less than 18 video scanlines for use of capital letters only; (II) For High Definition Television — no less than double the scanlines required for Standard Definition Television; and (III) The supers must appear on the screen for a duration sufficient to allow a viewer to have a reasonable opportunity to read and understand the statement, representation or term. (v) Be sufficient if the super on-screen display time is no less than three seconds for the first line of text and one second for each additional line. This is a rebuttable presumption. (F) In the case of printed advertising: (i) Include the information required to be disclosed by law and shall be in direct proximity to the terms it purports to clarify, to explain or to which it otherwise relates; and (ii) Be of sufficient prominence in terms of print style, size and contrast as compared with the remainder of the advertisement so as to be readily noticeable to an average person in the audience to whom it is directed. Print size which is 8 point type or larger in display advertisements which are less than 200 square inches in size or print size which is 10 point type or larger in display advertisements which are larger than 200 square inches in size shall be rebuttably presumed to be of sufficient size to be readily noticeable. (G) In the case of internet advertising: (i) Include the information required to be disclosed by law near, and when technologically possible, on the same screen as the triggering claim; (ii) Use text or visual cues to direct consumers to scroll down a Web page when it is necessary to view information; (iii) When using hyperlinks to lead to information required to be disclosed by law: (I) Ensure that hyperlinks are obvious; (II) Ensure that hyperlinks appropriately convey the importance, nature and relevance of the information they lead to; (III) Include consistent hyperlink styles and format; (IV) Ensure that all hyperlinks are placed in direct proximity to relevant information; and (V) Ensure that hyperlinks take consumers directly to the information on the click-through page. (iv) Be displayed prominently prior to purchase; (v) Be prominently displayed so the information is noticeable to consumers in relation to the size, color and graphic treatment of other parts of the Web page; (vi) Repeat information on lengthy Web sites when there are multiple or repeated claims; (vii) Include audio disclosures when audio claims are made on the Web site and the audio disclosures must be presented in a volume and speed so that consumers can hear and understand them; (viii) Include visual disclosures that are displayed for a duration sufficient for consumers to notice, read and understand them; and (ix) Use clear language and syntax in such a manner that an ordinary consumer can understand the information required to be disclosed by law. OFFICIAL COMMENTARY: Each advertisement shall be evaluated for its overall impression. The public should not have to weigh each word, hunt for the hidden meaning of each statement, or search for inconspicuous disclaimers. Advertisements which place material disclosures in small print, or inconspicuously bury material at the bottom of the advertisement are not clear and conspicuous. If on the other hand, the information does not materially change, limit or alter the offer being made, it can be placed at the bottom of an advertisement. 15 USC sec. 1667c(c) allows certain required lease disclosures to be given to a consumer in a radio advertisement by referring the audience to either a toll free telephone number or a written advertisement that appears in a publication in general circulation in the community served by the radio station on which such advertisement is broadcast. All lease advertisements on the radio must include the following disclosures to comply with Oregon and Federal law: that the transaction advertised is a lease; the total amount of any initial payments required on or before consummation of the lease or delivery of the property, whichever is later; the number, amounts, due dates or periods of scheduled payments, and the total of such payments under the lease; and the capitalized cost. (k) "Dealer" means a person who buys, sells, trades or exchanges, leases, displays or offers to buy, sell, trade or exchange motor vehicles either outright or by means of any conditional sale, bailment, lease, security interest, consignment or otherwise or who is a broker. "Dealer" does not include any person excluded by ORS 822.015; (L) "Document processing fee" means any monies or other thing of value, which a dealer charges to prepare, submit or prepare and submit documents pursuant to ORS 822.043; OFFICIAL COMMENTARY: Oregon law and administrative rules permit dealers to elect to prepare, submit, or prepare and submit documents necessary to issue or transfer a certificate of title for a vehicle; register a vehicle or transfer registration of a vehicle; issue a registration plate; verify and clear a title; perfect, release or satisfy a lien or other security interest; comply with federal security requirements; or render any other services for the purpose of complying with state and federal laws related to the sale of a vehicle. For providing this service, dealers may charge a purchaser of a vehicle a fee for the preparation of those documents, not to exceed the amount established by ORS 822.043. This fee is always negotiable; otherwise it could be classified as a tax. A dealer can process the documents without charging a fee. In addition to the document processing fee, dealers may offer consumers the option of electronically filing their title and registration documents using an integrator. Dealers may charge consumers an additional fee for this service. Consumers must knowingly agree to pay the additional fee for this