Black Friday and Cyber Monday might have already passed, but GWC Warranty contends that dealerships still can leverage consumers’ enthusiasm for spending to rake in some retail revenue via their finance departments.
“There are two ways to look at the holiday season,” the company said in a post on its blog, "Accelerate". “You can chalk it up as the slow time of year, or you can go big and use the last month to provide a jolt to the year’s profits. The choice is yours.”
With that decision ahead for dealers large and small, GWC Warranty offered four recommendations operators can try in order to breathe some life into the final days of the year.
“It’s the season for deals, giving and new beginnings, and your business is no exception,” the company said.
1. Social media advertising
If your store hasn’t tried social media advertising, GWC Warranty said the operation may be missing out on the deal of the century. Ads on Facebook, for instance, can be relatively affordable and allow you to target by age, location, gender and even interests.
“If you have a specific car for a specific audience that you need to get off your lot, social media ads might be your ticket to a quick, profitable sale,” the company said.
2. Contests
GWC Warranty emphasized that customers love to win, and they love a deal.
Promoting contests that can get customers engaged with your dealership don’t just reward the winner, but also get more foot or internet traffic for your dealership, according to the company.
“You can try discounts, free service vouchers, gas cards or similar giveaways for customers that help get conversations started during a season when they might otherwise not happen,” GWC Warranty said.
3. VSC second chance
If your customers didn’t bite on service contract coverage the first time around, GWC Warranty suggested that dealerships could try getting them back in to see if they might be interested now that they’ve been in the vehicle for a few months.
“Especially during the holiday season, you’d hate to see an unexpected repair hurt a customer’s monthly budget,” the company said. “You can use this to position a VSC as the perfect gift to give themselves this holiday season.”
4. Test a new lead tool
If this time of year is typically slow, GWC Warranty acknowledged that it couldn’t hurt to try something new.
“You can pilot the use of a tool like Covideo that uses video communication to help nurture leads and get customers on your lot,” GWC Warranty said. “Give it a shot with a few leads that come in and if it works well, you can build it into your regular processes for the new year.”
FNI Inc. president David Bafumo spent part of his Thanksgiving holiday dissecting the potential pitfalls that resulted in Santander Consumer USA reaching a settlement with the Consumer Financial Protection Bureau over a GAP product.
Two days before the country carved turkeys and passed around pie, the CFPB described a consent order detailing how the bureau found Santander violated the Consumer Financial Protection Act of 2010 by not properly describing the benefits and limitations of its S-GUARD GAP product, which the finance company offered as an add-on to its auto finance products.
The regulator also stated SCUSA failed to disclose the impact properly on consumers of obtaining a contract extension, including by not clearly and prominently disclosing that the additional interest accrued during the extension period would be paid before any payments to principal when the consumer resumed making payments.
Under the terms of the consent order, the CFPB said Santander must, among other provisions, provide approximately $9.29 million in restitution to certain consumers who purchased the add-on product, clearly and prominently disclose the terms of its contract extensions and the add-on product, and pay a $2.5 million civil money penalty.
Meanwhile, Bafumo did not doze into a turkey-induced nap this past week. Instead, he examined the consent order that’s available here and offered his analysis in an attempt to help dealerships and finance companies not have to fork over millions to their customers and the bureau.
“The bureau hangs their enforcement hat on just one element of the S-Guard GAP program, basing the entire ‘unfair and deceptive’ finding on a 125 percent loan-to-value benefit limitation found in the S-Guard consumer contract,” Bafumo wrote in his latest Take Action newsletter that he shared with SubPrime Auto Finance News.
“The cap means that no GAP benefit coverage is provided for the amounts financed over 125 percent — potentially leaving those customers partially unprotected,” he continued in the newsletter available here.
“In the bureau’s opinion, the limitation makes the S-Guard GAP marketing materials deceptive, as they do not specify the limitation and instead, make multiple references to ‘true full coverage,’ implying that a customer’s complete deficiency balance would be covered by the GAP contract benefits," he went on to say.
Bafumo explained that the CFPB first delved into regulating GAP coverage in 2012 and 2013. As a result, he noted that many providers modified their marketing material. Providers often changed the wording from, “In the event of a total loss, GAP pays the difference in what you owe on your loan and what your insurance company settles for,” instead to “GAP helps pay the difference in what you owe…”
Bafumo emphasized that this modification recognized there are exclusions to coverage and to imply the possibility of a balance still due.
