Given the drumbeat of the Consumer Financial Protection Bureau and its increasing influence on dealership F&I practices and consumer finance, Automotive Compliance Consultants emphasized that dealership professionals must be fully equipped to understand and comply with regulations.
Automotive Compliance Consultants president Terry Dortch pointed out that one such regulation specified by the CFPB is the use of a compliance management system (CMS).
“There is an unfortunate misconception that a CMS is software or some other ‘easy’ compliance technology,” Dortch said. “It is not, so lenders and the auto and powersports dealers they do business with should not be mystified.
“Instead, a CMS, according to CFPB, is a process to ensure a dealer’s compliance with consumer protection regulations. Usually, a proper CMS is a defined process for auditing, inspecting, and documenting lending and F&I practices so they conform to federal consumer finance laws,” Dortch continued.
Dortch and the Automotive Compliance Consultants expert staff will discuss CMS and other consumer lending topics at the American Financial Services Association’s 19th annual Vehicle Finance Conference this week in San Francisco.
“The regulations change rapidly — and the CFPB is always causing ripples that often cause lenders and dealers to shudder over their potential impact to their businesses and how they service consumers’ finance needs. Continuing education is so recommended for any party engaged in automotive retailing and finance,” Dortch said.
“We invite AFSA attendees to discuss the ins-and-outs of a compliance management system that will cover all facets of dealership consumer finance requirements,” he added.
For information, contact Dortch at terry_dortch@compliantnow.com or visit www.compliantnow.com.
If store managers and personnel can find 20 minutes in their schedule, they can take advantage of some of the added new training courses Ally Financial integrated into its Performance Development Center this week.
In hopes of further expanding the scope of their educational offerings for dealers, company officials highlighted that the new courses address important topics such as selling skills, customer loyalty and retention, social media marketing, F&I management and compliance education. Course content leverages nearly 100 years of Ally's auto industry experience, and includes real-world examples and practical techniques that can be applied to daily operations.
By offering one of the most comprehensive dealer training programs in the business, the Performance Development Center is designed to help Ally strengthen relationships with dealers and support them in a changing marketplace.
Ally pointed out that most modules can be completed in 20 minutes since they’re specifically tailored for busy dealership personnel.
Ally's Performance Development Center is an education platform that can provide innovative and easily accessible training sessions for dealership employees at all levels. Since its launch in 2013, more than 10,000 learners have registered for more than 70 different courses.
The Performance Development Center offers the flexibility to learn online 24-hours a day with on-demand modules, or in a classroom setting with instructor-led training that takes place in-dealership or offsite.
The new courses will be introduced to dealers beginning on Thursday at the National Automobile Dealers Association Convention and Expo. The new offerings include:
— Comprehensive F&I management training that teaches effective customer needs assessment and menu presentation skills
— Vehicle selling skills course designed to help sales consultants develop a consistent and professional approach
— Courses designed to help dealerships learn customer loyalty strategies and social media management.
Ally mentioned the curriculum is infused with practical examples, tips and techniques that the company has assembled through its extensive experience with dealers of all sizes across the country, which dealers can use to build the knowledge base and skill set of employees at all levels.
A new series of compliance-focused courses will also be added to the Performance Development Center later this month that aims to educate dealership employees about current rules and regulations.
The compliance training courses are being provided in connection with the enterprise governance, risk and compliance solutions division of FIS, which specializes in risk management, regulatory training and consulting services for the automotive and financial services industries.
FIS, a provider of banking and payments technology as well as consulting and outsourcing solutions, provides risk management, including compliance training, to more than 5,000 financial services companies across the country as well as all major regulatory agencies. The compliance training courses will cover topics such as Truth in Lending Act, Fair Lending, Regulation M and Federal Advertising Laws, and provide role-specific eLearning training for sales and finance professionals.
“As a leader in the auto industry, Ally believes that the combination of best-in-class products and services paired with a knowledgeable sales force is a winning combination for dealerships," said Jim Whiteford, executive director of performance development at Ally.
