Coming on the heels of Automotive Intelligence Council member MBSi Corp. making a move involving the firm, Recovery Industry Services Co. (RISC) announced it has joined forces with recently acquired Vendor Transparency Solutions (VTS) to unite compliance services and provide comprehensive vendor vetting, lot inspection and education services to the collateral recovery industry.
For years as independent companies, RISC and VTS stressed that they have advocated for a more professional repossession industry. By integrating the compliance solutions, RISC insisted that it now offers the best of both companies to the industry.
“We are proud to partner with RISC to provide a repossession training and vetting solution that has been embraced by both vendors and lenders, and we thank those who have supported our efforts,” said Max Pineiro, president of Vendor Transparency Solutions.
“With the recent acquisition of the VTS software platform, we looked to partner with the industry standard CARS program to add value to the VTS training curriculum and vetting services. Additionally, the involvement of Hudson Cook solidifies it as the industry standard,” Pineiro continue.
In the weeks and months ahead, RISC will announce new product offerings that combine the best of RISC and VTS curriculum and technology solutions.
“With this partnership, we continue to work towards improvement and unification of the industry,” RISC chief executive officer Stamatis Ferarolis said.
“It will take some time to integrate our curriculum and vetting services, but we believe together we now deliver the only comprehensive compliance and education solution to the collateral recovery industry,” Ferarolis went on to say.
The Federal Trade Commission on Tuesday said it is seeking comment on proposed amendments to two rules that protect the privacy and security of customer information held by financial institutions.
In separate notices to be published in the Federal Register shortly, the FTC announced that it is looking for comment on proposed changes to the Safeguards Rule and the Privacy Rule under the Gramm-Leach-Bliley Act. The Safeguards Rule, which went into effect in 2003, requires a financial institution to develop, implement and maintain a comprehensive information security program. The Privacy Rule, which went into effect in 2000, requires a financial institution to inform customers about its information-sharing practices and allow customers to opt out of having their information shared with certain third parties.
“We are proposing to amend our data security rules for financial institutions to better protect consumers and provide more certainty for business,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “While our original groundbreaking Safeguards Rule from 2003 has served consumers well, the proposed changes are informed by the FTC’s almost 20 years of enforcement experience. It also shows that, where we have rulemaking authority, we will exercise it as necessary to keep up with marketplace trends and respond to technological developments.”
As part of its periodic review of its rules and guides, the FTC sought comment in 2016 on the Safeguards Rule. In response to this review, and to keep the rule up to date, the FTC is proposing changes to the Safeguards Rule to add more detailed requirements for what should be included in the comprehensive information security program mandated by the rule.
For example, the FTC explained the proposal generally would require financial institutions to encrypt all customer data, to implement access controls to prevent unauthorized users from accessing customer information, and to use multifactor authentication to access customer data. The FTC also has proposed improving compliance with these programs by requiring companies to submit periodic reports to their boards of directors.
The agency indicated the proposed changes would bring the rules into line with changes implemented by Congress through the Dodd-Frank Act in 2010 and the FAST Act in 2015, which modified the annual privacy notice requirement under the Gramm-Leach Bliley Act.
While the scope of the Privacy Rule was narrowed significantly by the enactment of the Dodd-Frank Act, the FTC’s current Safeguards Rule continues to apply to all financial institutions within the FTC’s jurisdiction. The FTC proposes to revise the Safeguards Rule so that the scope of that Rule is clear on its face.
Officials recapped the Dodd-Frank Act transferred the majority of the commission’s rulemaking authority for the Privacy Rule to the Consumer Financial Protection Bureau, leaving the FTC with rulemaking authority only over certain motor vehicle dealers. To address these statutory changes, the FTC has proposed, for example, to remove from the Privacy Rule examples of financial institutions that do not apply to motor vehicle dealers. In addition, the revised Rule would clarify when motor vehicle dealers must provide annual privacy notices to reflect provisions included in the FAST Act.
The FTC also is proposing to expand the definition of “financial institution” in both the Privacy Rule and the Safeguards Rule to specifically include so-called “finders,” those who charge a fee to connect consumers who are looking for a loan to a lender. Officials indicated this proposed change would bring the commission’s rule in line with other agencies’ interpretation of the Gramm Leach Bliley Act.
