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Colorado Bans TrueCar - Detailed Documentation from the Colorado Department of Revenue and the Colorado Motor Vehicle Dealer Board

Shown below are excerpts from the actual document released by the Colorado Department of Revenue:

Issued December 15, 2011

The Colorado Department of Revenue Auto Industry Division (Division) has reviewed the text below, which was submitted by the Colorado Automobile Dealers Association after the Division’s presentation to the Motor Vehicle Dealer Board (“Board”) at its meeting on December 8, 2011. The Division believes the text fairly and accurately describes the issues surrounding the relationship between Colorado motor vehicle dealers and TrueCar. The Division will take all steps necessary to fulfill its statutory duty to assist the Board in protecting consumers, investigating suspected or alleged violations of statutes or rules, and enforcing all licensing statutes and rules.

 

 

MEMO:

It has come to the attention of the Colorado Motor Vehicle Dealer Board (“Board”) and the Auto Industry Division (“Division”) that a number of new motor vehicle dealers licensed in Colorado have relationships with a company known as TrueCar. The Division has identified a number of advertising violations in TrueCar materials and on its web site, as well as other potential violations of the Motor Vehicle Dealer Act (“Act”) and related regulations.


 

Any Colorado licensed dealer that is using TrueCar to promote and list its vehicles to consumers is ultimately responsible for any such violations. The specific advertising violations identified are:

  • Failure to include stock number of the vehicle for sale (violates Advertising Rule 3)
  • Use of the word “invoice” in the advertising (violates Advertising Rule 11)
  • Font size of disclaimers is too small (violates Advertising Rule 15)
  • Failure to advertise price of vehicle including all costs including Delivery & Handling (violates Advertising Rule 13)
  • TrueCar disclaimers also refer to a “Documentation fee” which is terminology that has led to lawsuits in Colorado in the past
  • No expiration date or time limit for offer which could possibly result in a motor vehicle being listed for sale but no longer in inventory (violates Rule 3)


In addition to the specific advertising rule violations, the Board and the Division have concerns with the ability of TrueCar to access the inventory information of a licensed dealer. There would appear to be the potential for a consumer [who has been quoted a price for a specific vehicle and assured a “guarantee”] arriving at the dealership to find that vehicle has already been sold. The consumer may then be targeted for the sale of a different vehicle. In certain circumstances, this may constitute a “bait and switch” transaction which is prohibited by the Act as well as other Colorado statutes (and could be a criminal offense).



Moreover, concerns extend to the compensation structure that is based on a completed sale, meaning there appears to be unlicensed sales activity taking place—a violation for both the entity engaging in the unlicensed activity as well as a violation for the dealer that is engaging with that unlicensed entity.



As of December 8, 2011, neither TrueCar nor its employees were licensed by the Board. The Board has instructed the Division to pursue licensure by TrueCar as either a Used Motor Vehicle Dealer or to have individuals associated with TrueCar licensed as salespersons or both.


 

The Division also noted that licensed motor vehicle dealers who knowingly allow an unlicensed person to exercise any of the privileges granted to a licensed dealer are in violation of the Act and can be held accountable for the acts of such unlicensed
persons. [C.R.S. §12-6-109]



Should the Division receive any consumer complaint regarding the activities of TrueCar, the Board will look to the licensed, selling dealer and will hold the dealer accountable for any violations.



The Board and the Division requested the Colorado Automobile Dealers Association (CADA) to inform its members immediately of these compliance issues. Meanwhile, TrueCar has been directed by the Division to correct the advertising violations that are controlled via content on their site immediately and meet with the Division concerning licensure.


 

Source: http://www.colorado.gov/


 

EDITOR'S NOTE: I have also attached the original Colorado Department of Revenue document to this ADM Forum discussion as a file attachment for ADM Members to download in its entirety...


