While officials said the complaint is not a finding or ruling that the finance company has actually violated the law, the Consumer Financial Protection Bureau sued Security National Automotive Acceptance Co. (SNAAC) today for aggressive debt collection tactics against servicemembers.
In a complaint filed in federal court, the CFPB alleges that SNAAC used a combination of illegal threats and deceptive claims in order to collect debts. The CFPB said it is seeking compensation for harmed consumers, a civil penalty and an order prohibiting the company from committing future violations.
Through this lawsuit, the bureau indicated that it seeks to stop the alleged unlawful practices of the company. The bureau also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.
“Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” CFPB director Richard Cordray said.
“For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company,” Cordray continued.
SNAAC is an Ohio-based auto finance company that operates in more than two dozen states and specializes in lending to servicemembers. It lends money primarily to active-duty and former military to buy used vehicles.
The CFPB alleges that the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, and abusive acts and practices by using aggressive collection tactics that took advantage of servicemembers’ special obligations to remain current on debts.
The bureau noted both active-duty and former servicemembers could encounter trouble with the company if they missed or were late on payments.
“Once consumers defaulted, they became subject to repeated threats to contact their chain of command,” bureau officials said. “In many other instances, the company exaggerated the consequences of not paying. Thousands of people were victims of the company’s aggressive tactics.”
Specifically, the CFPB alleges that the company has:
• Exaggerated potential disciplinary action that servicemembers would face: The CFPB believes that the company routinely exaggerated the potential impacts on servicemembers’ careers of remaining delinquent. The bureau alleges SNAAC told customers that their failure to pay could result in action under the Uniform Code of Military Justice, as well as a number of other adverse career consequences, including demotion, loss of promotion, discharge, denial of re-enlistment, loss of security clearance, or reassignment. In fact, these consequences were extremely unlikely.
• Contacted and threatened to contact commanding officers to pressure servicemembers into repayment: The CFPB stated SNAAC buried a provision within the fine print of contracts saying that it could contact commanding officers about servicemembers’ debts. The company would repeatedly contact commanding officers to disclose the debts in an effort to force payment, and suggest that the servicemembers were in violation of military law and other regulations.
The CFPB alleges that many consumers were unaware of the provision, and those who were aware of it did not understand the pressure that would be brought to bear on them because of it. The company’s tactics, the CFPB alleges, therefore took advantage of the servicemembers’ inability to protect their interests in their transactions with the company and was unfair.
• Falsely threatened to garnish servicemembers’ wages: The CFPB charged that SNAAC implied to consumers that it could immediately commence an involuntary allotment or wage garnishment. But officials said such consequences could not or would not occur because, through the military pay system, involuntary allotments are only processed once a judgment by a court is obtained.
They go on to state SNAAC would threaten to pursue an involuntary allotment before they had even determined whether the servicemember would be sued.
• Misled servicemembers about imminent legal action: In many instances, the bureau contends SNAAC threatened to take legal action against customers when, in fact, it had not determined whether to take such action.
The bureau added that in numerous instances, the company did not intend to take such action at the time.
With actions possibly coming against another 11 dealerships in the Big Apple, New York attorney general Eric Schneiderman raked in a multi-million dollar settlement with three dealerships on Wednesday in a development associated with the alleged unlawful sale of credit repair and identity theft prevention services, and other “after-sale” items.
Schneiderman reached this settlement with:
— Paragon Motors of Woodside, which does business as Paragon Honda
— Worldwide Motors, which does business as Paragon Acura
— Civic Center Motors, which does business as White Plains Honda
Officials explained the agreement, which returns more than $13.5 million in restitution to consumers, concludes an investigation into these dealerships for the alleged sale of finance office products to 15,000 consumers — items that in some cases added more than $2,000 in “hidden costs and fees” onto the sale or lease price of a single vehicle.
Under a consent order agreement signed by the companies that operate the Paragon dealerships, they will also pay $325,000 in penalties, fees and costs to New York State.
This settlement is part of the attorney general’s wider initiative to end the practice of what officials described as “jamming,” unlawfully charging consumers for hidden purchases by dealerships.
As part of the wider investigation, Schneiderman’s Consumer Frauds Bureau recently obtained a consent order that shut down Credit Forget It (CFI), a New York company that sold the unlawful credit repair and identity theft prevention services to dealerships. The dealerships turned around and sold those service contracts at a higher price.
The attorney general indicated it is a violation of state and federal law to charge upfront fees for services that promise to help consumers restore or improve their credit, and contracts that violate the law are void.