The FTC reiterated the notices seeking comment on the proposed changes to the Safeguards Rule and to the Privacy Rule will be published in the Federal Register soon. Instructions for filing comments appear in the published notices. Comments must be received 60 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.
The commission vote to submit the Privacy Rule notice for publication in the Federal Register was 5-0. The commission vote to submit the Safeguards Rule notice for publication in the Federal Register was 3-2. Commissioners Noah Joshua Phillips and Christine Wilson issued a dissenting statement that’s available here.
Along with explaining three reasons for their objections, Phillips and Wilson closed their statement by saying, “This is a notice of proposed rulemaking (NPRM), and the commission is merely proposing new regulation and soliciting views on its impact. But we are also aware that the momentum behind an NPRM regularly results in the promulgation of new or revised rules.
“While the commission is not making a final determination today, we are concerned that the specific suggestions herein will frame the debate so as to take the commission in a direction that may be unwarranted (particularly given the prospect of legislation), and which may have negative repercussions,” they continued.
“A review of the Safeguards Rule, especially in light of new legal developments, is warranted. But we should go where the evidence today leads us. We would strongly encourage those in industry, academia, and civil society with expertise in these areas to comment and provide evidence on this proposal,” they went on to say.
More consolidation in the recovery space arrived late on Tuesday as Automotive Intelligence Council member MBSi Corp. increased its collection of resources.
The provider of compliance-enabled repossession assignment management software and vendor management software announced the acquisition of My Recovery System and Vendor Transparency Solutions’ platforms. The company highlighted this acquisition allows MBSi to offer a single software ecosystem for repossession assignment management and vendor compliance management to recovery agents, forwarders and auto-finance companies.
The integration of My Recovery System’s back-office platform and Vendor Transparency Solutions’ web-based compliance management system with MBSi’s assignment volume, operating excellence and talent formalized what the company described as a “game-changing component” of MBSi’s overall solutions strategy.
“We are thrilled to be working with the My Recovery System and Vendor Transparency Solutions platforms and teams to provide a seamless software solution for the recovery industry,” MBSi president Cort DeHart said in a news release.
“By capitalizing on these easy-to-use platforms, we will be able to bring new efficiencies to the industry with a seamless software solution that includes routing, full back-office and compliance management. This, coupled with the talent of the teams, sets us apart to deliver real results,” DeHart continued.
Two leaders from My Recovery System and Vendor Transparency Solutions also described what the transaction means.
“I’m excited to be part of a growing company where designs and strategies bring efficiency and transparency to the auto finance recovery industry,” said Jeff Koistinen, founder and president of My Recovery System. “MBSi’s commitment to the recovery agents ties back to our collective mission to exceed the needs of agents.”
Vendor Transparency Solutions founder and president Max Pineiro added, “I couldn’t be happier to join the MBSi team as we work together to deliver next generation compliance management platforms for recovery agents, forwarders and lenders.”
MBSi indicated its teams will immediately begin working to integrate the platforms to provide data and secure access of sensitive consumer information. MBSi also said it will continue to partner with RISC, which provides vendor vetting, compliance training and lot inspection services.
MBSi is hosting a recovery agent user conference and appreciation event on April 17 at Texas Live!, an entertainment venue in Arlington, Texas, starting at 3 p.m. CT. The user conference is exclusive to recovery agents to learn more about the new platform, pricing and how to get started.
Recovery agents can register for the event here.
An executive with nearly 20 years of experience with Consolidated Asset Recovery Systems and Dealertrack now is part of the leadership team at Servicing Solutions.
The loan servicing organization specializing in primary and back up servicing announced on Wednesday that its new vice president of sales is Garrett Cline.
“I’ve known Garrett for years, and I can think of no one better suited to carry the Servicing Solutions message forward to companies looking to significantly improve their loan servicing function,” Servicing Solutions executive vice president of sales and marketing Jeff Swisher said.
“He is an accomplished sales and training leader with the ability to consult with companies to solve their most pressing business challenges. I’m excited to have him on board,” Swisher continued.
Prior to joining Servicing Solutions, Cline spent six years with Consolidated Asset Recovery Systems (CARS), a technology and services company focused on the repossession and remarketing of assets. He was responsible for new business development in the eastern United States within the automotive finance space.