My questions for this discussion are as follows:

  1. Does this ruling mean that TrueCar is not able to do business in the State of Colorado?
  1. Will other state Departments of Revenue and Motor Vehicle Divisions  issue similar rulings and administrative guidance to the dealers in their respective states?

Tags: Board, Colorado, Colorado Bans TrueCar, Dealer, Department, Detailed, Documentation, Motor, Revenue, Vehicle

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It looks like Colorado is basically telling dealers that they are liable for Truecar's actions with this statement:

The Division also noted that licensed motor vehicle dealers who knowingly allow an unlicensed person to exercise any of the privileges granted to a licensed dealer are in violation of the Act and can be held accountable for the acts of such unlicensed persons. [C.R.S. §12-6-109] 

Wouldn't be surprised if other states didn't do similar... Maryland, Louisiana, Texas, and Kansas. 

If the dealers are liable, which i have said since the issue came to light, which other vendors may be implicated?

Dealers, lock down your data... JIM

What Colorado’s statement also does is puts the dealer on the hook for violating the GLB (Gramm-Lech-Bliley act) for not protecting their customer's data appropriately. Again, this opens the dealer up to legal action by various consumer groups (we all know how much they love car dealers!)

These are in fact all pretty easy fixes for Truecar. These 4 or 5 things won't shut them down, or make them go away. Probably less than a day of programming for them and they'll update their website/program and be in compliance.

From a consumers point of view what is the disadvantage of Truecar? I tried it out last night just to see what all the hubbub was about and it seems like it would be very appealing to the general public. This morning I got three emails from dealerships trying to get me to use the coupon at their store, so the dealers seem engaged too.

It looks like TrueCar simply needs to tweak their advertising and get licensed in the state: "TrueCar has been directed by the Division to correct the advertising violations that are controlled via content on their site immediately and meet with the Division concerning licensure". Nowhere does it say that they are banned from doing business there.

Even if TrueCar is directed to do the same in every state, I don't think this will slow them down. I'm sure their legal team can handle this easily.


Meanwhile, since regulators are obviously beginning to pay close attention to TrueCar transactions ("Should the Division receive any consumer complaint regarding the activities of TrueCar, the Board will look to the licensed, selling dealer and will hold the dealer accountable for any violations"), it's more important than ever for dealers to make sure that they honor advertised prices and refrain from any activities that can be considered "bait and switch".

Excellent interpretation, Jim. TrueCar is simply going to change their model for states that require them to. This letter isn't "banning" them, just saying they need to change their advertising model or dealers who use them will be liable.

Good point, Arnold... I suppose "Ban" was to strong of a word... Can we call it a "TrueHeadline"?

I certainly think this is going to spread to other states and TrueCar will have to modify their advertising model. To do it "properly" they just need cooperation from their dealer partners who could provide them stock numbers and/or allow them to use certain pricing for certain trim levels. Since they have all the dealer's data anyways, they could easily integrate a field to always keep an in-stock vehicle VIN on the pricing page. Then, of course, they'll need to be properly licensed or whatever in the states that require it. 

They can't really accomplish this without their dealer partner's consent and participation unless they alter their contract to give them carte blanche in assigning stock numbers to prices.

Jim - I see the same thing... a few tweaks and an application to the Colorado Motor Vehicle Board and TrueCar should be right back in business in Colorado.  However, two things remain to be seen:

1. Will the Colorado Motor Vehicle Board grant TrueCar a license?

2. How well will TrueCar handle similar situations if they occur in 35 of the 50 states?

I am ecstatic that Colorado is standing upt to this company! We need Missouri to follow up also.

Oh I am sure they'll adjust and come back, and somebody else will readjust  and repeat step one. 

TrueCar should be required to assign a stock # to every price they produce everywhere for any vehicle.

They are not banned, as Jim R pointed out.  However, if you sit and think about what JUST the requirement for stock # would really mean to the system they've set up . . .

I started to write a long paragraph on that, but after I thought about it . . . I'm not going to help TC/Zag out of this one within a public blog.  :)

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