Furthermore, the agreement requires Paragon to pay $6 million into a restitution fund administered by a third-party administer to be distributed to Paragon consumers with CFI contracts and to provide each of the about 15,000 consumers with a $500 “settlement card” that can be applied to one or more of the following from Paragon:
— The purchase or lease of any new or used vehicle
— Certain services or maintenance, such as oil changes, tire rotations, tire repairs, and wheel alignments
— Certain accessories, such as mats and replacement windshield wipers.
The Paragon dealerships are located at 57-02 Northern Boulevard and 56-02 Northern Boulevard in Woodside, N.Y., and 344 Central Avenue, in White Plains, N.Y.
Details of Paragon Investigation
The attorney general’s investigation found that Paragon used fraudulent, deceptive and illegal methods to sell the approximately 15,000 CFI contracts to consumers. That investigation into the three Paragon dealerships found that, between 2010 and 2014, they used deceptive sales tactics, including charging consumers for credit repair services and other “after sale” items without their knowledge or by misrepresenting that the services were free.
According to the investigation, and starting in at least March 2010, Paragon entered into an arrangement with CFI to sell its customers CFI’s credit repair and identify theft protection services. Every time Paragon charged a consumer for these services, officials explained the stores violated state and federal laws banning upfront fees for these services.
After a consumer worked with a salesperson to choose a vehicle, Schneiderman’s office said they met with an F&I manager, who attempted to sell them additional products such as extended warranties, a security system and credit repair services.
In many instances, the investigation showed, Paragon simply charged consumers for the credit repair services and concealed that they were charging consumers. In others instances, Paragon allegedly falsely told consumers, who said they did not need or want the services, that the services were free. Some consumers were sold the services without their knowledge despite the fact that they had excellent credit.
In addition to charging consumers for credit repair and identity theft prevention services without their knowledge or consent, officials said the Paragon dealers added on charges for other after-sale items, such as tire protection and Lo-Jack, without clearly disclosing what they were charging for such items. The costs of these items were often bundled into the vehicle sale price and not separately itemized.
“As a result, often unbeknownst to the consumer, the price of the car stated on purchase and lease documents was inflated by the amount of these after-sale items,” Schneiderman’s office said.
The attorney general’s investigation further found that the dealerships failed to provide required disclosures, such as a consumer’s rights to cancel the credit repair services contract.
In addition, Schneiderman’s office said the dealerships sometimes negotiated purchase and lease terms with consumers in Spanish and then only provided contracts and documents in English. New York City law requires that when the terms of an installment agreement are negotiated in Spanish, the seller must provide documents translated in Spanish.
The settlement prohibits Paragon from:
— Selling, offering to sell or marketing credit repair and identity theft services in connection with the sale or lease of a vehicle
— Selling, offering for sale, or providing to consumers any after-sale product or service unless, prior to such sale, certain material terms, including price, are disclosed verbally and in writing
— Misrepresenting the price of the vehicle in final lease or sale contracts
— Negotiating any terms of a sale or lease with a consumer in a language other than English without providing a translation of certain material documents in the language in which the terms were negotiated before the consumer signs these documents
— Failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price
The Paragon dealers, all of which are owned by the same individuals, claim to sell or lease approximately 1,000 new and used vehicles a month
More Settlements & Consent Orders
Besides the Paragon dealerships, the attorney general’s office reached a $41,000 settlement with L.I. Autoworld, which does business as Generation Kia in Bohemia, N.Y., in Suffolk County. The settlement came after an investigation found the company fraudulently sold CFI services and other after-sale products.
According to the attorney general’s investigation, L.I Autoworld used deceptive sales tactics to sell CFI’s credit repair services and other after-sale items to consumers. Officials said the dealership failed to provide sufficient time for consumers to review their financing documents and sometimes failed to give consumers copies of those documents, and enticed consumers to enter into high monthly payments with the false promise that the consumer could refinance in six months.
As part of that agreement reached earlier this year, officials said Generation Kia made $16,000 in payments, reimbursing 24 consumers. That restitution is profits the company made off consumers related to the unlawful CFI contracts they sold.
In addition, the attorney general indicated the dealership paid more than $20,000 in restitution to a dozen other consumers who were subjected to deceptive business practices. Generation Kia also paid a $5,000 penalty.
The settlement requires Generation Kia to stop using deceptive and misleading sales tactics and to provide documents and disclosures required by law, including the itemization of the cost of after-sale items in sale and lease agreements.
The attorney general’s consent order with Credit Forget It and its two principals, Damien Bullard and Michael Morgan, dissolved the company and enjoined it and its principals from marketing, promoting, selling, or engaging in the “credit services business” in violation of the law or from misrepresenting the services they offer.
The order also required Credit Forget It and its principals to instruct all dealerships to whom they distributed contracts for credit repair services for sale to consumers to stop selling these services and to remove all promotional materials and contracts from their dealerships.