electronic filing service. If a consumer does not agree to pay the additional fee for the electronic filing service, a dealer may still electronically submit title and registration documents at no additional cost to the consumer. (m) "Extension sticker" means a label (other than a Monroney sticker or other label bearing the manufacturer's suggested retail price), affixed to a new motor vehicle, displaying the offering price of the motor vehicle; (n) "False advertisement" means any advertisement which is false, misleading or deceptive in a material respect. In determining whether any advertisement is false, misleading or deceptive, not only representations made or suggested by statement, word, design, device, sound or any combination thereof will be taken into account, but also the extent to which the advertisement fails to reveal facts material in light of representations made; (o) "Financial Organization" means any person who finances a sale or lease of a motor vehicle for a third party or purchases a retail installment contract from a dealer; (p) "Manufacturer" means any entity which: (i) Manufactures or assembles new motor vehicles for sale or distribution; (ii) Distributes new motor vehicles through franchised dealerships; (iii) Is engaged in the business of importing new motor vehicles for sale or distribution to dealers, through distributors, or to factory branches; or (iv) Is a subsidiary of a manufacturer including one that offers motor vehicle financing. (q) "Manufacturer's Suggested Retail Price" or "MSRP" means the Monroney price, or if there is no Monroney sticker, then the total price of the vehicle after all factory installed options and factory costs have been added together, less any option package savings offered by the manufacturer; (r) "Monroney sticker" means the label required by the Automobile Information Disclosure Act, 15 USC § 1232; (s) "Motor Vehicle" means any self-propelled vehicle normally obtained for personal, family, or household purposes, including all terrain vehicles, snowmobiles, self-propelled motor homes, personal watercraft, boats and, for the purposes of this definition, any motor home, recreational vehicle or trailer pulled by a self-propelled vehicle. Motor vehicle does not include aircraft; (t) "Negative equity" means the amount by which an existing lien on a trade-in vehicle exceeds the true market value of the trade-in vehicle; OFFICIAL COMMENTARY: In layman's terms, if a consumer has negative equity on his/her vehicle, it means the consumer owes more on the vehicle than it is actually worth. While the "true market value" of a vehicle may vary, it can be determined by using a motor vehicle price guide trade publication and the average sale price of the vehicle at regional vehicle auctions. While these publications are relevant, they are not determinative. Depending upon the supply and demand for a given vehicle, it could be worth more or less than its "book" value. (u) "Negative equity adjustment" means an amount which is added to both the purchase or lease price of a vehicle and the trade-in allowance for the trade-in vehicle in a transaction; (v) "Offering price" means the full cash price for which a dealer will sell or lease a motor vehicle to every consumer or member of the general public without exception, excluding only taxes, license and registration costs, Department of Environmental Quality (DEQ) fees and a document processing fee; OFFICIAL COMMENTARY: Examples of correctly calculated offering prices are as follows: (A) A car's MSRP is $10,000, license and registration are $100, undercoat is $100, dealer-added options are $2,000 and the document processing fee is $115. A financial organization offers a $1,000 rebate to qualified consumers. The offering price of the vehicle is $12,100. The offering price cannot include the $115 document processing fee or the $1,000 rebate that is not available to all consumers without exception. (B) A motorcycle's MSRP is $5,000, license and registration are $50, delivery, assembly and setup costs the dealer $250, custom accessories are $500 and the document processing fee is $115. The offering price of the vehicle is $5,750. The costs of delivery, assembly, setup and all accessories must be included in the offering price in any advertisement or quoted offering price given during the sales negotiation of the motorcycle and cannot be added in as fees or extras after the selling price of the motorcycle is agreed upon between the dealer and consumer. The advertised offering price does not need to include the license and registration or document processing fee. While the dealer may choose to prepare title and registration documents and may charge a fee for this service, nothing in this or any other rule requires a dealer to charge any document processing fee. Whether the consumer will pay any fee for this service and, if so, its amount, up to the maximum allowed by law, is always negotiable between the consumer and the dealer. (w) "Person" means natural persons, corporations, trusts, partnerships, incorporated or unincorporated associations, and any other legal entity except bodies or officers acting under statutory authority of this state or the United States and includes, but is not limited to, dealers, brokers, manufacturers, publishers, advertisers or advertising agents; (x) "Personal Watercraft" means a jet ski or other aquatic device of similar design; (y) "Publish" means to disseminate, mail, or otherwise make available to the public at large, or any section of the public, in whatever form and by whatever means any information; (z) "Publisher" means any person who publishes any advertisement; (aa) "Rebate" means: (i) The payment of money to a consumer or payment to a person on behalf of a consumer on the condition that the consumer purchase