In September 2014, dealers received a letter from the Department of Banking (“Banking”) regarding the repeal and replacement of the Motor Vehicle Sales Finance Act (“MVSFA”) with the Motor Vehicle Sales Finance provisions (“MVSF”) under the new Consumer Credit Code (“Credit Code”). This change was effective on December 1, 2014. Act 98 of 2013 created a combined Credit Code, which updated, modified, and consolidated governing retail vehicle installment sale contracts (“RISC”) under the MVSF. Another component of the Credit Code involves other goods and services that are sold and paid for over time (that are non-vehicle purchases), such as furniture, department store credit cards, etc. A link to the Act is available on Banking’s website at www.dobs.state.pa.us.
The new MVSF applies to indirect lending instances, where a RISC is entered into by the dealer, as the installment seller. Then, the dealer has the option of either assigning the RISC to a licensed sales finance company (manufacturer credit arm, or other financing source), or retaining the RISC on a buy-here/pay-here basis.
While the new MVSF provisions incorporated most of the MVSFA’s terms and requirements, there were changes that were made to the MVSF consistent with federal and state financing regulations, as well as PennDOT’s Vehicle Code, Federal Motor Carrier Safety heavy truck regulations, etc. Additionally, the MVSF provisions do require several new RISC wording revisions to be made to the written contract. These are different from the old MVSFA and the new MVSF includes these highlighted items (among other revisions) to be reflected in a revised RISC:
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The RISC must contain a statement that a customer may have additional rights under the Unfair Trade Practices and Consumer Protection Law. (As of December 1, 2014, a dealer must ensure all RISCs contain this new, required disclosure.)
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The RISC may contain an acceleration clause that authorizes the dealer or contract holder to declare the entire balance due and payable, if the customer provides intentionally fraudulent and misleading information on a credit application; files for bankruptcy; or defaults in the payment of a cross-collateralized obligation.
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Only the costs of necessary repairs disclosed at the time of the installment sale may be included in the contract. For example, in a buy-here/pay-here contract instance, necessary repair costs occurring after the contract’s execution may not be added to the original contract repayment obligation.
A dealer will need to ensure these highlighted, relevant and applicable wording changes (among other revisions) are incorporated into a new, revised RISC used by the dealer, provided by an indirect lender (manufacturer credit arm, or other financing source), or form provider, such as Reynolds and Reynolds. Like advertising created for a dealer’s use, ultimate responsibility for using a MVSF compliant RISC with a customer is the dealer’s responsibility, regardless of the source of the RISC, dealer, indirect lender or form provider.
