REMINDER: 10-DAY NOTICE REQUIREMENT IF FINANCING CANNOT BE OBTAINED

A reminder to all dealerships that an affirmative duty exists to notify consumers within 10 calendar days if financing cannot be obtained. Colorado Revised Statutes (C.R.S.) provide that this notice be required within a “reasonable time period” and regulations promulgated by the Motor Vehicle Dealer Board (M.V.D.B.) define that reasonable timeframe to be 10 days. It is also important to note this requirement is calendar days; not business days.

C.R.S. 12-6-118(3)(v) Failure to give notice to a prospective buyer of the acceptance or rejection of a motor vehicle purchase order agreement within a reasonable time period, as determined by the Board, when the licensee is working with the prospective buyer on a finance sale or a consignment sale (effective March 9, 2004).

REGULATION 12-6-118(3)(v). A dealer shall give notice of rejection of financing to the prospective buyer within ten (10) calendar days from the date of the purchase order or agreement on a finance or consignment sale (effective Dec.1, 2004).

As most dealerships may be aware, the following disclosure (which is required by statute) allows the dealership to disclose upfront and collect charges for the consumer’s use of the car if financing is still pending at the time of sale and does fall through:

REGULATION 12-6-104 (3)(k). Disclosures Required As Part Of A Motor Vehicle Contract:  SECTION E:

E. You and the dealer have agreed that the vehicle will be delivered to you prior to the purchase price being paid in full. If financing cannot be arranged at the terms stated in the contract, and the contract is canceled, you agree to pay the dealer $___ dollars per day and ___ cents per mile for your use of the vehicle from the date of delivery until the vehicle is returned to the dealer. If the contract is canceled, it may require you to immediately return the vehicle to the dealer and to pay the cost of repair for any damage occurring to the vehicle while it is in your possession along with the agreed upon daily and mileage charges. The contract may also give the dealer the right to take the vehicle from you 24 hours after cancellation and demand for the vehicle’s return. You may also be required by the contract to pay any costs the dealer may have to pay in regaining possession of the vehicle. If you owe any money from daily and mileage charges, damage repair costs or repossession costs to the dealer when the vehicle is returned, the dealer may keep your deposit(s) up to the amount owed. Otherwise, the deposit must be returned unless you ____ have agreed that it is nonrefundable.

RECENT SCENARIO:  Recently at a dealership, a consumer ignored requests to return the car after financing fell through and kept the car for more than 50 days. Unbeknownst to the dealership, the consumer was not fully responding to demands for additional information from the financial institution. Ultimately the financial institution rejected the deal well after the 10-day notice requirement. The Auto Industry Division’s (AID) position on enforcement under this scenario is that the dealership needed to provide the required notice as quickly as possible, and take all steps allowable under the law to reclaim the car from the consumer. If this scenario arises in your dealership, consult with an attorney on the proper steps to take if the consumer is not responding to demands to return the car.  Since dealerships do have remedies available, these should be pursued as soon as possible rather than allowing daily charges to accumulate. Those remedies may include the rights created under the buyer’s order/contract or the retail installment sales agreement as well as legal actions to recover the vehicle. Dealers should not assume the vehicle can be repossessed unless they have a legal right to do so. In addition, dealerships should keep track of outstanding financed deals to determine if there are problems with approval.