or lease a motor vehicle; or (ii) The return of any part of a payment made by a consumer in conjunction with the sale or lease of real estate, goods or services and includes, but is not limited to, an offer of a future cash refund, a direct or indirect payment of money to a consumer or a voucher for future payments. (bb) "Recreational vehicle" has the meaning given that term in ORS 650.300; (cc) "Sale," "Sell" or "Buy" means any transaction for the sale, purchase, trade, exchange or lease of a motor vehicle; (dd) "Spot Delivery" or "Spot Delivered" means that a consumer has taken possession of a motor vehicle from a dealer or broker and the consumer has committed to buy or lease the vehicle, whether or not there is a finalized transaction or final approval of financing; OFFICIAL COMMENTARY: Spot delivery occurs when a consumer signs a purchase order, lease agreement or retail installment contract for a motor vehicle and the consumer takes possession of the vehicle "on the spot," prior to a financial organization purchasing the retail installment contract or lease agreement from the dealer or a consumer presenting a dealer with payment for the full purchase price of the vehicle. (ee) "Taxes, license and registration costs" means those usual taxes, charges and fees payable to or collected on behalf of governmental agencies and necessary for the transfer of any interest in a motor vehicle or for the use of a motor vehicle; (ff) "Used vehicle" means any vehicle which has been previously: (i) Delivered to any person for his/her discretionary use for personal or business purposes and for more than a test drive before a contemplated purchase or preparation for sale; (ii) Titled or registered to any person, whether or not it was used for the person's own discretionary personal or business purposes; or (iii) Spot delivered. OFFICIAL COMMENTARY: See Weigel v. Ron Tonkin Chevrolet Co., 298 Or 127, 690 P2d 488 (1984). Vehicles that would be considered "used" include, but are not limited to: new vehicles that are spot delivered to a consumer, then subsequently returned to the dealer for any reason, including, but not limited to, the inability of the dealer to sell the retail installment contract; demonstrators and company cars that have never been sold to a retail customer, but have been driven for purposes other than test drives or moving, including use by the dealer, the dealer's employees, the dealer's corporate officers or anyone else; and all vehicles that have been driven more than the limited use necessary in moving or test driving a new vehicle prior to purchase or delivery to a consumer. (gg) "Vehicle identification number" or "VIN" means a number, a letter, a character, a datum, a derivative, or a combination thereof, used by the manufacturer or a Department of Motor Vehicles for the purpose of uniquely identifying a motor vehicle. For the purpose of this definition, any time a motor vehicle advertisement requires the publication of a "vehicle identification number," use of the last six numbers, letters or other characters will constitute compliance with the rule; (hh) "Wholesale" means the sale of motor vehicles, goods or services for resale by a dealer, broker or other person, as opposed to the sale of motor vehicles, goods or services to the ultimate consumer; (ii) "Yield Spread Premium" means the difference between a higher interest rate quoted to a consumer by a dealer or broker and the buy rate offered to the dealer or broker by a financial organization. (3) Violations: Failure by a person, in the course of the person's business, vocation or occupation, to comply with this rule constitutes unfair or deceptive conduct in trade or commerce. (a) Mandatory Posting of Offering Price — For any motor vehicle offered for sale or lease in an advertisement that states an offering price or capitalized cost for the motor vehicle, the dealer shall affix to the motor vehicle a clear and conspicuous label or extension sticker that states the advertised offering price of the motor vehicle listed in the advertisement. If a motor vehicle bears a label which states a MSRP and the MSRP is the offering price or capitalized cost for the vehicle, no additional label or extension sticker is required; (b) Extension Sticker — A dealer shall affix an extension sticker to any motor vehicle offered for sale bearing a Monroney sticker or a label stating a MSRP that states the offering price of the vehicle if the offering price is greater than the Monroney sticker price or the stated MSRP; (c) Offering Price — Any price stated in an advertisement or in a written or oral price quotation given to a consumer shall be the offering price, excluding only taxes, license, registration costs, DEQ fees and a document processing fee; OFFICIAL COMMENTARY: A vehicle has one offering price. This rule is to ensure that dealers do not add in hidden or undisclosed costs after the price for a vehicle has been advertised or negotiated with a consumer or charge different prices depending on where a consumer sees an advertised offering price. Examples of potential violations are as follows: (A) A vehicle is advertised or offered for sale at the dealership for $10,000. After the consumer accepts the dealer's offer and agrees to purchase the vehicle, the dealer learns that the consumer has a poor credit history. The financial organization to which the dealer sells the retail installment contract charges the dealer a premium of $500 to accept the retail installment contract. The dealer then tries to add this $500 to the contract with the consumer as a "loan fee." This practice is unlawful; (B) A person advertises a vehicle for $20,000 in the local newspaper. The vehicle has $1,500 worth of after-market accessories on the vehicle. When the consumer arrives at the dealership and