Tag Archive | "finance"

Randy Henrick Joins Mosaic Compliance Services


TAMPA, Fla. — Attorney and compliance expert William Randolph “Randy” Henrick has joined Mosaic Compliance Services LLC as vice president and compliance counsel, the company announced.

Mosaic’s cofounder and president, attorney James S. “Jim” Ganther, said he expects “great things” from Henrick, who joins the company with more than 20 years of experience in the consumer finance, compliance, bank regulatory and privacy and data security segments.

“Randy’s résumé speaks for itself, but it falls short of mentioning that he is, without question, one of the nation’s foremost compliance attorneys,” Ganther said. “We are extremely pleased to welcome him to the Mosaic family, and his presence has already begun to pay dividends for the company and our clients.”

Henrick most recently served as associate general counsel for Dealertrack Inc., where he authored 11 editions of the Dealertrack Compliance Guide. A prolific writer and speaker, Henrick has contributed to a number of industry publications and events, chaired the New York State Bar Association’s Consumer Financial Services Committee, and served as a panelist at an auto finance panel convened by the Federal Trade Commission, among other honors.

“I wanted to join Mosaic because they are an industry leader in making compliance training and compliant aftermarket product selling training available to dealers of all types,” Henrick said. “I look forward to working with dealers and providers to find and help them address the growing number of legal and regulatory issues they face and, by doing so, helping them be more successful in their businesses.”

Mosaic Compliance Services offers compliance and training tools to automobile, RV, motorcycle and marine dealerships. To learn more, visit Mosaic-Compliance.com.

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Trading Rate for Product (and Why It’s a Very Bad Idea)


Your company may design excellent and appealing coverages, properly price and reserve, and perform exquisite claim administration. But at the end of the day, none of that matters if the F&I manager facing the customer can’t make the sale. Frustrating, huh?

To help F&I managers get over the hump and make the sale, providers and administrators offer onsite or home office training, technology tools such as menus and desking software, and advice. It is everyone’s interest that any advice given is actually legal. Sometimes that’s tricky.

The Nuisance Is in the Nuances

The reason lawyers can cost so much is their training and experience with “Depends.” No, I don’t mean the adult diaper (though there may be some overlap). Rather, whether something is legal or not depends on many different variables, not all of which are obvious. So even if an F&I manager knows a basic legal principle, the nuances can get him in trouble.

Case in point: I was recently asked by a TPA employee (responsible for keeping their representatives in the field out of trouble) if it was OK for a dealer to “trade rate for product.” Trading rate for product means offering a customer a lower interest rate if the customer will agree to purchase an F&I product, such as a vehicle service contract. The general legal principle is freedom of contract, right? Except in certain states (I’m looking at you, Florida), the retail cost of F&I products is not regulated, so dealerships may negotiate their price. APR is negotiable, too. So trading rate for product should be perfectly fine.

And it is … except when it’s not.

Here’s one variable to consider: does the product price become a finance charge? This is a very, very big issue, and the leading reason I don’t recommend dealers trade rate for product. The Truth in Lending Act (TILA) defines “finance charge” as “the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not include charges of a type payable in a comparable cash transaction.”

So let’s say a customer has been offered an APR of 4.5% on his financing and the dealer offers to drop the APR to 4.0% if the customer buys a $2,000 service contract. This could be a method of “hiding” rate within the cost of the VSC. In Florida, where there is a presumption every customer pays the same amount for the same VSC, this might not be a problem. Everywhere else, it might be. Say the finance customer pays $2,000 for the VSC that drops his APR, but a cash customer paid $1,500. A court could easily find that the $500 difference was, in fact, a finance charge.

“So what?” you ask. Here’s what: All finance charges must be accurately and conspicuously disclosed in the “TILA box” on the Retail Installment Sale Contract. If part of the finance charge is buried in the cost of the VSC, the disclosures in the TILA box will be inaccurate and misleading.

“So what?” you ask again. Here’s what, again: If the violation was (1) intentional, (2) grossly negligent or (3) part of a clear pattern, all affected customers are entitled to restitution. In most dealerships that trade rate for product on a daily basis, both factors (1) and (3) will be present. That is not good for the dealership. And it only goes downhill from there.

Regulatory fines are the least of the dealership’s worries. Because trading rate for product is often a standard sales tactic at the dealerships who indulge the practice, it now sets up a class action. And since it is a violation of federal law to understate APR or finance charge, punitive damages enter the picture.

The CFPB’s Mandate

But wait, there’s more. Remember the Consumer Financial Protection Bureau? When a dealership reduces the rate for customers that buy a product, it triggers a deviation from its standard dealer participation rate. The CFPB recognizes seven legitimate nondiscriminatory reasons for deviating from the standard rate. Purchasing an F&I product is not one of them. (If the dealership does not have a fair credit policy and program such as NADA offers, it has a whole other set of problems that we’ll address in a future article.)

And we’re not done yet — not by a long shot. If a dealership routinely trades rate for product, can it prove the initial APR was not artificially inflated to make room for the “discount”? This requires an analysis of the desking process and timing of when a credit report is pulled. In short, any dealership trading rate for product had better have a bulletproof and consistent desking process that can demonstrate the APR is appropriate for the customer’s credit risk, and has a consistent mark-up, like the standard dealer participation rate discussed above.

On top of that, to protect the process of trading rate for product, there should be a standard markup on products as well. If the profit margins on products are all over the board from deal to deal, proving a legally compliant deal is difficult at best.