Earlier in his career, Cline spent 12 years with Dealertrack Registration and Titling Services in various sales and training roles.
And in other company news, Servicing Solutions also is preparing to host a free educational webinar to help finance companies.
Servicing Solutions pointed out that a continued explosion in disruptive technologies has led to Internet and mobile-technology being used more than ever with financial transactions. However, along with this explosion comes an increased level of compliance and operational risk, corporate responsibility, as well as government regulation and oversight for companies attempting to keep up with the times and their customers’ ever-increasing set of demands.
This webinar will address the need to have a compliance readiness program in place within your business. Furthermore, it will cover best practices communications should an organization run afoul of a regulatory authority.
The training event set to include Robert Caracciola of Servicing Solutions along with Michael Thurman of Thurman Legal is scheduled for 2 p.m. ET on Tuesday. Attendees can register for this free webinar by going to this website.
Top executives from Equifax, Experian and TransUnion all appeared on Capitol Hill on Tuesday for a hearing orchestrated by the U.S. House Financial Services Committee, which is seeking revamps to how credit reporting is completed.
And one of the companies offered six recommendations to assuage concerns about what some lawmakers are considering to be outdated practices and protocols.
According to a committee memorandum for Tuesday’s event, lawmakers explained why they summoned Equifax chief executive officer Mark Begor, Experian chief executive officer Craig Boundy and TransUnion president and chief executive officer James Peck.
“Our nation’s credit reporting system has an impact on almost every American. Credit scores and credit reports are increasingly relied upon by creditors, employers, insurers and even law enforcement. Yet it has been more than 15 years since Congress enacted comprehensive reform of the consumer reporting system, and there are numerous shortcomings with the current system that need to be addressed,” lawmakers said.
“In 2017, Equifax experienced a cybersecurity breach so massive that it affected approximately 148 million consumers, which, in addition to releasing the personally identifiable information of approximately half of all Americans, also highlighted deficiencies in the credit reporting system. Furthermore, many have experienced financial and other forms of distress due to incomplete or erroneous information on their consumer credit reports,” lawmakers continued.
“While a few provisions intended to improve the consumer reporting system were enacted into law last year, some have argued for comprehensive reforms to make the system more consumer oriented. Other jurisdictions, like California and the European Union, have taken steps to empower consumers to have more control over their data,” lawmakers went on to say.
Opening statements from Begor, Boundy and Peck all emphasized how each company strives to be as accurate as possible when it comes to its primary function — credit reporting. They each discussed improvements made to combat cyberthreats and more.
Begor began his testimony during the hearing by acknowledging and apologizing for the breach.
While I was not a part of the Equifax team when the cybersecurity incident occurred in 2017, I certainly recognize the disruption and impact that the cyberattack caused for consumers and our customers — and I deeply regret what happened. I also understand that our regulators and lawmakers undoubtedly felt, and continue to feel, a strong duty to ensure that the financial ecosystem is functioning in a way that benefits consumers, safeguards their personal data and is fueled by accurate and complete information,” Begor said.
“At Equifax, we too share that sense of obligation. Credit reporting agencies like Equifax are trusted to protect the personal data we hold, to provide accurate information to financial institutions making important risk decisions and to facilitate greater access to credit for consumers. I am committed to making improvements to our processes so that consumers have a seamless and positive experience when they are facing some of life’s pivotal moments — such as applying for a mortgage, financing an education or buying a car,” he continued.
Boundy stated that Experian agrees with the committee looking to help underserved consumers, keeping data safe, enhancing report accuracy and expand financial inclusion.
“Credit bureaus accurately compile individuals’ payment histories from creditors so lenders can use this data to make better lending risk decisions,” Boundy said. “Good lending decisions for credit cards, autos and mortgages mean fewer defaults. Fewer defaults mean lower cost of credit for consumers and greater availability of consumer credit across the economy.
“Credit bureaus helps stabilize the safety and soundness of the nation’s consumer lending sector,” he continued.
