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Free Monthly Webinars Stay current and up-to-date on the latest Compliance trends with our Webinars Unleashed Training program. Our experts provide monthly webinars that cater to the needs of Compliance Professionals seeking Continuing Education opportunities. Attend our free webinars and gain the knowledge and insight you need to stay ahead of the curve in the industry. Register Today! Richard Hudson Aug 30 4 min Direct Dispute Responses Decoded: Complying with the Furnisher Rule If you are furnishing credit data on your customers you know that one of the most resource intensive activities is investigating and... Richard Hudson Aug 10 3 min This Shouldn't be So Hard: The CFPB’s Warning Shot with the USASF Complaint For years, we've been speaking and writing about the exact types of violations alleged in this complaint. Steve Levine Mar 18 5 min Confessions of a Recovering Trial Lawyer BY STEVE LEVINE, IGNITE CONSULTING PARTNERS As I’ve mentioned in previous articles, I came to be a compliance lawyer after spending the...

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If you are furnishing credit data on your customers you know that one of the most resource intensive activities is investigating and responding to disputes. I have seen businesses ignore disputes or fail to do thorough investigations because they didn’t have the resources required to dedicate to them. The requirements for data furnishers are quite clear and you ignore them at your peril. Although the Fair Credit Reporting Act (“FCRA”) precludes private action against data furnishers for providing incorrect information, it does allow private action if the furnisher fails to conduct a reasonable investigation. The 2003 FACT Act bolstered protections against identity theft and its effects. It also ordered agencies to create rules governing the proper disposition of consumer report information, granted consumers the right to request free annual reports, and required businesses to provide copies of relevant records to identity-theft victims. As a data furnisher, you can be held liable for both willful noncompliance and negligent noncompliance. In the case of negligent noncompliance, the consumer can recover actual damages, costs, and attorney’s fees. In the case of a willful violation, the consumer can also recover statutory damages between $100 and $1,000, plus punitive damages. Furnishers who do not conduct a reasonable investigation of a consumer’s dispute may be liable for actual damages, including credit denials, and attorneys’ fees for a negligent violation, or statutory and punitive damages, plus attorneys’ fees in the case of a willful violation. What exactly is a reasonable investigation? The short answer is that it depends. When a furnisher reports back that the disputed information regarding the account has been verified, the question of reasonableness depends on whether the furnisher looked at enough evidence to prove that the information was true. What this means is that you must investigate every item that was disputed and look at all of the available evidence to substantiate your reporting. A data furnisher can conduct an investigation and conclude, based on that investigation, that the disputed information cannot be verified. If you are unable to conclude 100% that what you reported is correct, you must stop reporting that information and remove the account. Secondly, the furnisher might conduct an investigation and conclude that the disputed information is inaccurate or incomplete. When a furnisher determines that disputed information is wrong they must notify the CRAs through eOscar (AUD or ACDV) and must modify, delete, or block the incorrect information from being furnished in the future. This usually means also making a correction in the account servicing software. In the case of direct disputes, you are not required to conduct an investigation if: The disputed information is related to consumers’ identity (DOB, Address, etc.). The information was provided by another furnisher. The dispute is related to previous employers. You have evidence that the dispute was prepared by a credit repair organization on behalf of the customer. You determine that the dispute is frivolous or irrelevant. One question I often get asked is, “How do I tell a letter is from a Credit Repair Company? In some instances, I have seen disputes come from companies that clearly states on their website that they are a credit repair company that only gets paid after they are able to get credit lines deleted. When these type companies are involved, it is often difficult to tell if this is a valid dispute situation and many companies respond regardless of whether they believe it is. I recommend that clients exercise caution and treat it as a dispute and investigate. Another common question I get is, “When is a dispute frivolous or irrelevant?” Some of the most common examples include: The consumer didn’t provide enough information to investigate. The dispute is substantially the same as a previous dispute. The dispute is a duplicate. It’s similar to a previously submitted dispute. If a dispute is found to be frivolous or irrelevant, you must notify the consumer within five business days of making your determination. An example of this would be when the letter is missing an account number when the consumer has or had multiple accounts with you. There is another strategy that we have seen used more frequently by credit repair agencies lately, often sent on the letterhead of a law firm. The tactic involves sending dispute letters in three stages. The first letter is usually a standard dispute letter that disputes that the debt belongs to their client. After the furnisher responds that they conducted an investigation and confirmed the information is correct, the firm will send a debt validation demand that includes a list of questions to answer regarding the debt. By