It further ordered the dissolution of Credit Forget It.
If Credit Forget It and its principals do not comply with these terms, they must pay $2 million, according to Schneiderman’s office.
More Possible Actions Ahead
Schneiderman also served notice of his intent to sue 11 dealerships that allegedly engaged in similar practices. Those stores include:
— Westchester Autoplex, which does business as Honda of New Rochelle, 25 East Main Street, New Rochelle, N.Y.
— G. Hylan Motors Corp., which does business as Staten Island Honda and Staten Island Nissan, 1232 and 1220 Hylan Boulevard, Staten Island, N.Y.
— Huntington Honda, 1055 E. Jericho Turnpike, Huntington, N.Y.
— GPB 8, which does business as Nissan of Huntington, 850 East Jericho Turnpike, Huntington Station, N.Y.
— GPB 9, which does business as Volkswagen of Huntington, 838 East Jericho Turnpike, Huntington Station, N.Y.
— Plaza Motors of Brooklyn, which does business as Plaza Honda, 2740 Nostrand Avenue, Brooklyn, N.Y.
— Plaza Hyundai, 2740 Nostrand Avenue, Brooklyn, N.Y.
— Plaza Oldsmobile, which does business as Plaza Toyota, 2733 Nostrand Avenue, Brooklyn, N.Y.
— Louzoun Enterprises, which does business as Queensboro Toyota, 62-10 Northern Blvd, Woodside, N.Y.
— Potamkin New York, which does business as Potamkin Hyundai, 2495 2nd Ave., Manhattan
The office is continuing to investigate other New York dealers that sold or sell after-sale services, including Manfredi Auto Central on Staten Island, which allegedly sold more than 1,400 CFI contracts.
The attorney general filed a motion to compel documents from Manfredi, after it refused to comply with an investigatory subpoena.
“When consumers shop for a car, they deserve to be dealt with honestly and fairly — and not to be misled by auto dealers who use deceptive tactics to fleece their own customers,” Schneiderman said.
“New York consumers must beware: Car dealerships sometimes pad their pockets by charging for worthless after-sale items, which inflate the price of their car,” he continued. “These items are often ones that consumers don’t need, did not ask for and often are not even told about.
“Businesses need to make a profit to survive, but it’s illegal to do so by duping consumers,” Schneiderman added.
New York City Department of Consumer Affairs Commissioner Julie Menin praised the actions by Schneiderman’s office.
“A car is one of the biggest purchases many consumers make and we must do everything we can to protect them from unscrupulous auto dealers,” Menin said. “DCA has taken an innovative and aggressive approach, investigating dealers’ relationships with banks, creating a safe, affordable and transparent auto loan, and obtaining restitution for consumers harmed by predatory actors.
“We’re thankful to the attorney general for his hard-hitting actions against businesses that are deceiving New York City consumers,” she went on to say.
While a pair of industry associations indicated they weren’t blindsided when the Consumer Financial Protection Bureau released its final larger participant rule this week, an attorney with more than 30 years of experience cautioned finance company executives about not ignoring an important portion of what the CFPB emphasized.
Along with the National Automotive Finance Association and the American Financial Services Association, SubPrime Auto Finance News also reached out to David Silverman, who operates his own firm in Englewood, Colo., served two terms on the board of directors for the National Association of Retail Collection Attorneys (NARCA) and was founding president of the Colorado Creditor Bar Association.
“It’s great to finally have clarity of the rules of the game, taking much of the guesswork out of doing business,” said Silverman, an attorney since 1982.
Currently, the bureau supervises auto financing at the largest banks and credit unions. This rule extends that supervision to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year.
Under the rule, those companies will be considered “larger participants,” and the bureau may oversee their activity to ensure they are complying with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) prohibition on unfair, deceptive, or abusive acts or practices.
Under this final rule, which was proposed last September, the bureau estimates that it will have authority to supervise about 34 of the largest nonbank auto finance companies and their affiliated companies that engage in auto financing.
To coincide with this new authority, the bureau updated its Supervisory and Examination Manual to provide guidance on how the CFPB will monitor the bank and nonbank auto finance companies that it supervises.
“While it’s great to now know the rules, do not ignore the examination procedures,” Silverman said. “Following these procedures can give an organization of every size, not just the defined larger participants a huge competitive advantage because it’s analogous to the teacher publishing test questions before test day.
“This principal applies to every business in the automobile lifecycle from lead generation to default and recoveries and all phases in between,” he went on say.
The CFPB indicated rule will take effect 60 days after publication in the Federal Register.