And to keep that stability intact, Peck spelled out six improvement recommendations for lawmakers to consider. They included:
1. More timely updates of critical credit events
2. Establish new standards for reporting student loan data
3. Increase the number of Americans able to access credit
4. Help improve scores and access to credit innovations
5. Protect Social Security Numbers
6. Enhance financial education
“The credit reporting agencies play a pivotal role in the efficient and stable functioning of the nation’s credit system. We essentially act as curators, collecting and assembling information about consumers from lenders, creditors, and others. We share that information with third parties in accordance with specific legal and regulatory requirements, including requirements that dictate who is permitted to obtain consumer credit information, under what circumstances, and for what purpose,” Peck said.
“No other economy in the world offers consumers the quick and straightforward access to credit that we do in the United States. This capability provides opportunities to people and gives our economy a valuable global edge,” he went on to say.
The National Association of Federally Insured Credit Unions (NAFCU) recently reiterated its position regarding a significant accounting change coming later this year.
To recap, the Financial Accounting Standards Board (FASB) is looking to ensure that financial institutions have solid measures in place to ensure they have appropriate reserves for any future losses based on the life of each auto loan. As a result, the board has instituted its new Current Expected Credit Loss model (CECL).
The new model will require higher levels of loan loss reserves and lead to changes in lending practices and portfolio management. It will also require a significant amount of data capture, analysis and modeling to meet the implementation deadline of Dec. 15.
NAFCU sent a letter to FASB asking for credit unions to be excluded from CECL or, alternatively, a one-year delay of the effective date.
Noting implementation difficulties and impact on credit unions’ capital under the CECL standard, NAFCU’s Andrew Morris urged FASB to “reconsider its decision to include credit unions within the scope of CECL.”
Morris, NAFCU’s senior counsel for research and policy, continued by writing, “NAFCU continues to believe that credit unions should not have been included in the CECL standard, especially because credit unions have a unique capital framework and face certain regulatory constraints.”
Morris explained how credit unions’ capital framework limits the NCUA’s ability to mitigate CECL’s effect on institutions’ net worth without action from FASB.
“To deal with this problem, we urge the FASB to partner with the NCUA to identify opportunities for capital relief and prevent a scenario where credit unions must dramatically scale-back asset growth or face mandatory supervisory action in the event that net worth ratios fall below minimum levels,” Morris said.
Outside of an exclusion, Morris asked that FASB proactively provide credit unions with relief and consider a one-year delay of the effective date for non-public business entities (non-PBEs).
In January, Morris attended a roundtable discussion that covered a proposal outlining an alternative to the income statement impact of the CECL standard put forward by a group of banks along with the FASB’s consideration of charge-offs and recoveries and other transition issues.
FASB indicated that it would consider the banks’ alternative proposal in more detail and also hold a formal vote in March. In addition, the board is expected to make a final determination regarding the reporting of gross write-offs and recoveries by origination year at that time.
NAFCU insisted it has devoted considerable time and resources to educate credit unions on CECL requirements and to share the industry’s concerns with FASB. The association has also shared concerns with lawmakers, the NCUA and Federal Reserve, and has worked to obtain certain changes and more guidance on the standard.
Along with sharing an update involving investigations by state-level authorities in two locations, Credit Acceptance went through a series of year-end figures to detail its 2018 performance.
And to go with data about income and originations, the subprime auto finance company also got into the numbers attached to people — specifically its field workforce and growing dealer network.
The company reported that its fourth quarter consolidated net income softened a bit year-over-year, coming in at $151.9 million, or $7.79 per diluted share. That’s down from $177.1 million, or $9.10 per diluted share, during the last quarter of 2017.
However, for the year, Credit Acceptance highlighted that its consolidated net income rose to $574.0 million, or $29.39 per diluted share, up from $470.2 million, or $24.04 per diluted share, in 2017.
Helping to generate those figures is Credit Acceptance’s expanded workforce. Credit Acceptance senior vice president and treasurer Doug Busk mentioned the company had about 50 more market area managers at the close of 2018 than it did a year earlier.
“We’ve gone through a pretty rapid increase in the size of the sales force,” Credit Acceptance chief executive officer Brett Roberts told investment analysts who participated in the company’s latest quarterly conference call. “We’re probably at a period now where we’re filling in.
