Ignite Consulting Partners is counting down the days until May 17, which marks the beginning of its in-person compliance training event.
After the pandemic forced the firm to cancel last year’s Compliance Unleashed, Ignite Consulting Partners is preparing to host its three-day training session for independent dealerships and finance companies.
“We’ve missed our ‘in-person’ relationships a great deal,” said Steve Levine, chief legal and compliance officer at Ignite Consulting Partners. “We find that folks can often be intimidated by compliance subject matter, but that face-to-face interaction helps ease their minds and allows us to learn more about our clients to customize solutions that fit their specific operations.”
With plenty of new federal lawmakers now in place and new leaders coming at the Consumer Financial Protection Bureau and the Federal Trade Commission, Levine said much regulatory ground will be covered during the event, which will be at the Embassy Suites North in Dallas.
“Our curriculum runs the full spectrum, we’ll look in-depth about some of the new regulatory challenges ahead, what we can learn from past regulator activity and provide a whole range of ideas that will allow dealers and finance companies to build their defenses and avoid lawsuits,” Levine said.
“In addition, we have classes on collections, credit furnishing and dispute handling, human resources, advertising and more,” he went on to say.
Along with other members of the Ignite Consulting Partners team, including Richard and Robbie Hudson and Randy Henrick, Compliance Unleashed also is set to have appearances by Brent Carmichael of NCM Associates and David Brotherton of the National Independent Automobile Dealers Association.
While Texas was one of the first states to lift many pandemic-connected restrictions, Levine emphasized that Ignite Consulting Partners is committed to orchestrating an event that can be safe and rewarding as possible for attendees.
“We wouldn’t be having an in-person event if we didn’t think it would be a safe event,” Levine said. “We’re working with the hotel to make sure there is plenty of room and that all local safety protocols will be followed. We’ll certainly try to address any specific needs or concerns of our attendees. We feel that the vaccine rollout will be in full swing well before the event and that, coupled with the practices that will be followed, will allow for a secure experience.”
To register for Compliance Unleashed, go to this website.
The Who song, “Won’t Get Fooled Again” ends with the words that I’ve chosen to be the title to this article, and through them, Pete Townshend sums up the subject of revolution by seemingly saying “the more things change, the more they stay the same.”
I have been thinking about these lyrics a lot lately as I contemplate the coming regulatory changes in our auto finance world. A Biden administration means that consumer advocates (dare I say zealots) will once again have the ears of those in power and in many cases be the ones in power, just like they were during the Obama presidency.
The Trump presidency’s drive to roll back regulation is over and we can expect to see more efforts to direct what’s permissible (and harsh guidance on what’s not) when selling and financing vehicles. I hope that those who were “fooled” into a false sense of complacency during the Trump years are ready to do the work necessary to please the New Boss.
When I wrote this article, Biden was President-Elect and in the middle of a transition. CFPB director Kathleen Kraninger was replaced early in the Biden administration, and we can bet that a new director will hold principles very similar to former director Richard Cordray and Sen. Elizabeth Warren, who was instrumental in the creation of the bureau, hence my choice for the title and theme of this article.
For those of you who need a history refresher, that leadership period of the CFPB was known for aggressive consumer protection through a practice that came to be referred to as “regulation by enforcement,” with the bureau deterring what it perceived as wrongful conduct across the industry with highly publicized and Draconian actions against individual companies rather than by promulgating clear rules.
That bureau aggressively pursued theories based on disparate impact, discrimination, and ability to repay arguments. That bureau issued severe penalties for what it found to be “abusive” conduct, even though “abusive” wasn’t defined. It was gearing up for a challenge to widespread use of arbitration clauses by creditors.
It published debt collection rules that blurred the lines between first- and third-party collections and demonstrated an intent to promulgate restrictions that would have fundamentally changed the way debts were collected. In the minds of those running things prior to the 2016 election, a Clinton presidency was going to allow it to continue down these paths, and it had quite a robust consumer protection agenda.
My belief is that new bureau leadership will pick up right where they left off in 2016, and we can expect more of the same. Coupled with an FTC that’s been more active in the area of consumer financial protection over the past few years, state regulators that have increased their scrutiny of the lending industry, new mini-CFPB’s being created at the state level, and a generation of plaintiffs’ lawyers that studied the CFPB’s playbook on what constitutes bad conduct by lenders, and it appears that we’re going to have to navigate some treacherous waters over the next few years.