“By continuously adding courses to our Performance Development Center, we are creating an important resource for all dealers, offering valuable, real-world knowledge and tools to help them sharpen skills and increase efficiency and effectiveness throughout their organizations,” Whiteford said. “We are proud that our platform has reached 10,000 learners and we will continue to add new courses based on feedback and demand.”
Ally's Performance Development Center was launched in 2013 to provide dealers with convenient access to comprehensive education and training. The platform offers more than 29 on-demand and instructor led training courses with more than 44 on-demand modules covering a wide range of topics.
For more information and a demonstration of the new courses, visit www.allydealertraining.com or booth No. 2401S at the NADA Convention in San Francisco.
Ally Financial Declares Dividends on Preferred Stock
In other company news, Ally declared quarterly dividend payments for certain outstanding preferred stock. Each of these dividends were declared by the board of directors on Tuesday and are payable on Feb. 17.
A quarterly dividend payment was declared on Ally's Fixed Rate Cumulative Perpetual Preferred Stock, Series G, of $45.1 million, or $17.50 per share, and is payable to shareholders of record as of Feb. 1.
Additionally, a dividend payment was declared on Ally's Fixed Rate/Floating Rate Perpetual Preferred Stock, Series A, of $21.7 million, or $0.53 per share, and is payable to shareholders of record as of Feb. 1.
EFG Companies claims the results of its most recent dealer services client satisfaction study released this week show the company scored higher than outfits such as Apple iPhone, Southwest Airlines, USAA Banking and Insurance, and Nordstrom.
Among the key findings, officials indicated dealers rated the account representative, compliance oversight and F&I training as the highest priority capabilities of F&I providers. On a scale of one to 10, where 10 is the highest for attributes in a given area, dealers ranked EFG as:
• 9.4 for account representative
• 9.3 for compliance
• 9.2 for F&I training
• 92 percent likelihood to recommend
“At EFG, we are obsessive about performance measurement and accountability,” said John Pappanastos, president and chief executive officer of EFG Companies.
“Soliciting direct, objective input through a national client satisfaction survey augments the ongoing measurement of our effectiveness against the commitments we make to our partners,” Pappanastos continued. “Our partners' feedback is an invaluable driver in the evolution of our business, and they seized the opportunity to also identify areas of their business where we have not traditionally engaged, but where they believe our engagement could meaningfully impact their business performance.”
Research study participants noted the high quality and depth of EFG’s account service team as one of the company’s greatest strengths, describing the service as an extension of the dealership’s management team.
EFG’s clients found the company’s knowledge regarding government regulations and industry trends highly beneficial to their business, as well as EFG’s proactivity in offering new ideas and recommendations:
• 97 percent of EFG’s clients stated that EFG representatives are F&I education and compliance leaders.
• 98 percent of clients regarded EFG overall as an expert of the F&I landscape.
• 95 percent believed that EFG has expert knowledge about government regulations and economic trends that affect their business.
• 95 percent of dealers stated that EFG understands the performance drivers of their F&I organization.
Troubadour Research and Consulting, who conducts national research with brands such as Kaiser Permanente, Toyota, and Samsung Mobile, administered EFG’s client satisfaction study, analyzing qualitative metrics from dealer principals and quantitative metrics from general managers and F&I directors.
“The results of the study weren’t just excellent, they were aspirational,” said Dale Gilliam, CEO of Troubadour Research and Consulting. “It’s our goal to be the EFG of the research industry.”
In the qualitative analysis, recurring comments from dealer principals said the following about EFG:
“The onsite training is invaluable. Our account rep is training the entire time he’s here, every time.”
“EFG is proactive and ahead of the curve on compliance compared to most F&I providers.”
“Ultimately, we have great F&I numbers and I attribute that largely to EFG.”
The Bob Moore Auto Group — the national leader in F&I revenue per retail unit among the top 125 U.S. dealer groups — also cheered EFG’s capabilities.
“EFG’s objective, professional counsel has enabled us to evolve and strengthen our business processes with innovative solutions and products,” said Curtis Hayes, chief financial officer of the Bob Moore Auto Group. “Their engagement model is not replicable by any other product provider.”