wants to purchase the vehicle, the salesperson tells the consumer that the price is $21,500 with the added accessories. This practice is unlawful. If the dealer wants reimbursement for these options, the dealer should ensure that amount is included in any advertised price; (C) A motorcycle dealer charges $350 to set up and assemble a motorcycle. This amount must be included in any offering price advertised and cannot be noted only by disclosure at the bottom of the advertisement with the use of an asterisk. Further, any price displayed on the motorcycle or price quoted to a consumer during negotiations must include this amount; and (D) A vehicle is advertised or offered for sale at the dealership for $10,000. After the consumer accepts the dealer’s offer and agrees to purchase the vehicle, the dealer tries to add a $200 "processing fee" if the consumer wants to pay for the vehicle by personal check, certified bank check, debit card or credit card. A dealer may not add a fee for payment by personal check or certified bank check. However, if "pass through" swipe fees for a debit card or credit card are permitted under a merchant account agreement, those swipe fees must be disclosed in advance and separately stated on the purchase order, lease agreement and retail installment contract; a dealer may not add swipe fees to the offering price or negotiated price. (d) Limitations on Offering Price — An extension sticker shall accurately itemize and describe the charge(s) added to or subtracted from the MSRP to reach the offering price. No charge may be added for goods or services not actually provided. No charge may be added for services required by the manufacturer or distributor which are performed by a dealer prior to delivery of a motor vehicle to a retail consumer. No charge may be added for any overhead expense such as warehousing, flooring, advertising, and clerical costs. No charge may be added for transportation costs charged by the manufacturer or distributor to the dealer and included in the MSRP. In the case of inland freight, setup and dealer preparation, the charge listed must be the dealer's actual cost for freight from the port of entry to the dealership, and the actual cost of setup and dealer preparation and not included in the MSRP; (e) Additional Dealer Mark-up — If the offering price of a new motor vehicle is greater than the MSRP, the portion of the difference shown on the extension sticker between the offering price and the MSRP not representing additional goods or services shall be described as "additional dealer profit," "additional mark-up" or by a term of similar import; (f) Unconscionable Add-on Pricing — A person may not make false or misleading representations concerning the nature or amounts of charges for additional goods, accessories, services, products or insurance sold in conjunction with the sale or lease of a motor vehicle by selling them at a price which is unconscionably higher than the price used by the person for the sale of the same or substantially similar goods, accessories, services, products or insurance to other consumers; OFFICIAL COMMENTARY: This rule does not limit a dealer's ability to mark up or down the selling price of a product or service in the normal course of business. This includes offering special discounts to repeat customers or volume discounts to purchasers of large quantities of products or services. However, sometimes dealers try to unlawfully take advantage of the most vulnerable consumers, such as those who are illiterate, have a physical infirmity, have a mental handicap, are unable to understand the English language or have other limitations. (g) Disclosing Document Fee — A document processing fee may be separately stated in all advertisements and sales documents. If separately stated, the disclosure shall be clear and conspicuous; (h) Document Fee Not Government Required — A person shall not represent a document processing fee as a governmental fee or one required by government; (i) Vehicle Availability — A dealer or broker may not advise prospective customers that an advertised vehicle is available when the vehicle is not available for sale, or that an advertised vehicle is not available for sale when the vehicle is available for sale; (j) Undisclosed Price Packing — A dealer or broker may not sell or lease a motor vehicle to a consumer with the cost of any additional goods, accessories, services, products or insurance added to the sale or lease, without the consumer's actual knowledge, written consent and individual itemization of all such additional costs listed on any purchase order, lease agreement and retail installment contract; (k) Undisclosed Fee Payments — A dealer who sells or leases a motor vehicle to a consumer and makes any payment to any non-employee third-party in conjunction with the sale or lease, other than a referral fee of $100 or less (also known as a "bird-dog" payment), must specifically itemize such payment on the consumer's purchase order, lease agreement and retail installment contract; OFFICIAL COMMENTARY: This rule is intended to apply to a payment of more than $100 made to a single individual or business entity. For example, if two unrelated individuals refer a purchaser to a specific dealership, each individual may receive a payment of $75 and the dealer does not need to specifically itemize the payments. However, the dealer may not make a payment of $75 to a dealership and $75 to the owner of the dealership and fail to itemize the $150 payment on the purchase order, lease agreement and retail installment contract. (L) False Representations Regarding Financing or Goods — A person may not falsely represent to a consumer that, unless the consumer purchases additional goods, accessories, services, products or insurance, the person will