“The large participant rule was not a surprise to the industry. It was very similar to what the CFPB announced as the proposed rule,” said NAF Association executive director Jack Tracey, who welcomed Jeffrey Langer, assistant director, office of installment and liquidity lending markets at the CFPB, during the organization’s annual conference last month in Plano, Texas.
“The CFPB has a history of defining its supervision over large segments of each market they oversee, so the ruling is not a surprise to the industry,” Tracey continued in a message to SubPrime Auto Finance News. “Actually it probably good that the waiting is over. The auto financing industry has been dealing with the CFPB now for the past few years and I don’t see any additional concerns for them now that the ruling has been finalized.
“The large players already knew who they were after the proposed rulemaking was announced and they have been preparing themselves for the supervision,” he went on to say.
AFSA president and chief executive officer Chris Stinebert said in a statement to SubPrime Auto Finance News that the bureau’s final rule arrived this week “as anticipated.”
Stinebert surmised that the CFPB only made “minor changes” to its original proposal to define larger participants in nonbank auto finance.
“The CFPB’s rule retained its original transaction threshold, meaning that nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year will come under CFPB supervision and enforcement,” he said.
“At AFSA’s recommendation, the CFPB broadened the definition of asset-backed securities to ensure that they are excluded from the 10,000 transaction threshold,” Stinebert continued. “In addition, the CFPB modified the definition of refinancing for the purpose of the threshold. Specifically, the Bureau clarified that a refinancing must be secured by an automobile to be included in the definition.
“Basically, the final rule remains largely unchanged regarding auto leasing,” he went on to say.
No matter how often or significantly the CFPB or any other federal or state regulator modifies rules that govern auto financing, Tracey emphasized the impact makes the compliance certification program the NAF Association offers that much more valuable.
Broken up into four modules — two in-person sessions and two online components — the NAF Association’s certification program gives finance company managers the chance to learn foundational concepts and compliance strategies in a law-school-like setting.
“Everyone in the auto financing space, especially the large players, have to be sure that they have a good compliance management system in place with knowledgeable compliance people behind it to successfully deal with CFPB supervision,” Tracey said.
“The NAF Association has committed itself to assisting the industry in its ongoing dealings with the CFPB by developing education and training programs,” he continued. “We’ve had the Consumer Credit Compliance Certification Program in place for the past 18 months and we’ve just announced online training modules for auto finance underwriters and collectors.
“This new program should help our finance company members equip their front line people with the ability to be knowledgeable about compliance and help them to apply the knowledge when dealing with consumers,” Tracey went on to say.
For more information about the compliance certification program, go to www.nafassociation.com or contact Tracey directly at jtracey@nafassociation.com.
What the Consumer Financial Protection Bureau officially will consider to be a “larger participant” in the auto finance market took another significant step forward today.
The CFPB published a rule that will allow the agency to supervise larger nonbank auto finance companies for the first time. The CFPB also released the examination procedures that regulators will use to ensure that auto finance companies are following the law.
“Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life,” CFPB director Richard Cordray said. “Today’s rule will help ensure that larger auto finance companies treat consumers fairly.”
The CFPB estimated auto loans are the third largest category of household debt, behind mortgages and student loans. The bureau added American consumers had about $900 billion in auto loans outstanding in the fourth quarter of 2014.
Currently, the bureau supervises auto financing at the largest banks and credit unions. Today’s rule extends that supervision to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year.
Under the rule, those companies will be considered “larger participants,” and the bureau may oversee their activity to ensure they are complying with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) prohibition on unfair, deceptive, or abusive acts or practices.
Under today’s final rule, which was proposed last September, the bureau estimates that it will have authority to supervise about 34 of the largest nonbank auto finance companies and their affiliated companies that engage in auto financing.
These companies together originate around 90 percent of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers. The final rule also defines additional automobile leasing activities for coverage by certain consumer protections of the Dodd-Frank Act.
The bureau indicated it is finalizing the rule largely as proposed, with minor changes. The final rule broadens the category of transactions involving asset-backed securities that are not counted toward the 10,000 transaction threshold.
Bureau officials added the rule also makes a minor modification to the definition of refinancing for the purpose of the threshold.
To coincide with this new authority, the bureau updated its Supervisory and Examination Manual to provide guidance on how the CFPB will monitor the bank and nonbank auto finance companies that it supervises.
The regulator explained examiners will be assessing potential risks to consumers and whether auto finance companies are complying with requirements of federal consumer financial law. Among other things, examiners will be evaluating whether auto finance companies are:
• Fairly marketing and disclosing auto financing terms: The bureau will be examining auto finance companies that market directly to consumers to ensure they are not using deceptive tactics to market loans or leases. The Bureau would be concerned if consumers are being misled about the benefits or terms of financial products. The Bureau is also looking to ensure that consumers understand the terms they are getting.
