Driving the news: The financial services arms of Toyota/Lexus and Mazda this month issued notices to dealers stating that leases and sales involving brokers in the state of New Jersey will not be purchased.
Under both policies, if a brokered deal is inadvertently purchased due to an oversight or misrepresentation, the dealer will be required to repurchase the contract.
Toyota/Lexus sent its memo on May 5 and cited today (May 20) as the effective date. Mazda’s memo went out May 19, with a June 2 effective date.
Toyota and Lexus added that any application involving a broker must be declined using the adverse action reason: “Brokered Transactions are not accepted from this Originating State.”
Neither Mazda nor Toyota/Lexus have yet responded to a request for comment.
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For context: Both dealer notices reference a March 17 memorandum from the New Jersey Motor Vehicle Commission that states the act of brokering is illegal in the state.
The issue of brokering, or rather, illegal brokering, has heated up recently, particularly in the northeast region of the country, where the practice is more widespread.
Some New Jersey dealers and associations, including the New Jersey Coalition of Automotive Retailers (NJCAR) have been fighting to strengthen and/or enforce laws against illegal brokering in the state.
In April, Kia, Nissan, Hyundai, Toyota and Mercedes-Benz all sent out memos to dealers regarding their broker policies.
What they’re saying: Seth L. Dobbs, Esq., co-chair of law firm Fox Rothschild LLP’s National Automotive Practice, told us that although the memos aren’t new policies, it’s notable that memos were sent.
“The lender memos reflect a broader industry-wide effort to eliminate brokering practices, with enforcement initiatives now expanding beyond OEMs to include automotive finance captive lenders,” Dobbs told CDG News.
Dobbs is based in New Jersey and represents dealers across the country, including New York where they have recently tightened up broker regulations.
Bottom line: The lines on brokering have been drawn (again). The question now is how and if these policies will be enforced.
And, it’s worth repeating that this is regarding illegal brokering. We’ve heard from many who make a case that legal brokering is a necessary business.