not sell or lease a motor vehicle to the consumer or cannot provide credit or financing for the consumer. A person may not falsely represent to a consumer that additional goods, accessories, services, products or insurance are free or included in the price of a motor vehicle or the financing; OFFICIAL COMMENTARY: Nothing in this rule prohibits a dealer from ensuring that a consumer has motor vehicle insurance required by law or according to the terms of financing in order to protect the collateral financed. No person, however, can make false statements regarding any requirement to purchase products or services. This rule does not prohibit dealers from adding tangible accessories, which enhance the value and marketability of a vehicle to some of their inventory, and including the tangible accessories in the offering price of the vehicle. If a dealer adds high profit aftermarket products, including, but not limited to, paint protector, door edge guards and glass etching, to its vehicles which do not correspondingly increase the actual cash value of the vehicles, such practice would be carefully scrutinized as a possible violation of this rule. (m) Payment Price Packing — During negotiations for the sale or lease of a motor vehicle, a dealer or broker may not quote to a consumer a monthly payment or total price for the sale or lease of a motor vehicle that includes the cost of any additional goods, accessories, services, products or insurance, including, but not limited to, service contracts, security products, protectants, credit life or gap insurance, that are sold in conjunction with the sale or lease of a motor vehicle, unless the dealer or broker also clearly and conspicuously separately delivers in writing, during negotiations and prior to any purchase order, lease agreement or retail installment contract being executed by a customer: (A) The individual price of each additional good, accessory, service, product or insurance; and (B) The total cost of the lease or sale of the vehicle and the monthly payment, without such additional items included. OFFICIAL COMMENTARY: This rule addresses the practice that is commonly referred to as "packing," or the "presumptive sale." "Packing" is the deceptive practice of misrepresenting monthly payments or total cost of a vehicle to consumers during motor vehicle sales and lease negotiations in order to surreptitiously facilitate the sale of additional motor vehicle related goods, accessories, services, products or insurance. Consumers are entitled to be treated in a fair and non-deceptive manner during negotiations to buy or lease a motor vehicle, including the right to receive timely, accurate and non-misleading information about the cost of the vehicle and all related goods, accessories, services, products or insurance they are buying or leasing. Some dealers have used "packed" payment schemes and poor disclosures to trick consumers into believing that services such as credit insurance, vehicle service contracts, chemical protection, and security devices are included at no additional cost or provided "free" in the purchase or lease agreement; or that they are discounted when they are not. Others have quoted monthly payments calculated upon interest rates far in excess of what they believe will be the final interest rate or simply add an extra $40 or more to the monthly payment than what is needed to cover the price of the vehicle. They use this inflated quote in order to build in some "legroom" to later add other optional products and services to the transaction with the extra cost hidden or appearing lower to the consumer. Because the monthly payment does not increase and because the consumer believes the products are "free" or discounted, most consumers do not object when the products are included in the final contract. (n) Disclosure of Service Contract Coverage — A person may not misrepresent or fail to clearly and conspicuously disclose the following terms or conditions of a service contract sold in conjunction with the sale or lease of a motor vehicle: the length of the coverage, what parts or systems of the vehicle are covered by the contract, any exclusions in the coverage, and that there may be an existing manufacturer's warranty which provides the same or similar coverage. If a person advertises that a vehicle has an existing manufacturer's warranty or the person knows a vehicle has an existing manufacturer's warranty, the person must disclose the terms of the remaining warranty coverage; (o) Disclosure of Material Nonconformities and Defects — Prior to the sale or lease of a motor vehicle, a dealer or broker shall disclose existing material nonconformities and defects about which the dealer or broker knows or negligently disregarded when the dealer or broker should have known. This includes, but is not limited to if repairs have not been performed pursuant to a safety recall and the needed repairs can be identified through a VIN search; OFFICIAL COMMENTARY: Unless explicitly disclosed prior to a sale or lease, a motor vehicle that is offered for sale or lease to the public is represented, either directly or by implication, to be roadworthy when it is sold, to have an unbranded title and to have no undisclosed material defects. A dealer is not required to guarantee, warrant or represent that a used vehicle will not have any mechanical problems or undetected material defects once the vehicle is sold. However, for used vehicles, even if the dealer states on the FTC Buyers Guide (“As Is”) that the dealer is not providing a warranty, the dealer must still disclose material defects about which the dealer knew or should have known. See Parrott v. Carr Chevrolet, 156 Or App 257 (1998), aff. 331 Or 537 (2001) and Hinds v. Paul’s Auto Werkstatt, 107 Or App 63, 810 P2d 874 (1991). For