Tag Archive | "Biweekly Payments"

The Benefits of Biweekly Payments

Most agents know that biweekly payment programs offer dealers the opportunity to reduce their customers’ interest cost over the life of their auto loan by prepaying a small amount of the principal each month. But some may not be aware of the many additional advantages biweekly programs bring to a dealer’s F&I product lineup — for lease customers as well as finance customers.

To fill in the gaps, Agent Entrepreneur spoke with four leading executives in the biweekly segment: David Engelman of SMART Payment Plan, Equity 4 U Inc.’s Mike Hull, Lynn Simmons of Economic Advantages Corp. (EAC) and US Equity Advantage’s Robert Steenbergh. We learned that proper presentation is the key to getting biweekly payment programs on more menus at more dealerships.

Extolling the Virtues

First and foremost, the executives we interviewed agreed that agents should stress to dealers that these products carry significant benefits to end users and give them options that they might not otherwise have access to.

“Compared with many aftermarket products that customers purchase, where they may never experience the benefits, our program delivers benefits for the entire duration of our service,” says Lynn Simmons, president of Economic Advantages Corp. (EAC) in Sheldon, Vt. “In addition to added revenue to the dealer, a satisfied customer who has paid off their loan faster is a customer who returns to purchase their next vehicle sooner.”

The fact that biweekly payment programs benefit both the dealer and the consumer is a point David Engelman, CEO of Naples, Fla.-based SMART Payment Plan, stresses as well. “Our agents focus on providing dealers with a proven, reliable system for offering car buyers smaller and easier payments. Properly implemented, our smaller and easier payments can transform a dealership’s sales process. Agents and dealers want products and services with a proven demand and tangible benefits.”

“Above all else, agents need to verify that the company is licensed to transmit money, or is an authorized delegate to do so in the dealer’s state,” notes Robert Steenbergh, an attorney and president and CEO of Orlando, Fla.-based US Equity Advantage. “This is more than a benefit; it is a must. Agents should also do their due diligence to verify if the company’s banking relationship is with a reputable institution and whether it is a direct relationship or if there is a third party between the bank and provider. Other benefits to consider include the level of customer service and dealer support offered by the company and its experience in automotive.”

Mike Hull, president of Lamar, Mo.-based Equity 4 U Inc., points out that, for agents and dealers alike, making a profit on F&I products is only going to happen if there is room in the customer’s budget to add products in the first place. It doesn’t matter how much the customer might want or need those products, or how much it might save them in the long run, if they cannot afford them.

“[Biweekly payments offer] a turnkey solution that 100% of the time brings the dealer’s customer back in owing less money to their respective finance source than a conventional monthly payment schedule,” he says. “That benefit pays huge dividends to all parties involved. For example; using a $25,000 car at an average interest rate, the customer trading out of a 72-month loan in 42 to 48 months — in 2018 — from the time of sale will owe around $1,200 less to their bank. That $1,200 may be the difference in making the deal or not making the deal.

“If the customer is upside-down, now the dealer has to deal with getting an on the new loan, setting up an even higher negative equity situation on the next deal, if the banks will even let them,” Hull adds. “Now take that $1,200 and multiply it by 50, 80, 100 trade-ins per month, multiplied by three years. The benefit to the agent and dealer in 2018, 2019, 2020 and beyond now stands in the millions of dollars that the dealer can use to make more deals with.”

To sell the product to car buyers, Hull adds, agents should be sure F&I managers are able to explain the financial benefits over the life of the loan. “All customers should have a debt reduction plan that they can execute. F&I managers should focus on the seamless equity benefits as it relates to the customer’s budget, produced by setting up a biweekly debit schedule. We provide the F&I manager with an amortization schedule showing the equity build up at all stages throughout the loan term. The F&I manager should be able to explain the impact of increased equity once the customer decides to come back and trade or even sell their vehicle outright.”

“F&I managers should focus on the benefits our customers value about our service — convenience, smaller payments that match their paydays, paying off their loans faster and eliminating bill payment hassles and late fees,” Engelman notes.

“It’s also important to offer this payment option to all customers who are financing their vehicles,” Simmons says. “Different customers may have different reasons for their interest in this program. With today’s busy schedules, for instance, ease and convenience can make a big impact for many. For those who don’t budget themselves well, having their payments consistently made on time helps to keep them on track.”