sending this letter, they are hoping that the furnisher will just delete the tradeline to avoid further letters from a law firm. If the furnisher completes the questionnaire and send it to the firm, they are expecting to find differences or missing information between the first letter and the second. They then respond with another letter, noting the discrepancy, citing an FCRA violation, and using that to ask for an immediate deletion. These letters can be scary to receive, especially for a small business that doesn’t have in-house counsel to give guidance on the response. The best things you can do in these instances is to make sure you are conducting a thorough investigation, have records and documentation substantiating your decision, and be consistent in your responses. Last but most important, track your responses and keep copies of them. In the case of a second dispute, it’s critical that you be able to reference the previous dispute, details of your investigation, and your response. Richard Hudson is Managing Partner of Ignite Consulting Partners, which is a compliance, training, and advisory company that works with independent dealers and finance companies across the country. He is a frequent writer and speaker on credit furnishing and dispute handling issues. For more information visit their website at IgniteCP.com

by Richard Hudson For years, we at Ignite have been speakging and writing about the exact types of violations laid out in the complaint against USASF. From failure to ensure refunds to double billing and wrongful repossessions, these are not new issues. They are well-documented, well-understood, and easy to correct. Yet they go unheeded. This action should be a warning shot across the bow for all of us. For a lot of reasons, the recent complaint against USASF by the Consumer Financial Protection Bureau (CFPB) should be a huge wake-up call for dealers across the nation. The issues they brought up in the complaint are not complex. They're not unknowable. They're not unfixable. In the face of clear and explicit warnings, it's a sounding alarm that time is up for complacency and negligence. The Violations The CFPB's complaint against USASF highlights several critical violations that should serve as warnings for auto dealers. These violations are not complex or unknowable, but they do require diligence to prevent. Below is a summary of the key violations: Failure to Ensure Refunds of Premiums: They failed to refund unearned GAP premiums denying them at least $7 million. They had a policy that said they were issuing refunds but no one was monitoring the execution. Double Billing of Collateral-Protection Insurance (CPI): They charged at least 34,000 consumers twice for CPI, amounting to $1.9 million. This double billing led to delinquencies, repossessions, and errantr collection efforts. Misapplication of Consumer Payments: How many of you apply your payments to CPI first? Well, the CFPB alleges this was an improper application that happened at least 8,738 times, resulting in consumers paying around $1.2 million in additional interest and fees. Consumers had no control over these errors. Wrongful Repossession of Consumer Vehicles: At least 82 consumers had their vehicles wrongfully repossessed when the repo order wasn't rescinded after a payment or arrangement was made. These errors were beyond the consumers' control, and the vehicles were either sold or unavailable for 17 days. Violation of the Consumer Financial Protection Act (Unfairness): All of the above acts were in violation of the CFPA, constituting unfair practices that caused substantial injury to consumers. These injuries were neither reasonably avoidable by the consumers nor outweighed by any benefits, making them clear violations of the law. Call to Action As with previous actions by the CFPB, this is just the start. They tend to trickle down to state regulators and find their way into their examination manuals. Dealers who continue to ignore compliance are treading dangerous waters. 1. Understanding the Laws: Understanding consumer financial protection laws is not just a legal obligation; it's a business requirement. Compliance must begin with education, understanding the full spectrum of responsibilities, and the potential legal and financial repercussions. 2. Implementing Comprehensive Change Starts with a Robust CMS: The era of the "check the box" has got to be put behind us. This is not a time for patchwork solutions or window dressing. I bet that USASF thought they had all the boxes checked, do you? How sure are you? Compliance isn't a class you take once a year in January, it's ongoing. You have to instill a culture of compliance, backed by robust policies, vigilant oversight, and ongoing training. 3. Regular Auditing and Monitoring: In the fast-paced world of auto sales, it's easy to be distracted with what can seem like more important operational concerns. Compliance needs to be baked into your organization in the same way sales and collections are. Regular audits and monitoring are vital to catch errors early and rectify them promptly. That's not enough, though. Audit findings have to be followed up with change and that only comes when compliance efforts have the support of senior management and ownership. Conclusion Take Action Now: Don't wait for a regulatory knock at the door. Engaging with legal and compliance experts, conducting internal reviews, and addressing any identified shortcomings should be immediate priorities. In the end, the message is clear: The time for warnings is over. The era of enforcement has begun. Dealers must act with urgency, responsibility, and a steadfast commitment to the law. As professionals within the industry, we owe it to ourselves, our businesses, and our customers to rise to the occasion and ensure that the trust placed in us is well-deserved. Let this case be a lesson learned, not a harbinger of what's to come. Let's not let this go to waste.

