(As published in Leasing News on June 12, 2024)

For the past six years I have represented the New York Automobile Leasing Brokers Association as an attorney and registered lobbyist in a fight to stave off the push by the Greater New York Automobile Dealers Association (“GNYADA”) and the local United Auto Workers (UAW) to put the brokers out of business in New York.

Before the New York State legislature closed the session last week, both the Assembly and the Senate passed S.7553-A / A.3499-B (the “Bill”). The Bill is drafted in a complex manner so that the brokers cannot make the disclosures required in the Bill and the result is, if signed by the governor, the law will prevent the brokers from being paid, among other issues. As such the Bill is anti-competitive and violates the New York and U.S. Constitutions.

The Bill only permits a broker to be paid for its services by the dealer even though there are transactions that regularly occur since the pandemic in which the consumer makes the payment to the broker. Impossible. The Bill also requires the broker to disclose the amount of the broker’s fee in a written contract with the customer prior to the leasing of or sale of a vehicle. The hitch is existing law also requires a notification to the customer that it can cancel the contract within three days after the contract is executed. If as is usually the case, the customer were to sign the contract on delivery of the vehicle (because we all know this is the only time that all of the details of the transaction are ironed out including, price, make model and VIN in order to complete a contract), the customer can cancel the contract three days after he/she takes the car and the broker won’t get paid! Ridiculous.

Those are just a few of the legal snippets from an outrageously drafted Bill that will prevent the brokers from doing business in New York.

Sadly for New York State, the Bill may cost it approximately $5.4 billion in annual revenue generated by licensed auto brokers: figure an average of 10,000 cars each month or 120,000 cars a year, $45,000 average vehicle cost (which is a low average as most brokered vehicles are between $60,000 – $100,000) equals $5.4 billion!

The greedy dealers ranked 3 of the top 10 consumer fraud complaints in 2023 on the Attorney General of the State of New York (“NYAG”) press release dated March 4, 2024, with 3,533 complaints. This represents a whopping 37.2% increase over 2022. Notably, the NYAG press release does not contain any reference to complaints against brokers. As reported previously, the dealers have been admonished by the manufacturers to stop price gouging consumers. See  GM and Ford Article In fact, dealers made a fortune taking advantage of consumers and low inventory as a result of the pandemic. See NY Times Article.

As if price gouging was not enough for the dealers, over the past three months, the NYAG has secured $2.25 million in restitution and penalties from 7 dealers caught charging bogus fees upon lease buyouts by their customers. See AG Press Release 6-7-24. For the wealthy dealers, this is just a slap on the wrist and the cost of doing business.

Absurdly, the dealers and the union have claimed for years that the legislation is intended to protect consumers from the fraudulent activities of brokers. They have never come up with instances of rampant fraud on the brokers’ part except for one case of a bad apple in 2023 who was not a licensed broker and was prosecuted by the Queens district attorney.

Automobile brokers are a key part of the auto market. They are a trusted intermediary between customer and dealer, often speak the customer’s language and explain the deal terms. Brokers assist disabled customers who need special accommodations, are unable to visit a dealership or require extra assistance to obtain vehicle conversion accessories. Qualified dealers in New York and brokers in business for more than 40 years have developed clientele whom they service for the life of the vehicle. Broker business depends on repeat customers and word of mouth. Bad practices will lead to losing customers. Brokers search out the best deal for the consumer, so the consumer spends less on a car. Without brokers, customers likely will pay more.

Moreover, in 1995, the National Automobile Dealers Association (“NADA”) entered into a consent decree with the United States Department of Justice (“DOJ”) as a result of a complaint brought against the NADA alleging anticompetitive practices designed to lessen competition among car dealers.  U.S. v. National Automobile Dealers Association, Civil Action No. 95-1804 (HHG) (D.D.C.) Among the practices alleged was urging dealers to boycott auto brokers. Dealers sought to keep brokers out of the auto market because brokers were able to create transactions for consumers at lower cost to the consumer. The NADA Reduced Margins Task Force Report in 1994 recommended: “Refuse to do business with brokers or buying services. They inevitably do harm to new vehicle gross margin potential.” In the consent decree, the NADA agreed to abstain from such anticompetitive practices for 10 years. Just 15 years after the consent decreed expired, the GNYADA took up where the NADA left off. GNYADA’s March 4, 2021 Legislative Update stated: “[t]his week, the Association took another step forward in its effort to curtail this industry [brokers] by forming a special committee with the single task of passing sorely needed broker reform legislation.” Nowhere in the GNYADA newsletter and no memorandum in support of any of the bills introduced over the past 6 years contain concrete factual information explaining why broker activities require reform in New York. The bills are just a sweeping measure to put the brokers out of business, thereby removing any competition against dealers.

Sloan Schickler is a partner in the commercial finance law firm, Schickler & Schickler PLLC. Schickler, a veteran vehicle leasing, finance and bank attorney and the attorneys in her firm have decades of experience representing and protecting lessors, banks, captive and independent finance companies in all facets of the vehicle leasing and financing business. She has served as the NVLA Legal and Legislative counsel since 2017, is currently the only woman on the NVLA board of directors and is a supporter of Leasing News and sits on its Advisory Board.

Sloan can be reached at: sloan.schickler@schicklerlaw.com or 212-262-5297.