Plus, the new CFPB leadership will certainly have more to say about servicing, collecting and even underwriting practices during the pandemic
Suggestions for operators
So what’s a BHPH dealer to do? My advice is to do your BEST, and I don’t say that flippantly.
Your businesses come in many different models and sizes. I don’t expect a dealership with 10 employees to have the same compliance resources as one with 100 employees, but I think each one has to make its BEST effort to have a demonstrable compliance program that is appropriate for the “size and complexity of its business,” as the CFPB has itself said.
When a dealership has to defend itself, whether it’s a lawsuit or a regulator action, the key is to demonstrate all the steps that have been taken to attempt to get things right. That means having a written plan for compliance, policies and procedures that show there is a commitment to doing things the right way, conducting personnel training to engrain the “right way” in daily operations, doing some audits or assessments to verify that the business is operating as it should, and facilitating a company culture that believes in treating customers in a fair and transparent manner.
I challenge each of you to re-read that last paragraph and honestly ask yourself whether you are doing your best to achieve this goal. Discuss this with your leadership team, take a look at each department or business function and make a list of areas where you are strong and those in which you may be deficient. Then take steps to close those gaps. It’s not enough to “know” you are doing it right, approach it as if you will have to present and prove it to a judge and jury one day, which means your plan has to be written and demonstrable.
The New Boss is going to be tough, a lot like the Boss before the last one. If we are going to thrive over these next several years, and make no mistake, the goal is to thrive, not just survive, then it’s up to each of you to play a leadership role in this effort. One of the first things I tell clients is that compliance isn’t something that can be bought. Sure, I can lay out the plan, but it’s got to dedicate resources to get it done. 2021 is the time to meet this challenge head-on. Protect your business and make it your goal to end the year with a stronger commitment to demonstrable compliance.
Steve Levine is chief legal and compliance officer of Ignite Consulting Partners, which offers compliance, operational and best practices guidance to car dealers and finance companies. Ignite’s team has broad experience working with businesses of all sizes. These experiences allow them to develop strategy, overcome internal obstacles and implement meaningful change. Send a message to info@IgniteCP.com to learn more. Follow Steve on Twitter @LawyerLevine for compliance and industry related content.
A former president of the National Independent Automobile Dealers Association and one of his store managers recently pleaded guilty in federal court to a charge of fraud conspiracy, according to an announcement from U.S. Attorney Scott Brady.
The Justice Department said former NIADA president Andy Gabler of Harborcreek, Pa., and Chad Bednarski, of Fairview, Pa., pleaded guilty to one count before U.S. District Judge Susan Paradise Baxter.
Last August, the Justice Department revealed a 17-count indictment against Gabler and Bednarski.
In connection with the guilty plea, the court was advised that Gabler, as the owner of Lakeside Auto Sales and Lakeside Chevrolet, and Bednarski, as the finance manager of Lakeside Chevrolet, engaged in the following illegal activity between January 2015 and January 2019:
— Gabler falsely indicated that customers made down payments and falsified and inflated the income of customers when submitting auto loan applications to financial institutions on behalf of customers.
— Gabler caused extended warranties to be sold to customers buying vehicles at Lakeside Auto Sales and Lakeside Chevrolet and deliberately failed to remit the paperwork and payments to the extended warranty company.
— Gabler and Bednarski falsely reported vehicle sales to General Motors for vehicles that had not been sold in order to obtain expiring incentive rebates, and.
— Gabler and Bednarski deliberately did not inform S&T Bank when Lakeside Auto Sales and Lakeside Chevrolet sold a vehicle that the dealerships had purchased utilizing S&T Bank’s floor plan financing in order to delay and attempt to avoid the dealerships’ required payment to S&T Bank for the sold vehicles which had been purchased using S&T Bank’s floor plan financing.
Baxter scheduled sentencing for Jan. 6 for Gabler and Bednarski according to the announcement. Officials said the law provides for a total sentence of 30 years in prison, a fine of $1 million or both.
Under the federal sentencing guidelines, the actual sentence imposed is based upon the seriousness of the offense and the prior criminal history, if any, of the defendant.
Pending sentencing, the court continued Gabler and Bednarski on bond.
Assistant U.S. Attorney Christian Trabold is prosecuting this case on behalf of the government.
Officials added the Federal Bureau of Investigation and the Pennsylvania State Police conducted the investigation that led to the prosecution of Gabler and Bednarski.