new vehicles, even if the dealer does not need to disclose damage and repairs under ORS 650.155(6), the dealer must still disclose material defects about which the dealer knew or should have known. See BMW of North America v. Gore, 517 US 559 (1995). The dealer is in a superior position to inspect and determine the condition of a vehicle prior to marketing the vehicle. It is an easy matter, through a number of industry and internet sources, for a dealer or broker to review a vehicle's title, damage and ownership history. Examples of negligent disregard of some things that should put a dealer on notice and trigger its duty to disclose might include, but is not limited to, a large pool of oil or antifreeze under the vehicle, dark colored smoke coming from an exhaust pipe, water stains on carpet or doors, a different color paint than the body under the hood or in the trunk or tires that are worn very unevenly. A dealer does not need to create an exhaustive list of every ding, paint scratch, fabric tear or discoloration clearly visible upon inspection by an average consumer. When a dealer sells a vehicle to an individual that is registering the vehicle in a metro area that requires that the vehicle pass DEQ emissions testing to be roadworthy, the dealer must ensure that the vehicle can pass the DEQ emissions test at the time of sale. (p) False or Unsubstantiated Representations — A person may not make a misrepresentation or a false or incomplete statement of fact in conjunction with the sale or lease of a motor vehicle, or any other representation or statement which the person does not have sufficient information upon which a reasonable belief in the truth of the representation could be based; (q) False Statement of Broker Fees — A broker may not misrepresent the source or nature of any profit, compensation or fee which the broker will receive for its services or cause a consumer to believe the services are free or at no cost to the consumer, when they are not; OFFICIAL COMMENTARY: Brokers are a fiduciary of a consumer on whose behalf they have agreed to negotiate the purchase or lease of a vehicle. Unlike a dealer, a broker is not engaging in an "arm's length" transaction. Brokers market their services to act in the consumer's best interest. They are in an agency relationship. The consumer has a right to rely on that relationship. For example, a broker who tells a consumer that the broker may be receiving compensation from a dealer as part of the transaction, when the funds for that payment were part of the total amount paid by the consumer as part of the purchase or lease, is misrepresenting the nature of the transaction and making a false statement as to the source of the funds the broker will be receiving. The correct disclosure would be that the broker has added its fee to the price which it negotiated with the seller on behalf of the consumer. While ORS 822.047 does not require the broker to disclose the amount of its profit, once the broker undertakes to act on behalf of a consumer, or do anything that could cause a consumer to believe the broker is acting on the consumer's behalf, the dealer or broker may no longer engage in self-dealing, but must act in the consumer's best interest. Further, if a consumer asks what the fee is for the service, the broker may not misrepresent the amount of the fee being charged. In no case may the broker misrepresent the nature of the charge, the amount of the fee or in what way the fee for the broker's service is paid. (r) Disclosure of Dealer/Broker Status — A dealer or broker may not misrepresent or fail to disclose whether it is acting as a dealer or broker when it has done anything to cause a consumer to believe it is acting as a broker for the consumer in the purchase or lease of a motor vehicle; OFFICIAL COMMENTARY: It is well established in law that a broker is in a fiduciary relationship with its client. As such, a broker occupies a position of such power and confidence with regard to the property of another that the law requires brokers to act solely in the interest of the person whom they represent and in good faith. Fiduciary duties can be grouped into three categories: (A) Duty of Loyalty. A fiduciary must act in accordance with the interests of the beneficiary, and not his own interests; (B) Duty of Candor. A fiduciary must not withhold information from the beneficiary, particularly with respect to the fiduciary's dealings with the beneficiary; and (C) Duty of Care. A fiduciary must act with some degree of care with respect to the beneficiary. This is usually formulated as a duty to exercise the care that an ordinarily prudent person would in similar circumstances. In Oregon, only one type of dealer license is required, whether the licensee acts as a dealer or broker. This can lead to confusion by a consumer. If the consumer believes the person the consumer contacted was a broker, the consumer expects that person to act in the consumer's best interest. Brokers have an obligation to ensure the consumer knows what the broker's business status is in relation to the transaction and whether the consumer is dealing with it as a broker or a dealer. If a consumer first contacts a dealer who does not have a vehicle in its own inventory that the consumer wishes to buy or lease, and the dealer agrees to find, negotiate or arrange the purchase or lease of a specific vehicle for the consumer from a third party, a broker relationship may be created. If the dealer, without placing any obligations on the consumer, finds the desired vehicle, purchases it and places it into the dealer's own inventory, the dealer may thereafter negotiate and sell or lease the vehicle to the consumer and still remain a dealer. However, a dealer may become a broker under several circumstances, including, but not