“Missing this well known, industry-wide adjustment in GAP marketing was a mistake by Santander’s due diligence team and by the S-Guard GAP administrator who provided both the product and the marketing materials,” he said.
Bafumo closed his latest update by stressing some of the points and strategy offered via his firm that’s online here. He included:
- Document your product vendor and marketing due diligence.
- Establish a standardized, compliant marketing process.
- Implement a product-specific consumer disclosure form.
- Require product vendor agreement terms that protect you.
Lisa Scott took charge of PAR North America (PAR) last August with a specific objective near the top of her agenda as she began to oversee this segment of KAR Auction Services.
“One of my goals was to enhance the customer experience by creating the leading compliance platform in the recovery industry,” Scott told SubPrime Auto Finance News via email.
Well, now the industry can begin its evaluation of the robustness of PAR’s compliance endeavors. On Wednesday, the company launched its new web-based, self-service portal with real-time access to PAR’s compliance data and the compliance data of more than 600 vehicle recovery vendors across the U.S.
PAR — a provider of vehicle transition services in the U.S. with coast-to-coast solutions for recovery management, skip-tracing, remarketing and title services — indicated that Platinum Compliance offers this transparency tool in one easy-to-use dashboard.
“Our customers are facing increased scrutiny and heightened regulatory requirements,” Scott said in a news release. “Platinum Compliance gives our customers the peace of mind that only qualified, experienced and trained recovery vendors are working their assignments.
“Never has our industry had a more comprehensive real-time database of due diligence and compliance documentation — including current state-level recovery vendor requirements across all 50 states,” she continued.
In the email exchange with SubPrime Auto Finance News, Scott explained that vice president of compliance and operations Jessie Herdrich has been key on this project, working closely with the company leadership team to develop PAR Platinum Compliance. Herdrich is among the executives set to appear during Used Car Week 2018, which begins on Nov. 12 in Scottsdale, Ariz.
“We know that our customers are feeling the pressure as the industry faces increased regulatory scrutiny. We have always had a robust vendor management program but didn’t have a streamlined database or a real time point of access for our clients,” Scott said.
“Our biggest vendor management challenge is gathering and organizing information for our network of more than 600 recovery vendors,” she continued. “In the Platinum Compliance system, we have supporting documentation for all recovery vendors — a comprehensive database of state-level requirements, and PAR and vendor due diligence, including insurance certificates, relevant licensing, operational and enterprise policies and even employee-level compliance.
“This is all information our clients review during routine audits and it is now accessible to our clients at any time via a secure login,” Scott added.
Through the Platinum Compliance portal, customers can access due diligence and supporting compliance documentation for all recovery vendors. The comprehensive real-time database includes state-level recovery vendor requirements, and all PAR and vendor due diligence including insurance certificates, relevant licensing, operational and enterprise policies.
Scott reiterated that streamlining what was once an onerous process for collecting, reviewing and storing information, audits are now faster and more efficient.
The all-inclusive dashboard automates reminders and facilitates fast and easy uploading of updated compliance documentation allowing recovery vendors to remain in good standing. Only recovery vendors who are Platinum Compliant with PAR’s compliance checklist may receive recovery assignments.
Scott explained how critical that stipulation is to clients.
“We have earned our customers trust and want to keep it. So when we list recovery vendors as being PAR Platinum Compliant, our customers can trust that they are up-to-date on all required documentation and in good standing,” Scott said.
“That’s why we have developed an efficient, easy to use portal that ensures the compliance of recovery vendors. A comprehensive dashboard empowers every vendor manager to check the status on our checklist of due diligence items. The new system also automates reminders and facilitates fast and easy uploading of updated compliance documentation — making it simpler than ever for agents to remain in good standing,” Scott went on to say.
Scott closed the email exchange by reinforcing a message to finance companies about PAR’s commitment to excellence via this latest endeavor.
“Customers now have direct, self-service access to a single, user-friendly system housing all due diligence and compliance documentation for both PAR and our third-party recovery vendors,” Scott said.
