LEGISLATIVE


CONSUMER CREDIT DIVISION ADVISORY LETTER 2017 - 03

by - Posted 3 years ago

TO:


Indiana registered automobile dealers ("Registrants")


FROM:


Ryan E Black, Deputy Director, Consumer Credit Division


RE:


Lease-Here, Pay-Here business model for used motor vehicles


This Advisory Letter is being issued by the Consumer Credit Division of the Indiana Department of Financial

Institutions ("the Department"). Certain examination findings and trends have raised concerns that Registrants

subject to Indiana's Uniform Consumer Credit Code ("IUCCC") providing financing for the sale of motor vehicles

may be engaging in disguised credit sales, either knowingly or unknowingly, by utilizing a Lease-Here, Pay-Here

("LHPH") business model for used motor vehicles. All comments outlined in this Advisory Letter pertain only to


transactions for a personal, family, or household purpose.1


Background


A long-standing practice of many used automobile dealers, and some new automobile dealers includes engaging in


consumer credit sales2 that are retained in-house, commonly known as Buy-Here, Pay-Here ("BHPH")transactions.

In the typical BHPH transaction, a consumer enters into a retail installment contract with a Registrant whereby the

consumer is obligated to make more than four payments or to pay a finance charge in order to pay for the purchase

of the vehicle over time. Such transactions are subject to the IUCCC, specifically Ind. Code §24-4.5-2. Significant

provisions that a creditor must comply with include but are not limited to: maximum rate of finance charge (or


credit service charge)3; permitted additional charges4; delinquency charges5; rebate upon prepayment of a

precomputed transaction6; and restrictions on deficiency judgments in consumer credit sales7.

During recent routine examinations of Registrants, the Department has observed an increased prevalence of a

business model where the transactions are structured as leases. In these transactions, a consumer does not obtain


ownership of the motor vehicle at consummation. Rather, the seller/creditor retains ownership of the vehicle until

such time that the consumer exercises either an early purchase option or end of term purchase option, if provided

for in the contract.


1The IUCCC does not apply to transactions for a purpose other than a personal, family, or household purpose; extensions of

credit primarily for a business, a commercial, or an agricultural purpose are exempt. See Ind. Code §24-4.5-1 -202(b).


2Ind. Code §24-4.5-1-301.5(8)

3 Ind. Code §24-4.5-2-201

4 Ind. Code §24-4.5-2-202

5 Ind. Code §24-4.5-2-203.5

6 Ind. Code §24-4.5-2-210

7Ind. Code §24-4.5-5-103




BMV 1-1-17 Changes SOS Dealer Division*


Operating Prior to Registration Time Increased

On 1-1-17 the length of time one can drive a newly purchased vehicle on Indiana roadways without registering the vehicle is increased from 30 to 45 days. Details are below.

For not more than 45 days after the date on which the person acquires the vehicle, a person who purchases a vehicle may display on the newly acquired vehicle a valid and unexpired license plate transferred from another vehicle that the person disposes of by sale or other means. While operating the newly acquired vehicle, the person must have in their possession a manufacturer’s certificate of origin, certificate of title, or a bill of sale.For not more than 45 days after the date on which the person acquires the vehicle from a licensed dealer, the person may display on the newly acquired vehicle a valid and unexpired temporary license plate that was issued by the licensed dealer. The law differs when a vehicle is purchased from a private citizen instead of a dealership.

  • A person who purchases a vehicle from a non-dealer may operate the vehicle for not more than 72 hours after the date of acquisition, but only for the sole purpose of transporting the vehicle by the most direct route from the place of acquisition to:

  • A place of storage, including the person’s residence or place of business;

  • An inspection station for purposes of emissions testing; or a BMV license branch or full or partial service provider to register the vehicle.While operating the vehicle, the person must have in their possession a certificate of title indicating that the person owns the vehicle.

Administrative Penalty for Registrations

As of 1-1-17 the Delinquent Fee will now be called Administrative Penalty. This applies to registering vehicles, off-road vehicles (ORV) and snowmobiles. The amount of the Administrative Penalty is changing. Indiana residents will be assessed an administrative penalty when registering a vehicle, ORV, or snowmobile more than 45 days after the date of purchase/acquisition. Non-residents of Indiana will be assessed an Administrative Penalty when registering a vehicle, ORV or snowmobile more than 60 days after becoming an Indiana resident. Administrative Penalty rules related to titles were effective on 7-1-16.

*(Note: All above information is provided for overview purposes only and is not a substitute for Indiana Motor Vehicle Laws. For details refer to Indiana Code-Title 9.)