Along with revamping its tire-and-wheel coverage plan, F&I program provider RoadVantage recently unveiled a Web-based compliance management system (CMS) that can help dealers ensure their practices are compliant with standards set by the Consumer Financial Protection Bureau.
RoadVantage explained that according to the CFPB, elements of an effective compliance program include written policies and procedures, verifiable training on policy and compliance, monitoring and corrective action measures to ensure accordance with policies, a track-able complaint resolution system, and periodic review, revision and written reports via independent and third-party audits.
“The CFPB has stated that it expects to see a Compliance Management System in place in every supervised entity,” RoadVantage chief executive officer Garret Lacour said. “The RoadVantage CMS offers a straightforward, effective way for dealers to address this need.”
Created by attorneys specializing in dealership defense, the Web-based RoadVantage CMS is a comprehensive solution that can addresses these elements through four major components:
— Policy management
— Online compliance training
— Complaint resolution system
— Third-party compliance audits
“The recent industry events involving the CFPB mean it’s more important than ever for dealerships to ensure they have a compliance system in place,” said compliance expert Gil Van Over, president and founder of gvo3 and Associates, a nationally recognized compliance consulting firm. “The RoadVantage CMS offers the framework to help dealerships ensure they are meeting CFPB requirements.”
RoadVantage senior vice president of sales Randy Ross added, “Dealerships are looking for a turnkey compliance solution that integrates with existing practices and enables dealers to easily evaluate and demonstrate compliance.
“Because the RoadVantage CMS is an online tool, it offers a convenient way to foster compliance,” Ross went on to say.
For more details, visit RoadVantage online at www.roadvantage.com.
RoadVantage Outlines New True Coverage Offering
In other company news, RoadVantage also unveiled on Monday a solution called True Coverage, what officials described as a fresh approach to F&I that can simplify contract language and reduce the exclusions that typically cause claims headaches for dealerships and their customers.
With True Coverage, RoadVantage’s Tire & Wheel programs now can streamline complex contracts and eliminate several exclusions that often create problems for dealers and agents, including construction zones, metal plates on the road, tire pressure monitoring sensors, snow tires, car washes and more.
“True Coverage is an exciting development in automotive ancillary product coverage,” said Charles Brown, an independent agent and owner of Superior Automotive Co. “This can considerably reduce dealer service headaches by covering what customers already expect to be covered. It’s another example of how RoadVantage is raising the bar.”
RoadVantage has applied True Coverage to its entire product line including the Vantage Preferred multi-option bundles, which also include coverage for hail damage, cosmetic damage to hubcaps, aftermarket wheel coverage with no surcharges, cosmetic damage on chrome wheels with no limits, replacement for wheels with cosmetic damage, and a replacement-only program for tires.
“This type of coverage is not available in the industry today,” Lacour said. “With True Coverage, we’ve taken the bold steps to streamline complex contracts and remove the exclusions that commonly cause problems.
“True Coverage is another advancement in our continuing quest to provide the best customer experience available in the industry today,” Lacour went on to say.
The Larry H. Miller Group of Companies announced recently that Bryan Henrie, currently the president of Prestige Financial Services Inc., has now been named the president of Total Care Auto, effective immediately.
“Bryant has worked for the LHM Group for 27 years and has proven his ability to not only grow our business, but manage an award-winning workplace by providing training and advancement opportunities to his team by listening to and understanding their needs,” said Greg Miller, chief executive officer of LHM. “He exemplifies our standards and quality for customer service and employee recognition.”
Henrie, recently recognized by The Salt Lake Tribune for his leadership of a large company in their top workplace awards, believes the new role will pair the strengths of both companies.
“This opportunity allows us to expand TCA’s portfolio by offering our vehicle service contracts to a broader range of individual store locations and automotive groups beyond Larry H. Miller dealerships,” Henrie said. “The network of customers and contacts we’ve built at Prestige will help open doors to new business opportunities for Total Auto Care.”
Before Henrie, Steven Starks oversaw Total Care Auto as executive vice president, LHM.
“I’ve truly enjoyed the opportunity to work with TCA and general manager Robb Enger over the last few years,” Starks said. “With Prestige and TCA both servicing automotive customers, it is important to the growth of both companies that they work closely in providing their financial and insurance services to stores and customers across the country.”