“I think the last time we did a sales force expansion, it was 2011,” Roberts continued. “We grew the sales force pretty rapidly over a mostly one-year period, but followed that with a second year of some growth. It took us about five years to fill in that sales force before we got productivity back to where we started. So we’re now two years and one quarter into this expansion.
“We’ve probably reached the number that’s pretty close to the target number in terms of the maximum number that we want in this expansion, and now we’re probably in that two – to three-year period where we’re trying to fill in and get productivity back to where it was,” he went on to say.
That sales force is enjoying some notable productivity as Credit Acceptance shared that it finished 2018 with 12,528 active dealers in its origination network, representing an 8.5-percent lift year-over-year. The company defines its active dealers are operators who have received funding for at least one consumer loan during the reporting period.
Those dealers worked with Credit Acceptance to book 373,329 retail installment contracts in 2018, marking a 13.6-percent rise from the 2017 figure of 328,507.
And Roberts discussed where Credit Acceptance is carving out a bigger piece of the dealer world, flipping independent dealerships that might have had their own related finance company and operated as a buy-here, pay-here store.
“That market has always been a good source of business for us. I think our program has a lot of advantages over a typical buy-here, pay-here program,” Roberts told investors. “Advantages for the consumer in particular because they can reestablish their credit on our program. We report to the credit bureaus. They can move on and get a newer, nicer vehicle at a lower interest rate, reestablish their credit, move their life in a positive direction. So there’s a lot of benefits to our program.
“The buy-here, pay-here market is large, and we’ve historically had pretty good success enrolling those former buy-here, pay-here dealers in our program, so that hasn’t changed,” he continued.
“We’re having good success signing up dealers,” Roberts added.
Compliance update
In a separate filing with the Securities and Exchange Commission, Credit Acceptance relayed updates on where the company stands on two fronts.
Back on Aug. 14, 2017, the company recapped that it received a subpoena from the Mississippi attorney general, relating to the origination and collection of non-prime installment contracts in the state.
“In connection with this inquiry, we have been informed by representatives of the attorney general’s office that it believes that the company may have engaged in unfair and deceptive acts or practices relating to the origination and collection of auto loans in violation of the Mississippi Consumer Protection Act,” company officials said in the SEC paperwork.
“We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation,” they continued.
An even older matter also was included in Credit Acceptance’s SEC filing. The company first received a civil investigative demand from Massachusetts attorney general on Dec. 4, 2014 relating to the origination and collection of non-prime contract. And then on Nov. 20, 2017, the Massachusetts AG sent a second civil investigation demand to Credit Acceptance seeking updated information on its original civil investigation demand, additional information related to the company’s origination and collection of contracts and information regarding securitization activities.
“In connection with this inquiry, we were informed by representatives of the office of the attorney general that it believes that the company may have engaged in unfair and deceptive acts or practices related to the origination and collection of auto loans, which may have caused some of the company’s representations and warranties contained in securitization documents to be inaccurate,” Credit Acceptance said.
“The investigation relating to the origination, collection and securitization of non-prime auto loans and securities transactions by the office of the attorney general remains ongoing,” the company continued.
“We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time,” Credit Acceptance officials went on to say. “As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.”
In a continued effort to provide a most compliant financing solution, Vergent Loan Management Software recently announced a partnership with Carleton for consumer loan calculation support.
Vergent has been providing financial management software since 2006. Formerly eSoftware Solutions, the company offers a web-based loan management software solution that encompasses loan origination, loan servicing, marketing, reporting and accounting exports, along with ancillary services to enhance and streamline the lending process.
Its latest web-based lending solution interfaces with CarletonCalcs that’s geared to ensure payments and disclosures are accurate and compliant.
According to Vergent chief operating officer Terry Freeze, “Our company has experienced tremendous customer growth and we recognized a need to ensure our lending calculations are compliant with all federal and state regulations.
“Strong compliance is so important in today’s litigious lending environment which is why partnering with a very experienced company like Carleton for additional compliance support made a lot of sense,” Freez continued.
Carleton president and chief operating officer Matt Ruszkowski added, “Vergent recognized the importance of having compliance alignment between the contract language and their loan origination and loan servicing computations.