Allegations triggering a consent judgment surfacing back in May involving an Arizona independent dealership and the state’s attorney general could serve as a stern reminder of what compliance expert Randy Hendrick suggested to operators, especially when retailing vehicles classified “as-is.”
Among the seven deceptive practices alleged by attorney general Mark Brnovich against Dependable Auto of Tucson, Ariz., one included the requiring of consumers to sign a disclaimer stating that their vehicles were sold “as-is” and had no warranty, even though Arizona law says otherwise.
Henrick, a dealer compliance expert who serves as the head of the franchised dealer practice group for Ignite Consulting Partners, pointed out that in approximately 37 states, a dealer can sell a used vehicle “as is” without any warranties. In the other 13 states and the District of Columbia, Henrick said implied warranties cannot be disclaimed.
In all states, implied warranties cannot be disclaimed if you provide an express warranty or sell the customer a vehicle service contract within 90 days of sale, according to Henrick.
“Just because you are selling a vehicle ‘as is’ does not mean you can withhold negative information about the vehicle from the consumer such as its prior use, whether it was in an accident, or is a lemon law or rebuilt salvage vehicle,” Henrick wrote in an industry commentary previously published by Cherokee Media Group. “A number of states have lemon laws that define a ‘lemon’ (usually based on the number of unsuccessful repairs) and require that the vehicle be disclosed as such. Giving the customer a vehicle history report like a CARFAX is a good idea but not an assurance of no liability.
“State laws govern the duty to inspect and disclose both patent and latent defects,” Henrick continued. “Any merchant is considered to be more qualified than a consumer to inspect and disclose any defects that a reasonable inspection would uncover. Actively concealing defects or misrepresenting the condition of a vehicle is always a no-no. Check with your local attorney to understand how far your state’s law goes in requiring inspections and disclosing the results. It is always a good idea to keep a copy of the inspection report in the deal jacket to show your good faith.”
And speaking of salvage titles, that was another of the allegations from the Arizona attorney general as Brnovich claimed that Dependable Auto failed to disclose salvage titles to consumers. Henrick took a direct approach when discussing his operator recommendations about this topic.
“Some used-car dealers retitle vehicles to avoid having to disclose vehicle damage. A vehicle that has incurred water or hurricane damage may need a water damage title in some states and most states require a salvage title if an insurance company has declared the vehicle a total loss. But some states do not,” Henrick wrote.
“Title washing occurs when a dealer takes the vehicle to a state that does not have the necessary title branding to obtain a clean title. Title washing also occurs when an unscrupulous dealer removes the damage branding from the physical title,” he continued.
“Title washing is a federal and state felony and dealers have served jail time for mass title washing. Don’t even think about it,” Henrick went on to emphasize.
Brnovich went on to allege that Dependable Auto engaged in multiple other deceptive practices, including:
— Charging consumers for third-party service contracts, but failing to actually purchase the service contracts
— Overcharging consumers for government and document prep fees
— Failing to make repairs to vehicles it sold in accordance with the warranty required by Arizona law
— Representing that consumers were receiving “free labor maintenance” when the sales contract required consumers to pay over $1,200 for a service contract
— Misrepresenting the late fees it could charge consumers
The Arizona attorney general secured more than $90,000 in restitution for consumers connected to the consent judgment against Dependable Auto
Under the terms of the consent judgment, Dependable Auto’s owners are banned from engaging in these deceptive behaviors in the future. The owners of Dependable Auto have made the full restitution payment to the Arizona attorney general and the funds will be returned directly to consumers, according to Brnovich.
“Auto dealerships cannot charge consumers for services and fail to provide those services or lie to customers about the terms of their contracts,” Brnovich said.
Henrick closed that industry commentary with this recommendation to all dealerships.
“As the front-line seller of used vehicles, your obligations to disclose warranties, defects, and odometer readings, along with your obligation to deliver a clean and accurate title, can provide challenges in used-car selling,” Henrick wrote.
“Do a reasonable inspection (and a beyond-reasonable inspection for certified vehicles) and be up front with the customer about issues and expectations for the vehicle,” he went on to note. “Selling used vehicles is an area ripe for regulatory investigations, arbitration claims and lawsuits, but having a systematic process to obtain, inspect and disclose issues with the vehicle should help you manage used-car selling successfully.”