The National Independent Automobile Dealers Association and EFG Companies recently created a new strategic partnership to drive greater F&I profit opportunities for independent dealerships nationwide.
NIADA tapped EFG as a national corporate partner so association members can leverage the company as a single-source provider for F&I products, services and administration that has almost 40 years of industry experience.
“EFG Companies represents a leading force in the F&I training, compliance, and ancillary solutions market. We see a tremendous reservoir of very innovative, high impact, and leading edge F&I solutions that our member dealers need more than ever to effectively compete and ensure compliance within a very dynamic, hypercompetitive auto retail finance market,” said Scott Lilja, NIADA’s senior vice president of member services.
“EFG Companies exemplifies at the highest level what we look for in an endorsed NIADA National Corporate Partner,” Lilja continued.
EFG believes business success is ultimately measured by a simple premise: keeping a promise to a customer at a time when they need it most. EFG has dealer services field team is 100-percent AFIP certified. Last year, EFG also was awarded the Automotive Service Excellence (ASE) Blue Seal of Excellence, with EFG’s claims adjusters averaging 15 years of experience.
“During this time of increased compliance oversight and economic expansion, it is imperative that independent auto dealerships be equipped with the ability to drive F&I revenue in a compliant manner while increasing customer satisfaction,” said John Pappanastos, president and chief executive officer of EFG Companies.
“EFG has proven that an engagement model which combines F&I and sales training, recruiting services and industry analytics drives healthy and sustainable business growth,” Pappanastos added.
Condor Capital is no longer originating and servicing vehicle installment contracts for dealers who cater to subprime customers in New York or more than two dozen other states.
Just before the holiday, the New York Department of Financial Services submitted a final consent judgment to be approved by the Empire State’s court system to settle the department’s lawsuit against Condor Capital that first sprouted last spring.
New York Superintendent of Financial Services Benjamin Lawsky sent the order against, Condor, a subprime auto finance company based in Long Island, and its sole shareholder, Stephen Baron.
Among other violations, Lawsky claimed the defendants deceptively retained millions of dollars owed to vulnerable borrowers and overcharged them for interest in violation of the Truth in Lending Act.
Under the terms of the final consent judgment, Condor and Baron will make full restitution plus 9 percent interest to all aggrieved customers nationwide, which officials estimated to be $8 to $9 million.
Furthermore, Baron and Condor Capital are ordered to pay a $3 million penalty and admit violations of New York and federal law.
Following a sale of its remaining loans in a manner that ensures appropriate consumer protections, NYDFS said Condor Capital will surrender its licenses in all states, which include:
—Alabama
—California
—Colorado
—Connecticut
—Florida
—Georgia
—Iowa
—Illinois
—Indiana
—Kansas
—Kentucky
—Maine
—Maryland
—Michigan
—Minnesota
—Missouri
—Mississippi
—North Carolina
—Nebraska
—New Jersey
—Ohio
—Oklahoma
—Oregon
—Pennsylvania
—Tennessee
—Texas
—Virginia
—Washington
—West Virginia
Lawsky highlighted the lawsuit against Condor and Baron was the first legal action initiated by a state regulator under section 1042 of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, which empowers state regulators to bring civil actions in federal court for violations of Dodd-Frank’s consumer protection requirements.
“We will not tolerate companies that abuse New Yorkers and other customers — particularly vulnerable subprime borrowers who can least afford it,” Lawsky said.
“This case demonstrates that the Dodd-Frank Act provides a powerful new tool for state regulators to pursue wrongdoing and obtain restitution for consumers who were abused,” he continued.
“We hope other regulators across the country will consider taking similar actions when warranted,” Lawsky went on to say.
NYDFS first filed a complaint and obtained a temporary restraining order against Condor and Baron on April 23.
The state’s court system granted the NYDFS’ motion for a preliminary injunction and appointed a receiver on May 13.
Officials indicated the Receiver will remain in place until Condor’s loan portfolio is sold, the penalty and restitution are paid, and Condor has surrendered all of its licenses.
