As a part of the last SubPrime News Update of the year before the Cherokee Media Group team breaks for the holidays, the publication wanted to share a rundown of the top 10 stories that generated the most reader interest in 2014.

Not surprisingly the majority of these leading stories had a connection to a significant regulatory development with agencies such as the Consumer Financial Protection Bureau, the Federal Trade Commission and the Department of Justice.

1. SubPrime Auto Finance Executive of the Year Winner Named

CARY, N.C. — SubPrime Auto Finance News has revealed the recipient of this year’s SubPrime Auto Finance Executive of the Year award, an honor sponsored by Black Book Lender Solutions.

The accolade is going to Ian Anderson, president of Westlake Financial Services, which reached $2 billion in total receivables earlier this year.

Sparked by the some of the best months in company history this summer, Westlake’s portfolio now has that total receivables figure connected to more than 270,000 customer accounts.

2. Credit Acceptance Subpoenaed by Justice Department

SOUTHFIELD, Mich. — Another day, another finance company acknowledges it has received a subpoena from the U.S. Department of Justice.

Credit Acceptance Corp. posted a filing with the Securities and Exchange Commission stating the company that specializes in subprime auto financing received a civil investigative subpoena from the Justice Department pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

The subpoena is directing Credit Acceptance to produce certain documents relating to subprime automotive finance and related securitization activities.

3. CPS to Pay $5.5M to Settle FTC Charges

WASHINGTON, D.C., and IRVINE, Calif. — The Federal Trade Commission said that Consumer Portfolio Services will pay more than $5.5 million to settle charges that the subprime auto finance company used “illegal tactics” to service and collect consumers’ loans, including collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family and employers.

According to regulators, CPS agreed to refund or adjust 128,000 consumers’ accounts constituting more than $3.5 million and forebear collections on an additional 35,000 accounts to settle charges the company violated the FTC Act.

The FTC also indicated CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.

4. CFPB Allegations Against American Honda Finance

TORRANCE, Calif. — First, the Consumer Financial Protection Bureau and the U.S. Department of Justice delivered notices to Toyota Motor Credit Corp., alleging discriminatory practices regarding vehicle financing.

Now, American Honda Finance revealed it also received the same allegations from these federal regulators.

In documents filed with the Securities and Exchange Commission, officials from the CFPB and DOJ sent a letter to Honda’s captive finance company saying they have authorized enforcement actions alleging discrimination in automobile loan pricing to certain borrowers by dealers and alleging the loan pricing disparities were caused by AHFC’s business practices related to dealers.

5. Pelican Auto Finance’s Plan to be a Top Subprime Player

CHADDS FORD, Pa. — Pelican Auto Finance is using what executives describe as a “crawl-walk-run approach” to growth in the deep subprime auto financing world. And they want to start running to the point where the company’s portfolio ranks among the top five institutions nationwide, blending together a business strategy of being an indirect lender for franchised and independent dealers to tap as well as a purchaser of paper from buy-here, pay-here operators.

“Right now we have significant capitalization behind us,” Pelican chief executive officer Troy Cavallaro told SubPrime Auto Finance News.

“I think a year from now we’re going to be well positioned to be one of the top four lenders in the deep subprime space,” Cavallaro continued. “I understand that Westlake’s portfolio is well over a $1 billion and Credit Acceptance’s portfolio is well over $1 billion. We don’t expect to get there in the next 12, 18 or 24 months. But we think we can position ourselves to be the No. 4 or No. 5 deep subprime lender in the nation. That’s our goal is to get there.”

6. Dodd-Frank Power Triggers Action Against NY Lender

NEW YORK —The Dodd-Frank Act provided the foundation for more regulation of auto financing by federal regulators. Now a state-level agency is leveraging Dodd-Frank to seek orders against a New York-based subprime lender.

Benjamin Lawsky, who is New York’s Superintendent of Financial Services, obtained a temporary restraining order in federal court against Condor Capital Corp., a subprime auto lender headquartered on Long Island, and its owner, Stephen Baron.

Lawsky explained a DFS investigation uncovered that allegedly Condor has engaged in a longstanding scheme to steal millions of dollars from its customers — among other unfair, abusive, and deceptive practices.

7. Investment Firm to Merge Flagship Credit Acceptance & CarFinance Capital

CHADDS FORD, Pa., and NEW YORK — The investment firm that oversees two subprime auto finance companies — Flagship Credit Acceptance and CarFinance Capital — announced that it is merging the two operations together.

Officials from the alternative asset management unit of Perella Weinberg Partners explained the combined company now will total assets in excess of $2 billion.

“Since forming Flagship and CarFinance, we have been pleased with the performance and strong execution of both companies,” said David Schiff, partner at Perella Weinberg Partners and portfolio manager of the asset based value strategy. “Together, the two companies will create a top-tier independent auto finance company with enhanced scale, lower cost of capital, superior cost controls and more efficient access to the capital markets.”

8. Report: 6 Finance Companies Subpoenaed in NY

NEW YORK — Regulatory investigations of auto finance companies are piling up as now reportedly the New York Department of Financial Services is joining the fray.

An online report citing an anonymous source indicated New York state’s financial services regulator subpoenaed the captive arms of Ford, Honda, Nissan and Volkswagen as well as Santander and TD Bank.

A person familiar with the matter told Reuters the developments are part of a probe of possible consumer abuses in subprime auto lending.

9. Department of Justice Subpoenas GM Financial

FORT WORTH, Texas — As the company completed a property purchase to house more personnel, General Motors Financial said in a regulatory filing that the company has been subpoenaed by the U.S. Department of Justice.

According to the paperwork posted with the Securities and Exchange Commission, Justice Department officials served GM Financial with a subpoena on July 28.

Company officials said the subpoena directs them to produce certain documents relating to their and their subsidiaries’ and affiliates’ origination and securitization of subprime auto loan contracts since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

10. Latest House Bill Aims at Curbing CFPB’s Authority

WASHINGTON, D.C. — During the same week the Consumer Financial Protection Bureau “strongly urged” companies to make credit scores more readily available, a bill passed through the U.S. House aimed at limiting the authority of the bureau, which the measure’s author called, “a dangerously powerful and dangerously unaccountable agency.”

As currently constructed, Rep. Sean Duffy, a Wisconsin Republican who authored H.R. 3193 — known as the Consumer Financial Freedom and Washington Accountability Act — indicated the bill would accomplish four objectives.

SubPrime Auto Finance News gratefully thanks all subscribers, advertisers and industry partners for their support, interest, readership and feedback throughout the year.

Regular updates on industry trends, analysis and more will return on Jan. 2.

In the meantime, happy holidays and best wishes for a great 2015.

Best regards,
Nick Zulovich
Editor, SubPrime Auto Finance News