As with all products in the F&I office, ensuring that every customer has a chance to learn about biweekly payments and how the product could benefit them is crucial. “What’s important to one customer may not be the same for another,” Simmons continues. “The F&I manager cannot know what that would be and should, therefore, always offer the option with its costs and its benefits. We also know that although people could make additional principal payments themselves, most of us do not have the self-discipline to do it on a consistent basis. Ultimately, it is the customer’s determination as to what the value is for them. In the interest of full customer disclosure, it should be offered to all.”

“I believe there is a value statement for every customer,” Steenbergh says. “It could be to get out of a negative equity situation, to build equity sooner in the life of the loan, to owe less at trade-in, to pay off the loan early, to save interest, or any combination thereof. Even if a customer has a low interest rate with a term between 60 and 72 months, paying that vehicle off faster provides tremendous value in the equity of the vehicle at the time of trade. It is our job and the role of F&I to educate customers about the benefits of biweekly as well as any out-of-pocket costs, and let them make the decision to purchase.”

“Benefits such as automatic debits and ease of budgeting begin immediately,” notes Hull. “With proper disclosure, our service should be offered to all customers who are financing. Each individual customer will have different wants and needs, as an F&I professional; you should let the customer decide which products or services fit their needs.”

“Every customer achieves convenience: smaller automated payments that match their paydays, faster loan payoff, eliminating bill payment hassles and late fees,” says Engelman. “Even lease customers achieve benefits. And, when customers add mortgages and credit card payments, we can help our customers reduce interest charges. Every finance and lease customer should be given the opportunity to match a smaller payment to their payday and be fully informed about all additional benefits and costs.”

Know the Options

For agents, all four of our experts lead companies at the top of their game when it comes to biweekly payment products. But while they offer very similar programs, they each take approaches that set them apart from the competition. Before deciding to include one over another in the product mix an agent offers to their dealers, knowing what those differences are is key.

“Fundamentally, all biweekly payment services apply the same basic logic: You debit the customer’s account every two weeks in an amount equal to half of their monthly payment,” says Steenbergh. “This equates to 26 half debits per year (or 13 full months’ worth of payments). The additional monthly payment is initially used to pay fees and, in subsequent years, the extra amount is sent to the lender and applied to principal. Small differences exist in such things as flexibility in the debit schedule, the timing of sending lender payments, ancillary fees charged, and pricing and commission structure. More notable differences exist in areas such as licensing, corporate structure, bank partners involved in the handling of funds, and the levels of customer and dealer support that are provided.”

He went on to note those small differences that set his company apart. “I founded US Equity Advantage simultaneously with MenuVantage in 2003. The company is among, if not the industry’s oldest and largest provider. I believe our name is synonymous with an insider’s understanding of the car business and menu-presentation because biweekly was a large part of MenuVantage’s success. We are also committed to our customers and doing what is right for them; whether it’s the end customer or our dealers and agents. In addition, USEA holds the most state money transmitter licenses, by far, which only strengthens our market position.”

“Client payments are made on a schedule to match their pay days,” Simmons says of her company’s approach. “One additional payment is generated over the course of each year. These funds are sent to the lender to be applied against the principal portion of the loan. This accelerates loan payoff, providing additional benefits to the client such as a decrease in interest paid, accelerated equity in the vehicle, increased trade-in value, structured budgeting and the convenience of timely automated payments with online tracking and assistance from experienced customer service reps, providing stress free support. ‘Bi-Auto PriorityPay’ also enables our clients to add other debt, such as mortgages, credit cards and student loans, for the only roll-down program which provides additional significant savings by paying down higher interest obligations first.”

“Equity 4 U sets customers up on an electronic debit schedule that will generate additional payments to be used as principal reduction to accelerate the loan payoff,” notes Hull. “Where we like to stand out is with the customer experience. The Equity 4 U positive customer experience will in turn highlight another reason to return to the selling dealer. Our customers enjoy the benefits of our superior domestic customer service department, automated activity updates and nonsufficient funds forgiveness that includes zero add-on costs to the program even if the customer makes an occasional mistake. In everything we do, we ask ourselves if this will help or hurt the dealers’ CSI score.”