As of Dec. 19, the receiver has paid more than $5 million in restitution.
As part of the final consent judgment, officials explained Condor admitted to violations of Dodd-Frank, the Truth in Lending Act, the New York Banking Law, and the New York Financial Services Law.
Furthermore, officials added Baron admitted to violating Dodd-Frank by providing substantial assistance to Condor’s law violations.
NYDFS charged that Condor concealed from its customers and the department the fact that thousands of its customers had refundable positive credit balances (such money owed by Condor to a customer as a result of an overpayment of the customer’s account).
Officials determined Condor retained these positive credit balances for itself and maintained a policy of failing to refund positive credit balances except when expressly requested by a customer.
“Condor did not notify its customers when positive credit balances remained in their accounts at the conclusion of their loans,” NYDFS officials said.
“Furthermore, Condor programmed its website to terminate customers’ access to their account information once their loans were terminated, even if the customers had positive credit balances in their accounts,” the continued.
In addition, the agency asserted that Condor represented to the New York State Comptroller that it had no unclaimed property when in fact Condor was required to report its customers’ positive credit balances to the Comptroller.
And NYDFS said the company committed other violations associated with contract terms.
Officials said Condor also violated the Truth in Lending Act by calculating the interest it charged its customers based on a 360-day year and applying the resulting daily interest rate to its customers’ loan accounts each of the 365 days during the year. They explained this practice resulted in a difference in its customers’ APR in excess of the one-eighth of 1 percent tolerance permitted under the Truth in Lending Act.
“Even more egregiously, after being informed by regulators that this practice violated the Truth in Lending Act, Condor on multiple occasions attempted to add an additional one-eighth of 1 percent interest back to customers’ accounts,” officials said.
NYDFS pointed out one other compliance area where Condor Capital failed to meet regulatory protocols.
Officials claimed Condor also endangered the security of its customers’ personally identifiable information. Among other information security lapses, they discovered Condor left stacks of hard-copy customer loan files lying openly around the common areas of Condor’s offices.
“Condor also failed — despite repeated directives from the department — to adopt basic policies, procedures, and controls to ensure that its information technology systems (and the customer data they contain) were secure,” NYDFS officials said.
NYDFS noted the final consent judgment submitted to the court requires Condor’s CEO to pay damages to any customer who the department determines suffered identity theft as a result of Condor’s mishandling of their private information.
As SubPrime Auto Finance News reported last spring, the company’s website indicated Condor Capital was founded in 1994 by a management team with more than 50 years of auto financing experience.
According to Condor’s most recent annual report filed with NYDFS, at the end of 2013, Condor held more than 7,000 loans to New York customers with total outstanding balances of more than $97 million. That reported showed Condor’s 2013 loan portfolio contained aggregate outstanding loans of more than $300 million nationwide.
For the year, Condor reported net after-tax income of approximately $7 million on operating income of approximately $68.7 million, DFS said.
As a part of the last SubPrime News Update of the year before the Cherokee Media Group team breaks for the holidays, the publication wanted to share a rundown of the top 10 stories that generated the most reader interest in 2014.
Not surprisingly the majority of these leading stories had a connection to a significant regulatory development with agencies such as the Consumer Financial Protection Bureau, the Federal Trade Commission and the Department of Justice.
1. SubPrime Auto Finance Executive of the Year Winner Named
CARY, N.C. — SubPrime Auto Finance News has revealed the recipient of this year’s SubPrime Auto Finance Executive of the Year award, an honor sponsored by Black Book Lender Solutions.
The accolade is going to Ian Anderson, president of Westlake Financial Services, which reached $2 billion in total receivables earlier this year.
Sparked by the some of the best months in company history this summer, Westlake’s portfolio now has that total receivables figure connected to more than 270,000 customer accounts.
2. Credit Acceptance Subpoenaed by Justice Department
SOUTHFIELD, Mich. — Another day, another finance company acknowledges it has received a subpoena from the U.S. Department of Justice.