limited to, the following: the dealer places a contractual or monetary obligation on the consumer in order to arrange or negotiate the purchase or lease of the vehicle; the dealer makes any statement which could cause an average consumer to believe the dealer was acting as an agent of the consumer (such as saying the dealer would negotiate the best price for the transaction); or the dealer arranges the transaction for the consumer through another dealer and receives any compensation from the consumer or other dealer. (s) False Credit Applications — No person shall for any motor vehicle transaction: (A) Knowingly prepare, participate or assist in the preparation or submission of a false, misleading or deceptive credit application; (B) Direct any person to prepare or submit a false, misleading or deceptive credit application; (C) Request or allow a consumer to sign a blank or incomplete credit application; or (D) Knowingly accept or submit a false, misleading or deceptive credit application. (t) Illusory or Deferred Down-Payments and Hold Check Agreements — In any transaction for a motor vehicle: (A) No person shall request or accept from a consumer as payment for any part of a purchase or lease, or list the same as a down payment on any purchase order, lease agreement, retail installment contract, or credit application, any of the following: (i) A promissory note for future payment, without clearly disclosing on the purchase order, lease agreement, retail installment contract, and credit application: the amount of the promissory note given by the consumer, the terms of repayment, any interest rate and that such amount is in the form of a promissory note; (ii) A check that the person knows or should have known is drawn upon an account with insufficient funds, without clearly disclosing on the purchase order, lease agreement, retail installment contract, and credit application: the amount of such check, the terms of repayment, that there were insufficient funds in the checking account at the time the check was drawn and the date the check is expected to have sufficient funds available for its payment; or (iii) A post-dated check that the consumer has given the person for payment at a future date, without clearly disclosing on the purchase order, lease agreement, retail installment contract, and credit application: the amount of such check, that the check is post-dated, and the date the check is due and payable. (B) No person shall accept any check listed in (t)(A)(ii) or (iii) above without having a written hold check agreement, clearly disclosing on the purchase order, lease agreement and retail installment contract all terms and conditions of the hold check agreement, and disclosing the fact that there is a hold check agreement to any financial organization to which credit is requested; (C) No person shall accept any payment listed in (t)(A)(i), (ii) or (iii) above without properly listing and identifying such payment in any retail installment contract or lease agreement; and (D) No deferred portion of a down payment may be treated as part of the down payment if it is payable later than the due date of the second otherwise regularly scheduled payment and is not subject to a finance charge. (u) Yield Spread Premium Disclosure — Any dealer or broker that charges a consumer a yield spread premium: (A) Shall clearly and conspicuously disclose in writing, prior to the consumer applying for credit or executing a purchase order, lease agreement or retail installment contract: (i) That the dealer or broker may receive additional compensation from the consumer for arranging the sale of the retail installment contract which may be in the form of a fee or additional loan points; and (ii) That interest rates quoted by the dealer or broker may be negotiable; and (B) Shall not, during the negotiation for the sale or lease of a motor vehicle, quote a monthly payment calculated using an interest rate that is more than three points higher than the buy rate, unless the dealer or broker discloses in writing the yield spread premium to the consumer, if the dealer or broker quoting the rate knows the consumer's credit score or has the ability to obtain the consumer's credit score at the time the monthly payment is quoted. (v) Misleading or Deceptive Tying Requirements — If a person represents or implies that the person requires a consumer to purchase anything additional in conjunction with the sale or lease of a motor vehicle, including, but not limited to, any goods, accessories, services, products or insurance, the person will not sell, lease or enter into a retail installment contract for any motor vehicle without the sale of such additional items to every other consumer. (w) Deceptive Financing Representations — No dealer or broker shall falsely represent that a transaction is conditioned upon the consumer entering into a retail installment contract with the dealer that the dealer can sell to a financial organization when in fact the consumer is able to finance the transaction through other means or sources; (x) Unlawful Spot Delivery — No dealer or broker shall spot deliver a vehicle to any consumer unless the dealer or broker has a reasonable basis to believe that the dealer will either keep the retail installment contract (“buy here pay here”) or be able to sell the retail installment contract to a financial organization at the exact terms quoted to or agreed to by the consumer at the time of delivery; (y) Misrepresentation Regarding Failure to Sell Retail Installment Contract — No dealer or broker, who has spot delivered a vehicle to a consumer and thereafter fails to complete the transaction in accordance with the terms offered in the purchase order, lease agreement or retail installment contract, shall misrepresent to a consumer why the