• Providing accurate information to credit bureaus: The bureau will assess whether information auto finance companies provide to credit bureaus is accurate. The CFPB recently took an enforcement action against an auto finance company that distorted consumer credit records by inaccurately reporting information like the consumers’ payment history and delinquency status to credit bureaus. The CFPB is looking to prevent inaccurate information from being reported in the future.
• Treating consumers fairly when collecting debts: The bureau will assess whether auto finance companies are using illegal debt collection tactics. The Bureau will be looking to ensure that collectors are relying on accurate information and using legal processes when they collect on debts. The Bureau also will review the repossession process, including the practices of third-party service providers that are employed to repossess autos.
• Lending fairly: The bureau will assess whether auto finance companies’ practices comply with the Equal Credit Opportunity Act and other Bureau authorities protecting consumers.
Today’s rule will take effect 60 days after publication in the Federal Register.
A copy of the rule published today can be found here.
The examination procedures for auto finance can be found here.
Two Nissan dealerships in Alabama’s largest market are getting the attention of officials from the Department of Justice and the Federal Trade Commission.
Not long after one Birmingham, Ala., Nissan store received word from the FTC regarding a consent order regarding advertising, federal prosecutors charged the general manager of another Nissan store in the city with conspiracy to defraud Nissan North America through its dealership incentive programs.
U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Roger Stanton and Internal Revenue Service-Criminal Investigation Special Agent in Charge Veronica Hyman-Pillot announced the charges against Serra Nissan late last week.
The U.S. Attorney’s Office filed a one-count information in U.S. District Court charging that Randy Visser directed managers of the Birmingham dealership to falsify sales reports submitted by wire to the manufacturer so Serra Nissan could receive incentive payments it did not earn.
Prosecutors also filed a plea agreement with Visser, in which he acknowledges the conspiracy charge and states his intention to plead guilty.
The charge against Visser follows last month’s grand jury indictment of Serra Nissan’s controller, Kimberly Branch. The 16-count indictment of Branch includes conspiracy and wire fraud charges based on the same scheme to defraud Nissan North America by falsely reporting to the OEM that certain vehicles were sold at Serra Nissan when they were sold at another Serra dealership.
The conspiracy charge against Visser charges that, between March 2013 and April 2013, Visser directed other employees at Serra Nissan to create false documents reporting vehicles sold at Serra Visser Nissan in Cullman as sold at Serra Nissan in Birmingham.
Federal officials explained the process, known as “pooling sales,” occurs when a dealer owns or is associated with more than one dealership and attributes sales from one dealership to another in order to meet sales incentive levels that each dealership would not reach on its own.
At all times relevant to the charged offense, Visser owned 49 percent of Serra Visser Nissan. His wife owned 2 percent, and her father, Anthony Serra, owned 49 percent, according to Visser’s information and plea agreement. Serra owns 50 percent of Serra Nissan, and his daughter owns the other 50 percent, according to the documents.
Visser and others in the conspiracy fraudulently claimed 15 vehicle sales for Serra Nissan, causing Nissan North America to overpay the dealership $64,800 in incentives, according to the charges.
The conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine.
FTC Approves Final Consent Orders in 2 Deceptive Advertising Cases
In other news from federal regulators, following a public comment period, the FTC recently approved final consent orders involving two dealers that regulators said deceptively advertised the sale, financing and leasing of their vehicles.
Under the settlement orders, Jim Burke Nissan of Birmingham, Ala., and Ross Nissan of El Monte, Calif., are prohibited from misrepresenting in any advertisement the cost to purchase or lease a vehicle, or any other material fact about the price, sale, financing, or leasing of a vehicle.
The consent orders also address the alleged Truth in Lending Act and Consumer Leasing Act violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws.
The Jim Burke order also prohibits the dealer from representing that a discount, rebate, bonus, incentive or price is available unless it is available to all consumers or the qualification terms are clearly and conspicuously disclosed.
These cases were part of the FTC’s nationwide and cross-border auto sweep Operation Ruse Control, which was announced in March.
The commission announced a final consent with National Payment Network, a company involved in the sweep that deceptively advertised its add-on biweekly auto payment plan.
The FTC votes approving the final orders were 5-0.
With new state compliance demands coming at the beginning of next year, the Carolinas Independent Auto Dealers Association (CIADA) recently selected Auto Data Direct (ADD) as its exclusive vendor for the pending requirement for electronic lien and title (ELT) filing.
Officials recapped that ELT refers to the method of exchanging vehicle, title and lien information electronically with a state's department of motor vehicles. ADD's ELT services can allow finance companies to a number of tasks, including:
— Obtain an ELT number necessary to process liens on electronic titles.
