New Rule Allows for Customer Referral Fees
Before last Thursday, if an independent dealer paid a customer a referral fee they could and should have received a cease and desist order from the Texas Department of Motor Vehicles. For years the agency interpreted a customer referral fee as brokering, found in the Texas Administrative Code section 215.85. Due to that interpretation, when a dealer would contact TIADA to discuss their customer referral program, the conversation would usually end with frustration and confusion. Dealers were frustrated they couldn't pay a customer referral fee and confused as to why it was considered brokering. Independent dealers were left with a tough choice since many claimed their customer referral programs accounted for 30 - 40% of their business.
About three years ago, TIADA set out to change the perception and rules related to paying a customer referral fee. Blake Ingram, an independent dealer from Dallas, who at the time served on the TxDMV Board, lead the charge to educate and inform staff and Board members.
"It never made sense to me that brokering and referral fees were considered the same," Ingram said.
DMV Director of Enforcement, Corrie Thompson, who is charged with enforcing the rule along with DMV General Counsel David Duncan, wrote the language of the rule that eventually passed. During the TxDMV Board meeting, TIADA President-Elect Robert Beck from Stop-n-Drive Motors in San Antonio and TIADA member Erika Blankenship from Texas Auto Center in Austin and San Marcos both testified in favor the language.
The recorded testimony can be found on the TxDMV website. See Agenda Item 6.
The new rule will go into effect in early September. TIADA is working with TxDMV to develop clear guidelines on how an independent dealer can implement the new rule and stay compliant. Look for those guidelines in future TIADA communications.
TIADA President-Elect Robert Beck and TIADA Member Erika Blankenship after testifying before the TxDMV Board.