BY STEVE LEVINE, IGNITE CONSULTING PARTNERS As I’ve mentioned in previous articles, I came to be a compliance lawyer after spending the first several years of my career defending car dealers and finance companies in a myriad of colorful lawsuits. After seeing the damage that litigation can do to a small business, I had an epiphany that I wanted to help prevent dealers from getting sued rather than defend them after the fact. What I haven’t shared with many of you previously, though, is that during this time I also handled a few lawsuits for consumers and sued a few dealers. Since I’m not Catholic, that’s as close to “forgive me Father for I have sinned” as I’ll get. I’m not apologizing, I was young, hungry and had a chip on my shoulder. My philosophy was that if a dealer wasn’t smart enough to use my services they were fair game, plus I reasoned that if I didn’t take the cases someone else would. To this day, I’m grateful that I handled these cases because seeing the world from the other side of the aisle greatly improved my analytical abilities to defend similar cases. I was thinking about a few of those cases recently when I was preparing a presentation on avoiding lawsuits for a group of dealers at a state convention. They provide some valuable insight into how cases develop and evolve, I’ll share a few stories. In the first case, a gentleman had recently purchased a conversion van to provide transportation for his disabled daughter. Almost immediately, the van had significant mechanical problems that left him (and his daughter) without transportation. My client tried to work with the dealership but it refused his requests, relying on the “As-Is” language. Then he picketed the dealership, driving around the lot with a large yellow lemon affixed to the roof of the van. You’ve got to admire his creativity. When he first called me, I almost didn’t take the case because I thought the mounting of a “giant lemon” on the roof was surely an indication of a difficult client. I knew all too well that the quality of the person in the plaintiff’s chair matters a great deal. I changed my mind, though, when he told me he had taken video footage of the dealership’s employees “flipping him off” and throwing things at him as he drove by. Next he told me about the “spot the lemon van and get $ 500 off your purchase” campaign that the dealership flashed on its display sign on the roadway. What sealed the deal, though, was when he sent me a recording of numerous threatening messages that the dealership left on his answering machine. The end result was that I sued the dealership and finance company (just like a good plaintiff’s lawyer, I was looking for another pocket for recovery) for every claim I could think of for this conduct, plus I brought a class action for a disclosure error that I found when studying the contract because I was pretty sure if the dealer did it to this client it was a systematic error made repeatedly. Without going into details, the end result was a favorable financial settlement that enabled my client to acquire another, dependable means of transportation. Even though this is an extreme case with several explosive facts, there are lessons that I think every dealer should remember when it comes to how plaintiff’s lawyers evaluate a case. First, I found the gentleman’s story to be very sympathetic. As someone with a disabled sister, I was empathetic to his experience and I thought that a judge and jury would be, too. Also, I thought that the combination of the dealership’s employees mocking this person (which he was smart enough to video, thank you VHS) and making threatening calls made punitive damages likely. Finally, I thought the danger of a credible class action would bring the case to a head rather quickly, which it did. It is important to remember is that class action lawsuits rarely start out that way, they usually start out involving a mechanical problem, as was the case here, that turns into a much more dangerous class action once a lawyer got involved. The next case I’d like to mention also involved some pretty egregious facts, this time surrounding collections. A lady came in and told me that she had recently fallen behind on some payments on her car and that the BHPH dealer was calling her non-stop. When she shared the name of the company, my ears immediately perked up, because I’d tried to make this dealer a client and was dismissively and sternly told that they had everything in order and there was nothing I could possibly do for them. Being young, hungry, with the aforementioned chip on my shoulder, I sure did remember that statement as she started telling me about the dozens of collection phone calls she’d receive every day from this dealer. When I asked what proof she had to back up her allegations, she told me she’d mail me proof. Imagine my surprise when I received a videotape (Betamax!) of her finger scrolling through her answering machine, minute by minute, hour by hour, with literally 40, 50 and even 60 calls to her house in a single day. That case started out as a simple “wrongful debt collection” case based on the fact that so many calls a day was certainly harassment. By the time I looked through all of the paperwork, though, I threw in several more claims because there were incomplete forms, ones that had mathematical mistakes, and I thought that the dealer had sold her vastly over-inflated aftermarket products that provided illusory benefits in violation of state law. Foolishly, the dealer, stubborn as it was, refused a quick settlement and burned several thousands of dollars defending my discovery requests before agreeing to a settlement on the eve of depositions. Anyone see a pattern here? In both cases, little problems turned into larger problems for the dealer once a lawyer started digging his nose into the details. In this case, I also think the dealer made a big mistake in not admitting it had a problem quickly and resolving the case. Between my legal fees and their own lawyers, they probably spent close to $ 10,000 or perhaps even $ 20,000 that didn’t need to be spent if they had just honestly evaluated the case early on. This is a mistake that I’ve seen lots of dealers make over the years, and a point that I always stress in training dealers on defensive litigation tactics. I’d like to think that egregious examples like these would no longer happen because of the emphasis the industry puts on education, complaint management, and other defensive tools, but I’m not enough of an optimist to put money on it. That’s why when I first start working with a new dealer client, I emphasize the importance of putting key compliance blocks in place so that if it is attacked, I’ll be able to discourage the Plaintiff’s lawyer by demonstrating how this client is different than the stereotypical dealer. The key to doing this is to have demonstrable evidence to back up that claim, and that’s why complaint management, policies and procedures, training, risk assessments, and spot audits are so valuable! An ounce of prevention is truly worth a pound of cure, so take steps before trouble strikes. Steve Levine is Chief Legal and Compliance Officer of Ignite Consulting Partners, which provides compliance guidance, training, and other services to independent dealers and finance companies across the country. He is a frequent writer and speaker on industry issues and can be followed on Twitter @LawyerLevine. For more information about Ignite visit its website at IgniteCP.com

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