— Receive electronic title assignment from the DMV.
— Request a paper title be mailed directly to the lender without releasing a lien on a vehicle.
— Release a lien on a vehicle and provide the owner unencumbered electronic title or have a paper title mailed directly to the owner.
— Manage electronic liens and titles through an online archive.
“As the state of North Carolina mandates electronic filing for dealers in January 2016, we felt it was important for the CIADA to provide the independent dealer an experienced vendor who can work seamlessly and without confusion to keep the dealer in compliance,” CIADA executive director John Brown said.
“ADD will serve our members with the same high quality customer service that our dealers provide to their customers,” Brown continued.
ADD dealer services manager Mike Samaan noted, “ADD’s ELT services provide lenders with all of the tools necessary, with no term contracts, to be in compliance with state law while providing excellent service to their customers.
“Lenders who use our service also benefit from our free Lienlock123 which continuously monitors ELT vehicles and provides daily notifications through their account when theft reports, proposed export, or offers of sale on e-bay are located for a lienholder asset,” Samaan went on to say.
“As an experienced ELT provider, we're thrilled to partner with CIADA to offer this valuable service to North Carolina dealers,” he added.
Samaan also announced the addition of Marty Coates to the ADD team, serving the Carolinas.
“Our strategic partnership with Marty, president of Coates and Associates, will assist us in promoting our ELT service in North Carolina,” Samaan said.
“Marty's extensive training and experience in business market development combined with his relationship with thousands of dealers will help us expand our presence in the Carolinas,” Samaan continued.
Coates is the dealer trainer for the CIADA, where he provides continuing education and pre-licensing training in both North and South Carolina. He also consults with dealer clients on dealership related issues.
“We are truly excited to position ADD and the new ELT service with dealers,” Coates said. “The synergistic value of our two companies is certain to aid dealers in becoming compliant more quickly and smoothly.”
For more information on ADD’s service, visit its website at www.add123.com.
Federal banking agencies on Tuesday reiterated the disclosure requirements for the annual stress tests conducted by financial institutions with total consolidated assets between $10 billion and $50 billion.
Officials from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency explained these medium-sized companies are required to conduct annual, company-run stress tests — implementing a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act — with the results disclosed to the public for the first time this year.
Regulators went on to mention the firms are required to disclose certain information, including:
— A description of the types of risks included in the stress test
— A summary description of the methodologies used in the stress test
— Estimates of losses, revenue and net income
— Post-stress capital ratios
— An explanation of the most significant causes for the changes in regulatory capital ratios
As the agencies have previously stated, medium-sized companies are not subject to stress tests conducted by the agencies or the Federal Reserve's annual Comprehensive Capital Assessment and Review.
“The company-run stress tests are hypothetical results and are not intended to be forecasts or expected outcomes, and the agencies will not make any public statements about the results,” regulators said.
“Stress test results must be disclosed by the companies between June 15 and June 30. Any questions the public may have regarding the disclosures should be directed to the companies,” the regulators went on to say.
As one the leading experts in asset backed securities analysis took a stab at deflating the “subprime bubble” talk, the Consumer Financial Protection Bureau official whose jurisdiction is the auto finance market answered pre-submitted questions for nearly an hour on Thursday during the National Auto Finance Association’s 19th annual Non-Prime Auto Financing Conference.
The CFPB barred media outlets from attending this conference session, so SubPrime Auto Finance News followed up with NAF Association executive director Jack Tracey to obtain a recap of what transpired. The session included Jeffrey Langer, assistant director, office of installment and liquidity lending markets at the CFPB, as well as Hudson Cook partner Joel Winston, who spent decades of his professional career at the Federal Trade Commission.
“I think it went well,” Tracey said of the session that attracted most, if not all, of the more than 400 conference attendees who gathered in the largest meeting space available at the Dallas/Plano Marriott at Legacy Town Center in Plano, Texas.
“I think there are limitations on what can be said. But in the framework of what he could say, he was forthcoming,” Tracey continued. “During the question-and-answer period … we touched on the important things, disparate impact, size of finance company portfolios and compliance management systems.”
Winston posed the questions NAF Association members submitted in advance. Langer also took part in two other closed-door, informal gatherings with a select group of finance company executives later on Thursday.
“There’s always the wish that (Langer) was able to be even more forthcoming,” Tracey said. “But as he explained it, as long as they’re working on (policy) and it’s in the developmental stage, it’s improper to put it out there because it can cloud the marketplace.
“I’m personally respectful for what he’s trying to do. I’m particularly grateful that this is the fourth year they’ve come. They’re wanting to know our industry, and they’re using the NAF Association as the way to do it,” Tracey went on to say.
