Wolters Kluwer’s Lien Solutions business is hosting an informational webinar, Auto Repossessions Avalanche is Coming: Are You Ready? to share insights with lenders on managing their motor vehicle liens in preparation for higher loan defaults and car repossessions. This event will focus on how lenders can effectively mitigate these risks in the current economic environment and takes place from 1-1:45 p.m. CDT on Aug. 19.

As lenders assess the impact of COVID-19 to their lending portfolios, they expect a higher-than-expected volume of loan defaults and car repossessions. This trend is expected to continue for many months, presenting substantial risks to lenders who have not prepared across all jurisdictions in which they have loan interests.

Webinar participants include McGlinchey Stafford Attorney Mark S. Edelman, who provides guidance to banks, finance companies, and online lenders on regulatory compliance matters in the arena of consumer financial services; Rick Vanko, senior product manager for iLien Motor Vehicle in Wolters Kluwer’s Lien Solutions business who supports a portfolio of automated lien and risk management products; and Marina Hardy, marketing associate director for Wolters Kluwer Lien Solutions’ iLien Motor Vehicle business, who will also serve as a moderator for this event.

The 45-minute event will look at economic drivers of repossessions, jurisdictional guidelines on repossession restrictions, challenges of processing titles with departments of motor vehicles, and general considerations for lenders faced with properly interpreting federal, state, and local laws and regulations for auto repossessions and repossession titling in an evolving environment.

Fintech and automated loss mitigation provider Constant has announced the launch of AutoCare, an innovative module on its cloud-native SaaS platform designed to fend off auto loan delinquency and prevent involuntary repossessions. With auto loans emerging as one of the hardest-hit categories of credit amid the coronavirus pandemic, the ability to offer loan modifications, typically applied to higher dollar debt such as mortgage loans, is a game-changer for the auto loan industry: it can mean the difference between margin retention and partial or total loss for lenders. AutoCare includes a fully automated voluntary repossession feature for borrowers not able to retain their vehicle.

AutoCare is one of the first to offer automated loan modifications to the consumer. “Historically, it has not been cost-effective to offer mortgage-style hardship relief for small dollar loans,” said Carissa Robb, president and COO at Constant. “The timeline to collect and record a total loss is shorter for auto loans, as compared to real estate secured loans. As relief options tighten, delinquency worsens and charge offs accelerate, few relief options are available to restructure and return borrowers to performing. Until now.”

Robb added, “Offering mortgage-style relief options on auto loans can help reduce delinquency roll rates, charge-offs, and bankruptcy. Where appropriate, offering non-retention options like an automated repossession tool that allows borrowers to voluntarily surrender their vehicle if a workout option is not appropriate, protects asset value.”

A Florida man was recently arrested and charged with fraudulently obtaining $3.9 million in Paycheck Protection Program (PPP) loans and using those funds, in part, to purchase a sports car for himself. Authorities seized a $318,000 sports car and $3.4 million from bank accounts at the time of arrest.

David T. Hines, 29, of Miami, Fla., was charged by criminal complaint, unsealed recently upon his initial appearance before U.S. Chief Magistrate Judge John O’Sullivan in the Southern District of Florida, with one count of bank fraud, one count of making false statements to a financial institution and one count of engaging in transactions in unlawful proceeds.

The complaint alleges that Hines sought approximately $13.5 million in PPP loans through applications to an insured financial institution on behalf of different companies. The complaint alleges that Hines caused to be submitted fraudulent loan applications that made numerous false and misleading statements about the companies’ respective payroll expenses. The financial institution approved and funded approximately $3.9 million in loans.

Within days of receiving the PPP funds, Hines purchased a 2020 Lamborghini Huracan sports car for approximately $318,000, which he registered jointly in his name and the name of one of his companies. In the days and weeks following the disbursement of PPP funds, the complaint alleges that Hines did not make payroll payments that he claimed on his loan applications. He did, however, make purchases at luxury retailers and resorts in Miami Beach.

The Federal Trade Commission filed a complaint against Yellowstone Capital, Fundry, founder and CEO Yitzhak Stern, and president Jeffrey Reece, alleging they unlawfully withdrew millions of dollars in excess payments from their customers’ accounts, and to the extent they provided refunds, sometimes took weeks or even months to provide them.

The provider of merchant cash advances used deception to lure small business customers, then regularly withdrew money from their accounts without consent even after the customers had repaid the money they owed, according to a Federal Trade Commission lawsuit.

Fundry President Jeff Reece, Kiva Manager of Development Jessica Feingold, and Fundry CEO Isaac
Fundry President Jeff Reece, on the left and Fundry CEO Yitzhak Stern on the right. 

“Small businesses are struggling right now and need responsible sources of financing,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “Making sure that lenders and funders don’t deceive business borrowers or engage in servicing abuses is a big priority for the FTC.”

Merchant cash advances are a form of financing in which the defendants provide money to a small business up front in exchange for a larger amount repaid through daily automatic payments.

According to the FTC’s complaint, Yellowstone has regularly withdrawn hundreds or thousands of dollars from businesses’ accounts for days after customers had repaid the full amounts owed in their contracts. In some cases, Yellowstone would only refund this money when businesses complained, and even then the refunds could take weeks or months, leaving small businesses without needed cash on hand. The complaint also cites examples of businesses being left with bank overdraft fees as a result of the unauthorized withdrawals.

In addition, the complaint alleges that for years Yellowstone deceived potential customers about the amount of money they would receive, with the amount shown on the contract not reflecting additional fees that would be deducted.

Two new reports from the Federal Trade Commission highlight some of the challenges and confusion consumers can face in buying and financing a car, particularly relating to charges for add-on items after the initial price negotiation.

The reports are based, in part, on a study of auto buyers conducted by the FTC that consisted of in-depth interviews with 38 consumers about the car buying and financing process.

A staff report from the FTC’s Bureau of Consumer Protection (BCP) notes a number of issues that arose in the study, from the advertising that draws consumers in through the entire car buying experience.

The BCP report notes that consumers were sometimes not aware of key terms of sales and financing contracts, and it points in particular to issues that potentially keep them from having an accurate picture of the amount they are paying. One of those issues was focusing on monthly payments rather than considering other important terms as well, like the total price of the vehicle and the amount and length of the financing.

The later stages of the buying and financing process, including the sale of “add-ons” like extended warranties, service plans, and GAP (guaranteed asset protection), and meeting with the dealer’s financing office for additional negotiations after seemingly negotiating a price with a salesperson, also present issues, according to the report.

When it comes to add-ons, the BCP report notes a number of issues that caused consumers significant confusion in the study, including limited or no discussion of charges for add-on products, questions about whether the add-ons are a mandatory part of the purchase or financing, and unexpected limitations on add-on products such as extended warranties or service plans.  

The BCP report also cites issues after consumers negotiate a price with the dealership sales staff and are sent to meet with the “finance and insurance” office, pointing to multiple instances in the study where the previously negotiated price was changed during this process. The report notes that dealers should honor discounts and sales terms promised to consumers through the entire sales process, or not make them in the first place.

The report also states that consumers were at times not aware of the terms they had agreed to, with some only discovering key elements of their contracts while reviewing the documents as part of the FTC study. The report notes that the sheer length of the car sales process can overwhelm consumers and make it difficult for them to adequately review the paperwork presented to them.

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