Stemming from calls for social distancing to curtail the spread of the coronavirus, the Georgia Independent Automobile Dealers Association (GIADA) is hosting a webinar so operators can meet their continuing-education requirements needed for state license renewal by the end of March.
Instead of its typical in-person class, GIADA said it's orchestrating the webinar on Friday.
“GIADA is taking extra care and precautions to help prevent the spread of COVID-19,” the association said in a post on its website. “Our staff is dedicated to staying updated on and vigilant with important procedures from the CDC, World Health Organization, Georgia Department of Public Health and local authorities, all of whom are helping us accomplish this.”
GIADA noted that the association will be sending a legal document for the dealership to sign and return that the designee participated during the webinar.
“Once we receive the document, we will email your certificate to you,” GIADA said. “Not completing a (continuing education) is not an option, so we are making every effort to ensure all dealers can take the class in a timely manner and renew their dealers license by March 31.”
GIADA officials mentioned another element of its operations that being modified because of the ongoing crisis.
“Please mail or scan your titles to the GIADA Office and order your TOPS online whenever possible to prevent our office from being overcrowded until the current situation is cleared by the CDC,” association officials said. “This will protect you and our staff. We want to keep the GIADA office open, so we need to take these precautions.
“Thank you for your understanding. As always, we want to take care of the dealers in Georgia,” GIADA added.
For more details, go to giada.org.
A pair of North Carolina independent dealers received a six-figure penalty from the state’s attorney general.
This week, North Carolina attorney general Josh Stein announced that his office won a consent judgment against Nathaniel Thomas Brown and Samuel Ross Ketner and their dealerships — Auto House of Mooresville and Auto House of Salisbury — over deceptive sales and business practices that violated North Carolina’s Unfair and Deceptive Trade Practices Act.
The judgment requires the defendants to pay $160,000 in consumer restitution and fees and permanently bans them from engaging in any dealership business in North Carolina.
The lawsuit against Brown and Ketner alleged that they altered car bodies, emblems, interiors and accessories to make them appear as if they were of a higher trim level, and therefore of a higher value.
The suit further alleged:
— The defendants distributed promotional material to consumers that falsely implied that the recipient had won a prize,
— The defendants altered or falsely reported information on buyers when submitting credit applications to finance companies
— The defendants collected payment for service contracts with a third party but never submitted the service contracts or the payments to the third party
— The defendants sold vehicles without accurately disclosing the damage history of each vehicle.
“I’m pleased that these defendants won’t be able to take advantage of other North Carolina consumers,” Stein said in a news release. “My office will hold accountable businesses that scam customers. That’s what the law demands.”
The complete judgment can be viewed here.
Editor's note: This report has been updated to note the event has been rescheduled for Aug. 24-26 because of the coronavirus pandemic.
Compliance for buy-here, pay-here dealerships and finance companies that specialize in the subprime credit space can be extremely complex in connection with issues related to human resources, social media and advertising, as well as information security.
To help operations of all sizes and needs, Ignite Consulting Partners again is hosting Compliance Unleashed, the firm’s three-day conference that serves as a springboard to a year-round plan of support so companies can avoid pitfalls potentially resulting in swift penalties, or in the worst scenarios, going out of business completely. The event runs from May Aug. 24-26 in Fort Worth, Texas.
“The dangers faced don’t just come from car sales and financing, so we’ve included classes on diverse topics,” event organizers said. “Through this holistic approach, we aim to provide our participants with the skills and confidence to lead their companies on their compliance journey.”
The opening day includes a keynote presentation from Jessica Lesser, former head of Dallas field office for consumer protection with the Texas attorney general. Lesser also spent time as a vice president with GM Financial.
Educational sessions not only include presentations from the Ignite Consulting Partners team of Steve Levine, Richard Hudson, Kelly Blankenship, Randy Henrick, Jessica Cumbee and Bill Metzinger, appearances also are on the agenda by Brent Carmichael of NCM Associates and David Brotherton of National Independent Automobile Dealers Association
“We know that on a daily basis, business needs often force compliance initiatives to take a back seat to other priorities. That’s why it’s so important to take advantage of our time together and focus on issues that usually get pushed aside until a crisis brings them to the forefront. It’s our hope that the knowledge you gain here will give you the tools to be an impactful leader during these challenging times,” Ignite Consulting Partners said.
