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    Thomas B. Hudson, Esq. is the Publisher of Spot Delivery, a monthly legal newsletter for auto dealers, and the Editor-in-Chief of CARLAW®, a monthly report of legal developments in all states for the auto sales, finance and leasing industry. He is also a partner in the Maryland office of Hudson Cook, LLP. Spot Delivery and CARLAW are produced by Counselorlibrary.com LLC. For more, visit www.counselorlibrary.com

    Hudson Cook, LLP - Hanover, MD
    tbhudson@hudco.com
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Rabbit Disaster Recovery Plans

Appeared August 2013 - volume 10 - issue 8 - page 26
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I couldn’t make this stuff up if I tried.

Last Wednesday, I took my cup of coffee and copy of The Washington Post to the screen porch, took a sip and unfolded the paper. On the front page was a story about Maury the Magician and Casey the rabbit.

It seems that Maury, a 54-year old professional magician, used Casey in his magic act that he performed mostly for kids. Some time ago, as Maury concluded his act, a woman flashed a badge and said she was with the U.S. Department of Agriculture. “Where,” she asked, “was his federal license for Casey?”

Yep, that’s right. A 1966 law, later amended, requires most people who “exhibit” animals to get licenses for their animals. So Maury got the license.

The rules that come with the $40-per-year license require Maury to periodically take Casey to the vet and allow USDA inspectors to make surprise visits to Maury’s home to make sure Casey is OK. When Maury and Casey go on the road, Maury must submit their itinerary to the feds.

Recently, Maury got a letter from the USDA telling him that if he wanted to keep the bunny, he needed a “disaster recovery plan” setting forth what he would do to keep Casey safe in the event of a flood, hurricane, tornado, ice storm or other form of catastrophe.

The front-page newspaper story, or the threat of it, resulted in some furious backpedaling over at USDA, with the secretary of the agency ordering a review of how the disaster recovery rules were to be applied to small operations like Maury’s.

By now, you’re wondering what on earth this has

to do with the car business.

Here’s the connection. As the new Consumer Financial Protection Bureau has started its examination of the car finance operations of banks and other consumer finance businesses over which it has examination authority, we’ve learned what the Bureau’s expectations are with respect to what it expects to see when it does a compliance examination. In the process, we’ve learned a new buzzword – “compliance management systems.”

A compliance management system, or, more simply, a compliance management program, is the mechanism by which those who are regulated by the Bureau will meet the new compliance standards that the Bureau is imposing. What are those new standards? How has the compliance burden changed?

Here’s how. Before the Bureau came into existence, for the most part, a dealer and others regulated by the Bureau could stay out of trouble by not violating the law.

That is no longer sufficient. Dealers and those others must not only avoid violating the law, but must be able to show that they have programs and systems in place to avoid violating the law. Those programs and systems are a “compliance management system.”

If you review the Bureau’s published expectations about what a compliance management system should look like, you will find that creating and managing a system will be a large and expensive effort, and you might be tempted to think of rabbit disaster recovery systems.

You’d be forgiven for thinking about Maury and Casey, but for one saving part of the Bureau’s description of these required systems. According to the Bureau, a compliance management system can be based on the size, complexity and scope of activities of the regulated entity.

Will the Bureau enforce its mandate regarding a compliance management system in such a way that a three-person dealership can comply without breaking the bank? A government agency exercising sensible discretion? That would be almost like magic – a bit like pulling a rabbit out of a hat.

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