transaction cannot be completed according to the terms offered or agreed upon; (z) Anti-Bushing Rule — In any transaction in which the dealer or broker has spot delivered a vehicle to a consumer and the consumer does not qualify for the terms offered, the dealer or broker shall, prior to offering, negotiating or entering into new terms for the purchase or lease of a vehicle: (A) Inform the consumer that the consumer is entitled to have all items of value received from the consumer as part of the transaction, including any trade-in and down payment, returned to the consumer; (B) If the consumer is physically present when the dealer or broker informs the consumer that the consumer does not qualify for the terms offered, return all items of value received from the consumer as part of the transaction; and (C) If the dealer or broker informs a consumer by telephone or other means, without the consumer present, that the consumer did not qualify for the terms offered, clearly disclose the consumer's right to receive the immediate return of all items of value given by the consumer as part of the transaction when the consumer returns the spot delivered vehicle. The consumer's down payment and trade-in must be actually available to the consumer should the consumer wish to rescind the transaction and not enter into a new transaction. If a consumer has paid a down payment with a check, the dealer is not required to refund the down payment until the consumer's check has cleared. OFFICIAL COMMENTARY: ORS 646A.090 gives both dealers and consumers specific rights when it is necessary to unwind a spot delivery transaction. The consumer has an absolute right to walk away from the deal and get back his/her trade-in and down payment if the dealer is not going to honor the original agreed upon offer. (aa) Unlawful Negative Equity Adjustment — No person shall make a negative equity adjustment in the sale or lease of a motor vehicle; OFFICIAL COMMENTARY: Under Regulation Z, if the amount of an existing lien exceeds the value of a trade-in, a creditor must disclose the down payment as zero and not a negative amount on the down payment line of the retail installment contract. To illustrate, assume a consumer owes $10,000 on an existing motor vehicle retail installment contract or loan and that the trade-in value of the motor vehicle is only $8,000, leaving a $2,000 deficit. The creditor should disclose a down payment of $0, not -$2,000. (bb) Negative Equity Disclosure — Any negative equity of a vehicle taken in trade as part of any motor vehicle transaction shall be clearly and conspicuously disclosed in any purchase order, lease agreement and retail installment contract. (cc) Consignment Sales — If a person takes a vehicle on consignment, the person may not falsely represent or imply the amount that a potential purchaser has offered to pay for the vehicle or the amount that the consignor has agreed to accept for the sale of the vehicle. OFFICIAL COMMENTARY: When a dealer takes a vehicle on consignment, the dealer is acting as an agent for the consignor. The dealer may not tell a prospective customer that the consignor will not accept a particular offering price for a vehicle when that offering price is above the price the consignor has agreed to sell the vehicle for. Additionally, the dealer may not misrepresent or fail to disclose an offering price to the consignor. It is unlawful for a dealer who takes a vehicle on consignment to ask the consignor to agree to a reduction in the amount listed in the consignment agreement when the dealer has received an offering price from a prospective customer that is higher than the amount the consignor has agreed to sell the vehicle for because the dealer wants to negotiate a higher profit for the dealer from the sale of the vehicle. (dd) Dealer Cost — A dealer shall not misrepresent or fail to disclose the MSRP of a new vehicle. A dealer shall not state or imply that the MSRP is the dealer’s cost. OFFICIAL COMMENTARY: When negotiating the sale of a vehicle, a dealer may not misrepresent or fail to disclose the MSRP of the vehicle. For example, the Monroney sticker shows that the MSRP of a vehicle is $30,000. The dealer posts an extension sticker that shows the dealer added $5,000 of additional dealer profit and the dealer’s offering price is $35,000. When negotiating the vehicle, the dealer fails to disclose to the potential purchaser that the MSRP of the vehicle is $30,000 and the dealer’s offering price is $35,000. It is unlawful if the dealer represents to the consumer that the “market price” of the vehicle is $35,000 and the dealer is offering the consumer a $3,000 savings by starting negotiations at $32,000. Similarly, if the dealer obtains a vehicle through a dealer trade, the dealer must disclose that the MSRP of the vehicle is $30,000 and cannot represent to the consumer that the vehicle is $35,000 without also disclosing the MSRP and that the $35,000 offering price includes $5,000 of dealer mark-up. (ee) Provide Copy of Contract — A dealer must provide the purchaser of a vehicle a copy of all documents signed or initialed by the purchaser or that are material to the terms of the sale. OFFICIAL COMMENTARY: When a consumer signs a purchase order, lease agreement or retail installment contract, the dealer should promptly provide a consumer with a signed copy of the agreement for the consumer’s records. The dealer should also provide the consumer with any other documents that are material to the terms of the sale, such as a “we owe” form that reflects that the dealer will perform post-delivery repairs. (ff) Document Processing Fee — If a dealer collects money from or charges a purchaser a document processing fee, the dealer must prepare and submit all documents to complete the transaction as permitted by law.