Credit Acceptance Corp. posted a filing with the Securities and Exchange Commission stating the company that specializes in subprime auto financing received a civil investigative subpoena from the Justice Department pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
The subpoena is directing Credit Acceptance to produce certain documents relating to subprime automotive finance and related securitization activities.
3. CPS to Pay $5.5M to Settle FTC Charges
WASHINGTON, D.C., and IRVINE, Calif. — The Federal Trade Commission said that Consumer Portfolio Services will pay more than $5.5 million to settle charges that the subprime auto finance company used “illegal tactics” to service and collect consumers’ loans, including collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family and employers.
According to regulators, CPS agreed to refund or adjust 128,000 consumers’ accounts constituting more than $3.5 million and forebear collections on an additional 35,000 accounts to settle charges the company violated the FTC Act.
The FTC also indicated CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.
4. CFPB Allegations Against American Honda Finance
TORRANCE, Calif. — First, the Consumer Financial Protection Bureau and the U.S. Department of Justice delivered notices to Toyota Motor Credit Corp., alleging discriminatory practices regarding vehicle financing.
Now, American Honda Finance revealed it also received the same allegations from these federal regulators.
In documents filed with the Securities and Exchange Commission, officials from the CFPB and DOJ sent a letter to Honda’s captive finance company saying they have authorized enforcement actions alleging discrimination in automobile loan pricing to certain borrowers by dealers and alleging the loan pricing disparities were caused by AHFC’s business practices related to dealers.
5. Pelican Auto Finance’s Plan to be a Top Subprime Player
CHADDS FORD, Pa. — Pelican Auto Finance is using what executives describe as a “crawl-walk-run approach” to growth in the deep subprime auto financing world. And they want to start running to the point where the company’s portfolio ranks among the top five institutions nationwide, blending together a business strategy of being an indirect lender for franchised and independent dealers to tap as well as a purchaser of paper from buy-here, pay-here operators.
“Right now we have significant capitalization behind us,” Pelican chief executive officer Troy Cavallaro told SubPrime Auto Finance News.
“I think a year from now we’re going to be well positioned to be one of the top four lenders in the deep subprime space,” Cavallaro continued. “I understand that Westlake’s portfolio is well over a $1 billion and Credit Acceptance’s portfolio is well over $1 billion. We don’t expect to get there in the next 12, 18 or 24 months. But we think we can position ourselves to be the No. 4 or No. 5 deep subprime lender in the nation. That’s our goal is to get there.”
6. Dodd-Frank Power Triggers Action Against NY Lender
NEW YORK —The Dodd-Frank Act provided the foundation for more regulation of auto financing by federal regulators. Now a state-level agency is leveraging Dodd-Frank to seek orders against a New York-based subprime lender.
Benjamin Lawsky, who is New York’s Superintendent of Financial Services, obtained a temporary restraining order in federal court against Condor Capital Corp., a subprime auto lender headquartered on Long Island, and its owner, Stephen Baron.
Lawsky explained a DFS investigation uncovered that allegedly Condor has engaged in a longstanding scheme to steal millions of dollars from its customers — among other unfair, abusive, and deceptive practices.
7. Investment Firm to Merge Flagship Credit Acceptance & CarFinance Capital
CHADDS FORD, Pa., and NEW YORK — The investment firm that oversees two subprime auto finance companies — Flagship Credit Acceptance and CarFinance Capital — announced that it is merging the two operations together.
Officials from the alternative asset management unit of Perella Weinberg Partners explained the combined company now will total assets in excess of $2 billion.
“Since forming Flagship and CarFinance, we have been pleased with the performance and strong execution of both companies,” said David Schiff, partner at Perella Weinberg Partners and portfolio manager of the asset based value strategy. “Together, the two companies will create a top-tier independent auto finance company with enhanced scale, lower cost of capital, superior cost controls and more efficient access to the capital markets.”
8. Report: 6 Finance Companies Subpoenaed in NY
NEW YORK — Regulatory investigations of auto finance companies are piling up as now reportedly the New York Department of Financial Services is joining the fray.
An online report citing an anonymous source indicated New York state’s financial services regulator subpoenaed the captive arms of Ford, Honda, Nissan and Volkswagen as well as Santander and TD Bank.