“As a result, customer audits will be faster and more efficient. Customers will also be able to quickly reference state-level statutes and regulatory requirements,” she concluded.
With the interest rates connected to a retail installment sales contracts becoming more pronounced thanks to actions by the Federal Reserve, Carleton recently revisited a topic the compliance firm often discusses with clients.
Carleton reiterated official definitions as well as shared best practices regarding how best to achieve accuracy in Truth in Lending Act (TILA) disclosures for annual percentage rates embedded in those contracts.
To address the corresponding regulatory requirements, Carleton explained there are three key considerations, including:
—TILA’s Regulation Z states the annual percentage rate is “to be determined,” meaning calculated.
—Appendix J to Regulation Z contains 15 pages of definitions, variables and algorithms to accurately calculate an APR value.
—Yet, nowhere within Regulation Z is there any guidance that “in the absence of fees included in the finance charge, the resulting APR will be the same as the interest rate.”
To be clear, Carleton recapped the federal explanation included within Regulation Z to define the determination of annual percentage rate.
“The annual percentage rate is a measure of the cost of credit, expressed as a yearly rate,” the act states. “Creditors may use any other computation tool in determining the annual percentage rate if the rate so determined equals the rate determined in accordance with Appendix J to this part, within the degree of accuracy set forth in paragraph (a) of this section.”
Carleton acknowledged that it is a common practice of loan origination and dealer management systems to pass the contract interest rate to populate the TILA APR portion of the “Fed Box” for retail installment sales transactions. In those instances, Carleton explained there is no actual “calculation” of an APR but it is simply a reiteration of the interest rate.
“The frequent assumption is that with no fees included as part of the TILA finance charge, the interest rate will always be within the 0.125-percent tolerance allowed by Regulation Z when measured from an accurately calculated TILA APR,” Carleton experts said.
“However, to assure compliance — despite the interest rate value being within the tolerance most of the time — Carleton’s recommendation is to always compute an accurate and precise APR to absolutely ensure compliance for both regulatory and civil liability needs,” the firm continued.
Carleton went on to mention that oftentimes the two resulting rates (the APR and the interest rate) may legitimately be represented by identical values. More often than not, Carleton noted that any differences are driven by differences in the calendars used by the system(s) to compute the actual interest.
“In today’s world, ‘simple interest’ has become quite prevalent and incorporates an interest charge based on the actual calendar days existing between scheduled payments,” Carleton said.
“But the actuarial method of computing a TILA APR disregards the fact that months have varying numbers of days and treats each ‘month’ as 1/12 of a year. Thus, the two rates in comparison may actually be derived from disparate and divergent principles,” the firm continued.
Carleton emphasized that it is important to note that the 0.125-percent tolerance requirement is only a TILA “regulatory safe harbor” within a lending transaction.
“The more critical concern is often litigation and defending an ongoing ‘pattern of practice,’” the firm continued.
Should an accurately-computed APR be slightly larger than a base-computed interest rate on a regular basis, a claim of consistently under-stating the APR value on the contract to consumers may be problematic, according to Carleton.
“The chosen methodology is ultimately driven by a lender’s tolerance for risk pertaining to compliance,” Carleton said.
“Carleton’s best practice recommendation is for lenders to adopt an accurately computed TILA APR as their ‘no-risk’ solution,” the firm concluded.
For more details, go to carletoninc.com.
As we approach the holiday season, our thoughts turn to families and friends sitting around their living rooms. What are they talking about? Probably politics, little Joey’s grades, the football game, etc.
What would it take for your customer to talk about your dealership during Thanksgiving dinner?
When you offer the same-old-boring-message, boring services, boring offers, people will NOT talk about your business at Thanksgiving dinner.
Where I live, the Las Vegas City Council is voting on whether to allow fish pedicures. Yep. You read that right.
This is a pedicure in which a garra rufa carp, or doctor fish, nibbles on the toes. I don’t know if it works for others, but I am way too ticklish for that to work for me. It would feel like a new kind of Chinese water torture in which I could be coaxed into giving all my top-secret marketing strategies to the enemy.
And yet. This ticklish pedicure does get people talking.
At dinner with a client in South Dakota after a consulting day, I asked the server about dessert. The server was like a robot. He handed me the dessert menu and did zero selling.