And another thing: When a deal jacket is audited, one of the things auditors look for is variation in APR and amount financed from the first pencil to the menu to the buyer’s order and RISC. Any variation requires an explanation. Is there a process in place to memorialize the negotiations and create a clear paper trail?

Think this is confusing? Imagine how confusing it could be for the customer. And in the eyes of the FTC, if it’s confusing, it’s deceptive. Another potential whammy.

Does the dealer trade rate for product more often with women and minorities than white dorks in bow ties? Add potential discrimination to your list of worries.

Going back to the original question, is it OK to trade rate for product? Of course it is — as long as you dodge all of the landmines that come with the practice. Do you trust your client dealerships’ personnel to consistently do so? Neither do I. And that’s why I never recommend it.

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Vehicle Depreciation Accelerates Heading Into Q4


LAWRENCEVILLE, Ga. — A steep decline in Crossover/SUV wholesale values, which have been strong all year, may point to more than seasonality as the reason for higher depreciation recorded for two-year-old vehicles last week, Black Book said this week.

This week’s Black Book Market Insights report show a greater weakening in pricing on vehicles in both car and truck segments heading into the fourth quarter, which is typical this time of year. What caught the firm’s eye, however, was that most crossover/SUV segments showed the highest value declines last week, with the full-size crossover/SUV segment leading the way with a 1.12% drop.

“Typical seasonality trend of the higher depreciation in the fourth quarter continue,” noted Anil Goyal, senior vice president of automotive valuation and analytics for Black Book. “Crossover/SUV values, which have been strong all year, are also starting to see steeper declines.”

Volume weighted, overall car segment values decreased 0.80%, which was higher than the depreciation rate of 0.69% seen in the previous four weeks. Leading the way were the mid-size and sporty car segments, which decline by 1.20% and 0.88%, respectively, last week.

The overall truck segment values, including pickup, SUVs, and vans, decreased by 0.76%, which was higher than the depreciation rate of 0.57% seen in the previous four weeks.

Past seasonality trends, according to Black Book, show that vehicle depreciation is typically highest in the fourth quarter. This year is looking to be no different, except that retention values are lower this year than what was recorded the previous four years.

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GWC Warranty Appoints Marketing Manager


WILKES-BARRE, PA. – GWC Warranty, the best-in-class provider of used vehicle service contracts and related finance and insurance products sold through automotive dealers, announced the addition of Melissa Roberts as the new Marketing Manager.

As a member of the Marketing Department, Roberts will be responsible for developing and implementing a comprehensive customer strategy focused on engaging and retaining GWC partners by designing a customer experience aimed at helping them sell more cars and increase profitability.

Roberts brings to this role nearly a decade of experience in research and analytics for international business-to-business manufacturer, InterMetro Industries in Wilkes-Barre, Pennsylvania. She most recently held the title of Product Manager, Data & Services, responsible for developing and managing the company’s portfolio of extended warranties and service contracts.

Having graduated summa cum laude from the University of Pittsburgh in 2006, Roberts is also an accomplished project manager having received training in Risk Management and Project Management from Pennsylvania State University.

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GWC Warranty Surpasses $400 Million in Claims Paid


WILKES-BARRE, Penn. – GWC Warranty, the best-in-class provider of used vehicle service contracts and related finance and insurance products sold through automotive dealers, has successfully topped $400 million in claims paid to date.

GWC Warranty’s $400 million in claims paid, combined with sister-company EasyCare’s $3.1 billion, brings the APCO Holdings, Inc. claims paid total to more than $3.5 billion.

“Surpassing $400 million in claims paid is an important milestone for GWC and our dealers as well,” said Rob Glander, CEO and President of GWC Warranty.  “By partnering with an organization that has totaled more than $3.5 billion in claims paid, dealers who sell GWC service contracts can rest assured that we’ll stand behind it. And their customers can enjoy their vehicles knowing that if a breakdown occurs, GWC will be there to get them back on the road quickly.”

This new claims paid milestone is the latest accolade for GWC Warranty, which is a Motor Trend® Recommended Best Buy for Independent Dealers and rated A+ by the Better Business Bureau. Since 2015, GWC has been designated a Bronze Level National Corporate Partner of the NIADA. For the past two years, GWC has also been recognized in both SubPrime Auto Finance News’ SubPrime 125 and Auto Remarketing’s Power 300.

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Financial Technology Company Aims at Simplifying Financing Process


MCLEAN, Va. — AutoGravity, a new financial technology company, is aiming to simplify the financing process by allowing customers to apply for financing straight from their phone.

According to the company, its platform is available as a smartphone application and mobile-responsive website that breaks the financing process into four steps. The first step is choosing a car. From there, the customer chooses a dealer, then applies for financing and lastly selects one of the multiple lenders that will deliver a personalized financing offer. The process, according to the company, should only take minutes.

“AutoGravity harnesses the full potential of cutting-edge smartphone technology,” said Andy Hinrichs, founder and CEO of AutoGravity. “Our app allows customers to take advantage of in-phone GPS, camera-based optical character recognition, fingerprint log-in and other mobile technology to be empowered by a digital car finance experience.”

The company further stated that its platform is not only beneficial to customers, but also to lenders and car dealers. Lenders on the platform, the company stated, gain increased access to customers —particularly Millennials. Car dealers gain increased showroom traffic, qualified leads and boosts to overall customer satisfaction, according to the company.

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