A person familiar with the matter told Reuters the developments are part of a probe of possible consumer abuses in subprime auto lending.
9. Department of Justice Subpoenas GM Financial
FORT WORTH, Texas — As the company completed a property purchase to house more personnel, General Motors Financial said in a regulatory filing that the company has been subpoenaed by the U.S. Department of Justice.
According to the paperwork posted with the Securities and Exchange Commission, Justice Department officials served GM Financial with a subpoena on July 28.
Company officials said the subpoena directs them to produce certain documents relating to their and their subsidiaries’ and affiliates’ origination and securitization of subprime auto loan contracts since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
10. Latest House Bill Aims at Curbing CFPB’s Authority
WASHINGTON, D.C. — During the same week the Consumer Financial Protection Bureau “strongly urged” companies to make credit scores more readily available, a bill passed through the U.S. House aimed at limiting the authority of the bureau, which the measure’s author called, “a dangerously powerful and dangerously unaccountable agency.”
As currently constructed, Rep. Sean Duffy, a Wisconsin Republican who authored H.R. 3193 — known as the Consumer Financial Freedom and Washington Accountability Act — indicated the bill would accomplish four objectives.
SubPrime Auto Finance News gratefully thanks all subscribers, advertisers and industry partners for their support, interest, readership and feedback throughout the year.
Regular updates on industry trends, analysis and more will return on Jan. 2.
In the meantime, happy holidays and best wishes for a great 2015.
Best regards,
Nick Zulovich
Editor, SubPrime Auto Finance News
BillingTree offered four trends the payment processing solutions provider thinks will impact the industry in the coming year.
The projections cover a wide array of elements auto finance executive might or might not already see on their radar, as well.
1. Payments Really Are Going Mobile
BillingTree indicated that in North America, the number of mobile transactions has almost doubled since 2013 to 17 percent of all transactions. The company mentioned 1 million people signed up for Apple Pay in the first 72 hours after its October launch.
BillingTree also menitoned Google Wallet, which has been in the market place since 2012, has also come to the forefront of consumer thinking.
“Payment processors and collectors must incorporate mobile payment options for an increasingly mobile customer base in 2015,” the company said.
2. EMV Is Coming
In October of next year, officials noted the liability shift of Europay, MasterCard and Visa (EMV) will take place in the U.S. They explained this mandate means any company that processes card payments is required to offer a chip-and-PIN payment system — or risks being liable for counterfeit fraud.
Europe rolled out EMV in 2004, switching liability to merchants in January 2005. Now 10 years later the U.S. is using the same approach to convince merchants to leave magnetic swipe behind.
“Compliance remains a strict requirement for merchants switching to EMV and PCI DSS will continue to be an important consideration after making the move to the new payment method,” BillingTree said.
3. Tokenization
In explaining what BillingTree described as “the combat fraud king,” Visa chief executive officer Charles Scharf recently told attendees at the Bank of America Merrill Lynch 2014 Banking & Financial Services Conference that tokenization is “the single biggest change that’s been made in payment networks easily over the past 15 or 20 years.”
With the emergence of new payment options such as EMV and mobile, BillingTree contends there will be fresh concerns about fraud prevention.
“But tokenization is the combat fraud king, covering a range of payment channels targeted by fraudsters – card present, card not present and mobile,” BillingTree said. “2015 will see big players like Visa and MasterCard pushing their tokenization services to payment processors of all sizes — incorporating a range of emerging payment methods.”
4. Goodbye Passwords. Hello Biometrics?
BillingTree acknowledged iris scanners and fingerprint readers might seem more suited to espionage movies than the payment processing industry. But if Visa and MasterCard have their way, BillingTree said both could soon become commonplace.
“These innovative technologies are known as biometrics. Plans are in place for current online authentication systems such as MasterCard SecureCode and Verified by Visa to possibly be phased out in the near future,” BillingTree said.
The Federal Trade Commission penalized a pair of dealership groups for violations of a previous consent order regarding advertising the cost of buying or leasing a vehicle.