I ordered the dessert seen in the image at the top of this page. The picture doesn’t do it justice. This was a s’mores plate with ice cream in a bowl that was filled with dry ice. I could see the smoke from the dry ice all the way from the kitchen until it was delivered to our table.
It was a great tasting dessert with a unique presentation. It was an attention-getter for sure, one that got me talking.
I ordered this dessert in spite of the server’s lack of enthusiasm for any after-dinner sweets.
Two things to do to get people talking about your dealership
No. 1: Have or do something worth talking about. Don’t be boring.
No. 2: Make sure your employees are excited about your products and services — unlike the server at the restaurant in South Dakota.
Perhaps when he first started, this server was excited about the smoking s’mores dessert. People’s energy tends to fade when they get used to something. Keep their energy and excitement up — your customers will benefit from your exciting offers and their unique experience.
Kenny Atcheson is a business strategist, marketing consultant, customer service/sales trainer, and author of Marketing Battleground: How to Deploy Under-the-Radar Strategies to Explode Your Profits. He teaches workshops and speaks at conventions all over the country. His website can be found at www.DealerProfitPros.com.
Both Spireon and AUL Corp. added to their award collections this week.
Spireon was named Internet of Things (IoT) Innovator in auto dealer management by Compass Intelligence for 2018. And AUL was named winner of both a Gold and Bronze Stevie Award in the Employer of the Year category at the third annual Stevie Awards for Great Employers competition.
Spireon highlighted the technology company was chosen for its leadership in providing new insights to dealers via automotive analytics to enhance dealer operations, customer engagement and profitability with its Kahu offering — the connected vehicle solution specifically designed for dealerships. The awards comprise 20 IoT innovation categories and are voted on by a team of over 30 independent analysts, editors, consultants and advisers.
Spireon’s Kahu solution can connect any vehicle to Spireon’s cloud-based NSpire IoT platform, empowering dealers nationwide with vehicle visibility and actionable data analytics to manage inventory, enrich the consumer purchasing experience and increase customer loyalty.
Standard features like geofencing, speed alerts, battery management and stolen vehicle recovery mitigate risk for dealers and make Kahu a profitable add-on when sold through to consumers. Dealers can also utilize mileage data from customer vehicles post-sale to realize new revenue streams, as they’re able to identify and target them for servicing, lease renewals and trade-ins.
“We are honored to receive this recognition from Compass Intelligence as an innovator in delivering new insights and analytics to improve dealer management with Kahu,” said Jason Penkethman, chief product and strategy officer of Spireon.
“The rapid growth of Kahu across the country, specifically with the largest dealer groups, is a true testament to Spireon’s commitment to advancing the automotive IoT industry with powerful and practical vehicle intelligence solutions,” Penkethman continued.
This award, given on behalf of Compass Intelligence, adds to Spireon’s corporate accolades in 2018, which include: IoT Vehicle Telematics Company of the Year in the 2018 Compass Intelligence Awards, a Silver award in the 2018 Stevie Awards for Sales & Customer Service and a Silver for New Product or Service of the Year in the 2018 American Business Awards, awarded to Spireon’s NSpire IoT platform.
Workforce honor for AUL
Meanwhile, AUL president and chief executive officer Jimmy Atkinson announced the warranty provider was named winner of both a Gold and Bronze Stevie Award in the Employer of the Year category at the third annual Stevie Awards for Great Employers competition Corp. The Stevie Awards for Great Employers recognize the world’s best who help to create and drive great places to work.
Named the Stevies for the Greek word meaning “crowned,” the competition received more than 550 nominations this year from organizations in 21 nations for consideration in a range of human resources-related categories. AUL was nominated in the Employer of the Year category for Other Industries, for which it won Gold, and in the Insurance Industry, winning Bronze.
“Since AUL’s founding in 1990, we have dedicated ourselves to establishing a culture of excellence, teamwork and integrity,” Atkinson said. “To be honored by the Stevie Awards, with two wins no less, is a tremendous validation of our hard work and the quality of our people.”
AUL HR manager Helen Van Deren added, “The reason AUL is the premier vehicle service contract in the United States is simple. AUL fosters a culture where our people come first — a culture of caring. From providing leading benefits packages, to encouraging personal time off, and enriching professional and educational development, AUL truly believes that thriving employees go above and beyond to ensure a thriving business.