Langer conducted similar sessions during the NAF Association’s annual gathering last year. Before leaving the bureau for a partner position with Hudson Cook, Rick Hackett also appeared twice at this conference.
“It’s very important for the NAF Association to have relationship with other industry associations as well as an amicable relationship with the regulators,” Tracey said. “The flow of information and the opportunities for discussion are what an association has to do.”
Return of Bubble Talk
As she has done for nearly every NAF Association conference, Standard & Poor's senior director Amy Martin gave nearly a 30-minute presentation about how the ABS market is performing. Soon after Martin finished her commentary on Thursday, she took questions, and it didn’t take longer for the discussion to return to a subject that might make subprime finance company executives grind their teeth.
Martin responded to an inquiry about how the industry can diffuse discussions about finance companies inflating a “subprime bubble” similar to what happened in the mortgage space.
“We don’t think there is a bubble in subprime autos because people don’t speculate with their cars. They don’t buy a car thinking it’s going to appreciate in value,” Martin said.
“There is a real need for this segment to have basic transportation to get to and from work, to the grocery store and take their kids to school. Many of them are a one-car family. They need the car,” she continued.
Martin referenced back to her presentation to show how the subprime ABS market nearly evaporated during the low point of the Great Recession back in 2009.
“And because the ABS market wasn’t open for business many subprime auto finance companies could not obtain the financing with which to make subprime loans,” Martin said. “There was a scarcity of subprime lending. So yes, there’s been a lot of growth. But maybe we’ve gotten back only to where we were before the crisis.”
Where Martin sees records being set in the auto finance space stems from the opposite side of the credit spectrum. She pointed to the volume of super prime consumers taking out vehicle installment contracts as what could be making headlines.
“I don’t think that there’s a (subprime) bubble. But I do think we need to watch the rise in delinquencies and losses,” Martin said.
“We have to be disciplined and identify to make sure the credit enhancement is commiserate with the ratings and loss expectations,” she continued. “Just because collateral losses are going up, it doesn’t mean the companies can’t be profitable. They just need to price the risk appropriately.”
Ohio attorney general Mike DeWine and 30 other state attorneys general reached a settlement this week with the three main credit reporting agencies — Equifax, Experian and TransUnion — which have agreed to make a number of changes to their business practices.
Enforcement officials recapped that DeWine initiated a multistate investigation in 2012 that focused on consumer disputes about credit report errors, monitoring and disciplining data furnishers (providers of credit reporting information), accuracy in consumer credit reports and the marketing of credit monitoring products to consumers who call the credit reporting agencies to dispute information on their credit report.
Under the settlement, officials said the credit reporting agencies have agreed to increase monitoring of data furnishers, to require additional information from furnishers of certain types of data, to limit direct-to-consumer marketing, to provide greater protections for consumers who dispute information on their credit reports, to limit certain information that can be added to a credit report, to provide additional consumer education, and to comply with state and federal laws, including the Fair Credit Reporting Act.
“Today is a good day for all consumers,” DeWine said. “We are announcing a comprehensive multistate settlement that will help protect consumers from credit reports that are wrong, out of date, or even mixed up with someone else’s report, and it will reduce the chance that a consumer is wrongly denied a house loan, a car loan, or even a job, because of an inaccurate credit report.
“This settlement requires the credit reporting agencies to do a better, more careful job, to produce more accurate credit reports, and to be much more responsive when consumers call to correct their mistakes,” DeWine continued.
In reacting to this week’s settlement, Stuart Pratt, president and chief executive officer of the Consumer Data Industry Association, referenced back to how Equifax, Experian, and TransUnion created the National Consumer Assistance Plan back in March. Pratt emphasized that strategy was geared to enhance their ability to collect accurate consumer information and to provide consumers with a better experience in interacting with the national credit reporting agencies about their credit reports.
“That plan, which arose out of collaborative discussions between the three agencies and a group of state attorneys general and the attorney general of New York, will enhance credit report accuracy, increase transparency, and provide meaningful benefits to consumers,” Pratt said.
“Those benefits, which will be rolled out nationwide, stand as an example of what can be achieved when private industry and government officials work together,” he went on to say.
In agreement to this week’s settlement, Pratt emphasized that Equifax, Experian, and TransUnion “have been in compliance with federal and state law, but as we showed in launching the National Consumer Assistance Plan, we do not hesitate to make improvements beyond what the law requires when doing so will benefit consumers.
“With the exception of the financial payments the credit reporting agencies are making to the attorneys general to cover the costs of their investigations, consumer education and other purposes, the settlement essentially adopts the plan announced with the New York attorney general,” he continued.
Pratt pointed out that what’s been described as “the most recent comprehensive government study” showed that credit reports are “materially accurate” 98 percent of the time.