Part of the consent orders established in March 2012 indicated FTC officials could inspect any advertising material distributed by Billion Auto — a chain of 20 family-owned dealerships in Iowa, Montana and South Dakota, and a family-controlled advertising company, Nichols Media — as well as Ramey Motors and three affiliated dealerships in Virginia and West Virginia.
Last week, the agency announced that Billion Auto and Ramey Motors violated of those FTC administrative orders, which prohibit the dealerships from “deceptively” marketing elements to making a vehicle purchase such as down payments and annual percentage rates.
FTC officials said Billion Auto and Nichols Media have agreed to settle charges that they violated a 2012 FTC administrative order. That order prohibits Billion Auto, and any companies in active participation with it, from misrepresenting material costs and terms of vehicle finance and lease offers and requires specific disclosures, mandated by the Truth in Lending Act (TILA) and Regulation Z, and the Consumer Leasing Act (CLA) and Regulation M.
The Billion Auto defendants agreed to pay $360,000 in civil penalties to settle the FTC’s charges.
According to the complaint against Billion and Nichols, the dealerships and advertising company violated the 2012 FTC administrative order by frequently focusing on only a few attractive terms in their ads while hiding others in fine print, through distracting visuals, or with rapid-fire audio delivery.
“For example, some dealership ads promoted low monthly payments or attractive annual percentage rates and finance periods, while concealing other material items, such as low payments were for leases, not sales,” FTC officials said. “Major limits existed on who could qualify for discounts, and offers often included significant added costs.”
In a separate action seeking civil penalties, the FTC charged Ramey Motors with violating a similar 2012 FTC administrative order.
Among other things, the FTC contends Ramey Motors’ ads allegedly misrepresented the costs of financing or leasing a vehicle by concealing important terms of the offer, such as a requirement to make a substantial down payment.
The complaint also charges Ramey Motors with failing to make credit disclosures clearly and conspicuously, as required by the TILA. The FTC also alleges that the dealer group failed to retain and produce appropriate records to the commission to substantiate its offers.
Ramey Motors and its affiliates are subject to $16,000 in civil penalties for each alleged violation of the FTC administrative order.
The FTC vote to refer the Billion complaint and proposed stipulated order to the Department of Justice for filing was 5-0. The Justice Department filed the complaint and proposed stipulated order on behalf of the FTC in the U.S. District Court for the Northern District of Iowa last Thursday.
The FTC vote to authorize filing the complaint against Ramey Motors was 5-0. It was filed in the U.S. District Court for the Southern District of West Virginia last Thursday.
“If auto dealers make advertising claims in headlines, they can’t take them away in fine print,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “These actions show there is a financial cost for violating FTC orders.”
Consent Order Background
Back in March 2012, Billion Auto and Ramey Motors and three other dealerships agreed to FTC settlement orders that require them to stop running ads in which they promise to pay off a consumer's trade-in no matter what the consumer owes on the vehicle.
The consent order associated with both Billion Auto and Ramey Motors indicated an “advertisement” shall mean a commercial message in any medium that directly or indirectly promotes a consumer transaction.
The FTC insisted that those ads contain “clearly and conspicuously” elements, with five associated mandates:
— In a print advertisement, the disclosure shall be in a type size, location, and in print that contrasts with the background against which it appears, sufficient for an ordinary consumer to notice, read, and comprehend it.
— In an electronic medium, an audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. A video disclosure shall be of a size and shade and appear on the screen for a duration and in a location sufficient for an ordinary consumer to read and comprehend it.
— In a television or video advertisement, an audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. A video disclosure shall be of a size and shade, and appear on the screen for a duration, and in a location, sufficient for an ordinary consumer to read and comprehend it.
— In a radio advertisement, the disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it.
— In all advertisements, the disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or promotion.
Furthermore, the consent order mandated the stores stop two other practices regarding trades, including:
— Misrepresent that when a consumer trades in a used vehicle in order to purchase another vehicle, the dealer will pay any remaining loan balance on the trade-in vehicle such that the consumer will have no remaining obligation for any amount of that loan.
— Misrepresent any material fact regarding the cost and terms of financing or leasing any newly purchased vehicle.