“These awards are further validation of our core convictions,” Van Deren went on to say.
When roughly 70 percent of its applications resulted in turn downs, Prestige Financial Services responded by taking a significant step toward using machines instead of human manpower to examine applications and finalize underwriting.
ZestFinance, a leading artificial intelligence (AI) software company that uses machine learning to vastly improve credit underwriting, recently announced a partnership with subprime auto finance company Prestige Financial Services to implement a fully explainable machine learning model to predict borrower risk.
Prestige replaced legacy scoring techniques with Zest Automated Machine Learning (ZAML) software, allowing the finance company to harness thousands of data variables and advanced math in its credit models.
The new models enabled Prestige to achieve a 36 percent increase in new applicants, resulting in a 14 percent higher approval rate. Within six months of deploying the AI-based credit underwriting model, Prestige doubled its origination volume without added portfolio risk.
At the time Prestige engaged ZestFinance, the company said it had raised its underwriting thresholds to the point where roughly seven out of 10 applicants were turned down for a retail installment contract. Applying machine learning enabled Prestige to rank-order risk more effectively across all types of borrowers, allowing Prestige to swap out risky borrowers and replace them with thin-file and new-to-credit consumers who were more creditworthy than a traditional credit score might suggest.
“We had considered using machine learning models in the past,” said Steven Warnick, chief credit and analytics officer at Prestige. “We knew they were better at predicting risk, but had concerns because we couldn’t explain them.
“ZestFinance not only helped us build better models of predictability, but also provided a read-out of the key factors that led to the credit model’s output, so we can fully comply with all regulatory requirements. That was the game changer,” Warnick continued.
The work with ZestFinance has allowed Prestige to achieve its original goal of approving more borrowers without taking on more risk. It’s also resulted in greater interest from independent dealerships across the country.
As a result of the initial success, Prestige is developing plans for other ways to automate and innovate in traditional auto financing.
“It’s been shown over time that AI-based underwriting can help financial service organizations better evaluate the creditworthiness of applicants, expanding credit options to applicants who might not otherwise qualify using traditional credit scoring,” ZestFinance founder and chief executive officer Douglas Merrill said.
“But the historic lack of explainability and model-risk management tools has made lenders reluctant to transition to machine learning technology. We’ve focused on building technologies that provide clear and comprehensive explanations for every underwriting decision,” Merrill went on to say.
Automotive Personnel founder and chief executive officer Don Jasensky tackled one of the most challenging work elements facing both employers and employees — financial compensation.
Jasensky, who established his human resources firm in 1989, pinpointed what he believes are three key influences on the figure that might arrive in your bank account regularly. He articulated the elements as:
1. The need for one’s labor
2. The ability to perform it
3. Difficulty in replacing a person.
Jasensky, a longtime board member of the National Automotive Finance Association, elaborated on these points by sharing scenarios from other sectors. For example, say there is a brain surgeon who is one of only three professionals in the country who can perform a specific and difficult procedure.
“They would be in a position to charge an exorbitant fee,” said Jansensky, speculating as the cost for services rendered at $75,000 per procedure.
“With little or no competition but a steady need for this service, the insurance companies have to pay,” he continued. “There is a strong need, terrific ability to perform surgery and little competition.”
Then, Jasensky proposed that say surgeons from other parts of the world arrived, offering procedures at a much lower rate; even as a low as a third of that $75,000 fee mentioned earlier.
“Now the surgeons have a decision to make. Do the procedures for $25,000 or risk losing the procedures,” Jasensky said. “Market prices are being influenced by competition.”
Jasensky went into yet another scenario, wondering what would happen to the surgeon’s financial prospects if a medicine arrived eliminating the need for an invasive procedure and costing just a small fraction of the doctor’s original fee.
He also pointed out that these factors come into play for hourly wage workers, too. Jasensky described how an experienced roofer might command $30 per hour while a novice might only be able to get less than half of that rate.
Add in complicated outside factors such as a hurricane and an hourly wage for an experience roofer might, as Jasensky put it, “well it ‘goes through the roof.’” And conversely if a recession arrives, “there is less need for roofers, and they may need to take jobs at half their ‘normal rate’ if they want to work,” he went on to say.