“We often hear that compliance personnel have two common obstacles — relevant subject matter training and resources to call upon when new issues arise,” the firm continued. “Our conference is designed to solve both of these. First, we provide valuable subject matter expertise. Secondly, and perhaps even more importantly, we plan this event to allow you to network with others and learn from each other.
“We don’t view our conference as a finite event, but as membership in a compliance community to facilitate both personal and business development,” the firm went on to say. “From our post-conference coaching sessions to our monthly webinars to our Compliance Unleashed ListServe, we are committed to enriching our community for the greater good.”
Ignite Consulting Partners also planned time for attendees to unwind with a reception on tap at the Dallas Cowboys Golf Club.
The complete agenda and registration details for Compliance Unleashed can be found on this website.
The National Independent Automobile Dealers Association is hosting a free webinar on Thursday focused on a business function the association is concerned that operators might overlook or not understand completely — maintaining compliance with federal mandates from the Occupational Safety and Health Administration (OSHA).
In this webinar, hosted by NIADA and presented by ComplyNet, operators will participate in “crash course” on how to complete a variety of tasks, including:
— Records that must be kept
— How to fill out OSHA forms properly
— When completed forms must be posted and provided to OSHA
— When specific incidents must be reported to OSHA
— Fines and penalties that can be levied for failing to fulfill these obligations
NIADA mentioned the presenters also will discuss the differences between repeat violations, willful violations, serious violations, and other-than-serious violations as well as review recent cases in which OSHA has initiated criminal proceedings against offenders.
The experts will also discuss the importance of analyzing injuries and near misses, and how this exercise can lead to fewer injuries and illnesses, greater productivity and increased savings.
“You can't afford to miss this opportunity to learn how this applies to you,” NIADA said.
The free webinar begins at 1 p.m. ET on Thursday. Registration for the session can be completed here.
Along with adding two more veterans to its roster of compliance experts, Ignite Consulting Partners plans to offer what the firm believes is the first free training offering of its kind.
Ignite is going to host a free webinar about completing the financing and delivery of vehicles to Hispanic customers by conducting the entire education event in Spanish.
The webinar will be led by one of Ignite’s newest consultants, Jessica Cumbee, who was formerly general counsel with Tricolor Auto, a leading provider of financing to Hispanic customers.
The session is scheduled for 3 p.m. ET on Feb. 11. Dealers and managers can register for the free event here.
“We feel this webinar is an important step to make compliance attainable for what has been an under-served market,” Cumbee said in a news release. “Many car dealership and finance company personnel speak Spanish as their native language, and I believe that explaining compliance concepts to them in the language with which they are most comfortable will help their understanding and retention.
In my experience, the compliance message doesn’t easily spread throughout a company, so providing this alternative is a way to increase awareness and protect the business,” she continued.
This free webinar is part of Ignite’s monthly series dedicated to important compliance concepts. Sales personnel, collections staff, administrative employees and those having customer interaction are all encouraged to attend.
“My plan is to cover the crucial compliance concepts in a way that is both entertaining and informative and encourages questions,” Cumbee added.
As mentioned, Cumbee is one of the newest additions at Ignite. Along with her time with Tricolor Auto, Cumbee has previously been general counsel with Spartan Financial.
The other expert who recently joined Ignite is a family name to readers of SubPrime Auto Finance News.
Randy Henrick joined the firm as the leader of Ignite’s new franchised dealer group. Previously with Dealertrack, Henrick’s background includes auto finance, privacy, data security and consumer credit. He is a frequent speaker at industry events and regular contributor to SubPrime Auto Finance News.
“Randy is a thought leader on dealer training and education, which philosophically aligns with Ignite’s vision. Plus, he brings a wealth of expertise that will be a benefit our clients, both franchise and independent dealers,” Ignite chief legal and compliance officer Steve Levine said.
Dealer Profit Pros president Kenny Atcheson closed 2019 by reaching out to an array of leading executives, experts and observers of the buy-here, pay-here industry and other parts of the automotive space to gather their expectations for 2020.
From compliance to wholesale and retail, Atcheson recorded audio segments with each participant and posted them on his website. Along with Atcheson, the group offering their 2020 projections included:
— Scott Carlson, founder of AutoZoom
— Eric Johnson, partner at Hudson Cook
— Chris Macheca, president and chief operating officer of PassTime
— Bill Neylan, president and chief executive officer of TaxMax
— Nick Zulovich, senior editor of SubPrime Auto Finance News and BHPH Report
All of the segments can be found here.