“But our goal is always to improve beyond even that high standard of accuracy, and we will continue to look for ways to make further enhancements, as we have done several times in recent years,” Pratt said.
More Details of Latest Settlement
Key provisions of the settlement — what officials called an assurance of voluntary compliance — include:
— The credit reporting agencies must maintain information about problem data furnishers and provide a list of those furnishers to the states upon request.
— The credit reporting agencies and data furnishers must use a better, more detailed system to share data.
— The credit reporting agencies cannot market credit monitoring services to a consumer during a dispute phone call until the dispute portion of the call has ended.
— The credit reporting agencies must tell consumers that purchasing a product is not a requirement for disputing information on their credits reports.
— The credit reporting agencies must implement an escalated process for handling complicated disputes, such as those involving identity theft, fraud, or mixed files (in which one consumer’s information is mixed with another’s).
— Each credit reporting agency must notify the other agencies if it finds a mixed file.
— The credit reporting agencies must send a consumer’s supporting documents to the data furnisher. (The credit reporting agencies implemented this change after the attorneys general initiated their investigation and raised the concern that the pertinent complaint documents were not being sent to the furnishers.)
— Consumers may obtain one additional free credit report in a 12-month period if they dispute information on their credit report and a change is made as a result of the dispute.
— The credit reporting agencies are generally prohibited from adding information about fines and tickets to credit reports.
— The credit reporting agencies cannot place medical debt on a credit report until 180 days after the account is reported to the credit reporting agency, which gives consumers time to work out issues with their insurance companies.
— The credit reporting agencies must require debt collectors to provide the original creditor’s name and information about the debt before the debt information can be added to a credit report.
— The credit reporting agencies must tell consumers how they can further dispute the outcome of an investigation into a dispute, such as by filing a complaint with other agencies.
— Each credit reporting agency must provide a link to its online dispute website on the website www.annualcreditreport.com, and the credit reporting agency’s dispute website must be free of ads and any marketing offers.
Officials explained the changes required under the settlement will be implemented in three phases to allow the credit reporting agencies to update their IT systems and procedures with data furnishers. All changes must be completed by three years and 90 days following the settlement’s effective date.
Participants & Ramifications of Settlement
Officials went on to mention a violation of the settlement by any of the credit reporting agencies can be enforced according to state law.
In Ohio, for example, a violation of an assurance of voluntary compliance is prima facie evidence of a violation of the state’s Consumer Sales Practices Act, meaning it would provide sufficient proof for the state to establish a case.
Under the settlements, the credit reporting agencies also will pay the participating states $6 million. As the lead state, Ohio will receive $459,912.80 under the settlement.
Participating in the settlement are the attorneys general from the states of Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont and Wisconsin.
KPA, a provider of dealership management software and services, recently launched a new product line that combines efficient software, comprehensive content and on-demand expert advice to help stores follow sales and finance best practices and ensure their business complies with federal and state regulations.
The company highlighted its sales and finance compliance management system can give all dealership employees who works with a customer during the shopping and purchase process instant access to crucial regulatory data, forms and processes.
As a result, all dealer staff can assess and reduce risk at every step of the selling process, from the first interaction with a customer in the showroom to final paperwork in the F&I department.
“Today’s dealers face increasingly complex compliance requirements as regulatory agencies revisit and refine their enforcement priorities,” KPA chief executive officer Vane Clayton said.
“Dealers who are cited with violations from government agencies are getting the spotlight in this national conversation, which has brought an unprecedented focus on dealer sales and finance operations,” Clayton continued. “In the current regulatory environment, even inadvertent missteps can be shockingly costly.”
The subscription-based service also includes an extensive content library of reference materials and guides that are geared to keep dealerships informed on the maze of regulations that impact their business. The KPA sales and finance compliance software can allow dealers to create and update customized policies and procedures specific to their operation.
Online employee training consists of comprehensive materials and self-paced courses that are available on-demand to accommodate busy dealership employees.
A learning management system can allow dealership human resource managers, sales managers or other staff administrators to track employees’ progress as well as ensure the entire dealership team is always up to speed on the latest regulations and best practices.
“With multiple employees involved in presenting prices and payment information to consumers — such as sales consultants negotiating with a customer or social media managers posting an advertisement — it’s essential that the entire organization is knowledgeable in order to avoid potential fines, civil lawsuits and reputation damage,” Clayton said.
In addition to online training and compliance management tools, KPA experts can provide in-person training as well as on-site auditing and consulting services. These services can assist dealerships in catching errors and avoiding costly legal actions and damage to their valuable reputations.
To learn more about KPA and its complete portfolio of service offerings, visit www.kpaonline.com or call (866) 365-1735.