Bottom line — Jasensky reminded all individuals involved in the automotive industry that their income is highly influenced by, once again:
1. Need for your labor
2. Your ability to perform it
3. Difficulty in replacing you
“Keep these influences in mind as you make educational and career decisions,” said Jasensky, who can be reached at (216) 226-8190 or [email protected].
The Consumer Financial Protection Bureau (CFPB) has issued its final rule adopting changes to Regulation P, which governs the requirements for financial institutions to issue privacy notices to its customers.
The final rule implements new timing requirements for sending annual privacy notices pertaining to financial institutions that no longer qualify for the exception and eliminates the “alternative delivery” option for annual privacy notices. The most significant impact of the final rule is the creation of an exception which permits financial institutions to avoid sending annual privacy notices to its customers under certain circumstances.
The final rule will have the biggest impact on financial institutions who do not share nonpublic personal information with unaffiliated third parties. However, with recent amendments to the Gramm Leach Bliley Act (GLBA) and Regulation P regarding privacy notices, all financial institutions should evaluate their current privacy policies and procedures.
The final rule will become effective on Monday.
Creation of annual privacy notice exception
The changes to Regulation P are intended to align the rule with amendments made by Congress to the Gramm Leach Bliley Act (GLBA) in 2015. Under Regulation P, financial institutions are required to send a privacy notice to all customers every 12 months without exception. This includes information such as whether the financial institution shares consumer information with nonaffiliated third parties, how the financial institution protects nonpublic personal information obtained from customers, and whether the customer has the right to opt-out of the sharing of that information.
The final rule now creates an exception to this rule and exempts financial institutions from this requirement if it satisfies two conditions:
1. The financial institution does not share nonpublic personal information with nonaffiliated third parties.
2. The financial institution must not have changed its “policies and procedures with regard to disclosing nonpublic personal information” from the policies and procedures outlined in the most recent privacy notice sent to the consumer.
This exception only applies to annual privacy notices and does not impact current requirements regarding initial privacy notices or amended privacy notices.
Amendment to timing requirements
In addition to creating the annual privacy notice exception, the final rule also adopted new timing requirements for issuing annual privacy notices in the event that a financial institution has made changes to its privacy policies and procedures and no longer qualifies for the exception. The timing requirements are rather nuanced but essentially require a financial institution to issue an annual privacy notice either:
1. Before implementing the changes in the policy or practice which trigger the obligation to send a revised privacy notice
2. Within 100 days after adopting a policy or practice that eliminates the financial institution’s notice exception but the changes did not trigger the obligation to send a revised privacy notice.
Removal of “alternative delivery” method
Finally, as part of its changes to Regulation P, the CFPB eliminated the “alternative delivery” method for annual privacy notices.
Under the “alternative delivery” method, financial institutions were permitted to satisfy the annual privacy notice requirement in certain circumstances by posting a copy of the annual notice on its website. However, the CFPB rationalized that many of the requirements permitting a financial institution to use the “alternative delivery” method were the same as the requirements for a financial institution to qualify for the new annual privacy notice exception and, therefore, the method was now irrelevant.
As regulators continue to amend privacy notice requirements, it is imperative that financial institutions monitor their privacy practices to remain in compliance.
Alexander Koskey, an associate in Baker Donelson’s Atlanta office, represents individuals, businesses and financial institutions on a wide range of regulatory and compliance issues, real estate and commercial matters. He can be reached at [email protected].
Regularly, alerts and messages arrive in my inbox containing some kind of enforcement action against a dealership or finance company. Oftentimes, my approach is just stick with the facts of the matter contained in a press release, share the developments through our channels here at Cherokee Media Group and carry on with the next task.
However, an alert from the Department of Justice arrived this week about how Hallman Chevrolet of Erie, Pa., entered into a deferred prosecution agreement involving more than $2.1 million in penalties and restitution for auto financing misdeeds. Immediately, childhood memories came flooding back of being a pre-pubescent boy and then eager-driving teenager at that store that was as close to growing up in the car business as I personally experienced.