“Our 50 years of lending calculation experience and demonstrated lender and dealer support is why Vergent partnered with Carleton,” Ruszkowski went on to say. “We are excited to be part of the Vergent team as we are both committed to providing the highest quality level of service in each of our areas of expertise.”
Additional products sold to buyers during the financing process along with their terms and conditions continue to create issues for servicemembers, according to the newest report from the Consumer Financial Protection Bureau.
The agency’s Office of Servicemember Affairs (OSA) monitors and analyzes complaints from servicemembers, veterans and military families. The regulator released its annual report last week that contained a specific segment dedicated to rehashing how add-on products are triggering issues.
The bureau reported that roughly 75 percent of servicemembers have a vehicle and make monthly payments. The regulator acknowledged many add-ons are marketed as particularly helpful to servicemembers due to the unique aspects of military life.
“We have heard from many servicemembers who did not understand that these add-ons were optional and that they would be added to the total amount financed,” officials said in the 40-page report that’s available here.
“We have heard from many servicemembers who didn’t understand how they wound up financing thousands of dollars in add-on products like service contracts, window etching, guaranteed asset protection (GAP), key replacement warranty and tire, dent and paint protection packages,” the CFPB continued.
The report went on to mention that confusion about GAP intensified when the servicemember took the vehicle overseas. Officials recapped what they were told:
“I am a military member… (Company) is refusing to pay on the GAP insurance that I purchased at the time I signed the financing agreement. While stationed at (military base), I purchased a (new car) … When I purchased the vehicle the original financing agreement included an option to purchase GAP insurance for an additional (cost). … (Company) agreed in writing for me to ship my vehicle to (country) when I received military orders re-assigning me to (country). The letter explicitly authorized me to drive the vehicle here in (country) while I am stationed overseas. The vehicle was totaled in an accident. Now (company) is refusing to honor the GAP insurance/waiver provisions because the loss occurred outside of the United States. … I simply want (company) to honor its commitment to cover the deficiency between the insurance payout and the remaining balance on the loan.”
The bureau emphasized at the close of its section on auto financing that, “It remains important for servicemembers to comparison shop when it comes to car add-on products such as GAP.”
The bureau reiterated that complaints submitted by servicemembers serve as a key initial indicator of emerging issues and continuing trends in the financial marketplace.
The report is designed to provide data and analysis around the most common complaints submitted by servicemembers. These complaints are used to help to inform the bureau and external stakeholders in addressing these issues as they evolve.
The bureau went on to note that the majority of complaints received from servicemembers during the reporting period revolve around credit or consumer reporting followed by debt collection issues.
“We regularly hear from servicemembers who are worried that incorrect information on their credit reports will put their security clearance, duty status, potential promotion or even military career in jeopardy. Recent changes to the Department of Defense (DOD) security clearance rules make credit reporting and debt collection issues even more important to resolve as quickly as possible,” officials said in the report.
The Hudson Cook team has been in writing mode, and the results are its latest resource to help dealerships and finance office professionals.
CounselorLibrary.com, the publisher of multiple products and resources for the consumer financial services and privacy industries, on Thursday announced that it has updated its popular CARLAW F&I Legal Desk Book. Winner of the Axiom Business Book Award, the book gives readers 363 things to know about auto, boat and RV dealer finance laws and regulations.
This is the brand-new eighth edition of this compliance resource.
The book presents a law-by-law, regulation-by-regulation guide through the legal maze that dealers face every day. Authored by Thomas Hudson, Michael Benoit, Ralph Rohner and the attorneys at Hudson Cook, this new edition reflects the latest updates to the federal laws and regulations affecting F&I practices.
Formatted in a straightforward Q&A design, the book is crafted to address many of the everyday compliance issues dealers face and includes links to the actual laws and regulations discussed in each chapter.
The 390-page book is designated as the official textbook for the Association of Finance and Insurance Professionals’ Certified F&I Professional Program, and is available for $49.95 (plus shipping and handling) by going to this website.
Reynolds and Reynolds has featured earlier editions of the book, and is pleased to announce that once again it will be hosting a book signing of the latest edition at its booth at the NADA 2019 Convention in San Francisco beginning on Jan. 24. Both Hudson and Benoit will be signing these books at the convention. Attendees of the book signing will receive a complimentary copy.