Hallman Chevrolet is situated on State Street in this northwestern Pennsylvania city. The dealership is a test drive away from Lake Erie, meaning snowfall is often measured in feet. My father purchased a half dozen vehicles at the dealership, ranging from the family ride of the day, a 1978 Chevrolet Impala, to a 1991 Chevrolet Cavalier for one of my siblings to a 1983 Chevrolet Custom Deluxe half-ton pickup that eventually became my first vehicle.
See, my father’s first cousin was married to the gentleman who oversaw new-truck and used-car sales at Hallman Chevrolet. Being my dad’s shotgun rider “on trips to town,” there were many times we visited that dealership. If their conversation wasn’t of interest to me, I meandered the lot, peaking inside vehicles where cassette players were the high-end electronics of the day.
During the past 10 years as I’ve interacted with finance company executives, dealers and scores of service providers, it’s crossed my mind more than a few times that had we lived closer to Hallman Chevrolet, I would have tried to become the store’s next Lou Bertie. (That was the name of the gentleman who was related by marriage and turned metal at the dealership).
So that’s why the DOJ news release about the matter involving Hallman Chevrolet struck me significantly this week.
U.S. Attorney Scott Brady said Hallman Chevrolet entered into a deferred prosecution agreement and agreed to pay a monetary penalty of $1.4 million and more than $737,000.00 in restitution to various finance companies.
According to the agreement entered into between Brady and David Hallman (on behalf of Hallman Chevrolet and the Hallman Auto Group), from 2009 through 2015, with knowledge and acquiescence of David Hallman, Hallman Chevrolet engaged in a bank fraud scheme and a conspiracy to commit bank fraud, for which Hallman accepted responsibility.
That news release indicated the parties entered into a comprehensive deferred prosecution agreement to hold Hallman Chevrolet accountable for its actions and to compensate finance companies. The agreement requires the monitoring of Hallman Chevrolet’s conduct over the next four years and imposes other substantial obligations on the auto dealership and its owner.
“For over six years, Hallman Chevrolet defrauded financial institutions throughout the region by systematically falsifying loan documents in hundreds of transactions,” Brady said. “The perpetration of large-scale auto loan fraud schemes in western Pennsylvania must stop.
“The auto dealership industry is put on notice that substantial penalties await those who engage in such schemes,” he continued. “In addition to the combined fine and restitution exceeding $2 million, the policies, procedures, compliance and ethics program required by this agreement should serve as a template for responsible, ethical conduct within this industry.”
Knox McLaughlin Gornall & Sennet represented Hallman Chevrolet in the matter. The firm sent me a press release as well, emphasizing that Hallman Chevrolet worked to cooperate with the attorneys and agents from the FBI and U.S. Attorney’s office during the investigation that focused on the store’s used-vehicle department.
“Hallman Chevrolet takes full responsibility for the conduct described in that agreement. Since the investigation began, Hallman Chevrolet has taken significant steps to employ a compliance plan and philosophy that will prevent the sort of conduct that led to the investigation and agreement,” the store said in that release.
“Hallman Chevrolet has already installed a version of this plan and made material changes to its business operations,” the store continued. “Consistent with the agreement, Hallman Chevrolet plans on continuing that work into the future. Additionally, and pursuant to the agreement with the United States Attorney, Hallman Chevrolet is making full restitution to the financial institutions whom the United States Attorney identified as having suffered losses due to the conduct at issue.
“Hallman Chevrolet is committed to moving forward from this investigation in a way that treats compliance with all applicable laws and regulations as the primary and non-negotiable component of every transaction,” the store went on to say. From that place of compliance, Hallman Chevrolet will continue to provide exceptional value and service to its customers.
“Hallman Chevrolet has been a presence in downtown Erie for more than 44 years, and it plans on continuing its tradition of value and customer service into the next generation,” the store went on to say.
Since I left northwestern Pennsylvania more than 20 years ago, I haven’t followed in my father’s footsteps and made a vehicle purchase at Hallman Chevrolet. Despite the development, my memories of Hallman Chevrolet are still fond. It’s my hope the store has learned from its transgressions, and both franchised and independent dealerships shore up their compliance endeavors as not to sully the efforts of operations adhering to state and federal regulations.
Nick Zulovich is senior editor of SubPrime Auto Finance News and can be reached at [email protected].