“First, we are not a ‘biweekly payment company.’ We are a bill payment service,” Engelman stresses. “We pioneered and perfected matching automated bill payments to paydays. We focus on providing exceptional customer service, dealership training and compliance. We are the only company in the industry to employ a chief compliance officer, and are fully compliant regarding fee disclosures, contract terms, customer notices, training and sales materials.”

Leaving Controversy Behind

It is worth noting that while biweekly payments came onto the national radar in May 2014 with a memo from the National Automobile Dealers Association (NADA), our experts all agreed that, while it was frustrating at the time, it is now firmly in the past. The memo focused on the fact that the FTC was taking a closer look at these payments, and that the NADA itself had received inquiries. The memo warned dealers that biweekly programs could be susceptible to claims of unfair or deceptive practices, and suggested they should take care in selling them.

However, providers were very quick to point out that the memo failed to acknowledge all of the benefits of a biweekly payment program to a consumer; only reducing the amount of interest paid over the course of an auto loan was addressed. Benefits such as increasing the amount of equity in the vehicle faster, paying off the loans faster, convenience of scheduling payments to match payday cycles and never having to worry about late or missed payments were ignored in the initial memo. Overall, however, while the storm has long since passed, the experts note that it is part of an ongoing attack on the F&I department, and that they all learned something from it.

“I think a more accurate characterization is that biweekly is under review, and I suspect the entire F&I product line is, as well,” says Steenbergh. “Much has been made about the cost of bi-weekly programs compared solely to interest savings. That does not reflect a fundamental flaw in the service, but rather that the perception that interest savings is the only reason why a consumer would want to enroll in a service. Consumers pay for many conveniences in their daily lives and know that it comes with a cost. Think of ATM fees, pre-made food, personal trainers, lawn care and the list goes on. Automated accelerated payment programs are no different.

“Many people assume the only benefit of a biweekly payment program is interest savings. However, a statistically relevant customer survey we conducted in September 2014 revealed that paying off their vehicle sooner is the top reason customers enroll, followed by convenience and any interest savings net of fees,” Steenbergh adds. “These are solid value statements to disclose upfront along with all the costs and benefits related of the program.”

“While we did not lose any business because of that memo, I have heard that others did, which is unfortunate,” says Steenbergh. “It’s only natural for dealers to shy away from anything that is being looked at by the FTC, or any government agency, for that matter. For agents who live and die by their dealer relationships, no one wants to be the one who brings in a liability. So yes, I think the recent negative press has given some reason to pause, but this is not necessarily a bad thing. Sometimes it makes sense to step back, review your business and make sure you are aligned with the right partner and products/services for the long term. I wouldn’t expect agents to do business with us if we couldn’t prove our integrity and value.”

“There is no doubt the FTC inquiries and subsequent NADA memo has had an impact on the decision making process for both dealers and agents,” says Hull. “The NADA memo was profoundly more damaging, as it incorrectly drew parallels from one company (NPN) being investigated to the entire biweekly industry coming under siege by regulators. All companies and services go through increased regulatory pressure at some point; those who learn from the mistakes of others will emerge stronger than ever.”

“Naturally, negative headlines influence behavior and can create fear in the marketplace,” says Engelman. “However, dealers and agents who do business with us recognize our leadership role in addressing compliance, focusing on convenience, smaller and easier payments, faster loan payoffs, offering exceptional customer service and disclosure of total costs and fees. The agents and dealers that offer our service are familiar with the proven demand, our values, our people and our commitment to regulatory compliance.”

“We believe that the dealers and agents who have been properly and successfully marketing this payment option would and should not be discouraged. It was, however, a reminder for all concerned not to become lax with regard to disclosure,” notes Simmons.

However, all four companies have taken a more active approach in making sure they are ready should any regulatory agencies turn their eye on their products, specifically. Ensuring programs are compliant and up-to-date, with clear terms and fees stated up front has always been a priority, but now they are taking steps to ensure nothing got overlooked along the way.

“I believe all products and services sold at the dealership are and will be targeted by the CFPB,” says Hull. “We have prepared more in the last 12 months for increased regulatory pressure than we have the last 10 years. We have initiated internal and external reviews of all language in our materials, contracts and website to ensure we are fully compliant. As a result of these reviews, we have either completed implementation or are in the process of implementing updates.”

Engelman agrees. “Our focus has always been on helping people and providing exceptional service to consumers, auto dealers and agents,” he says. “We have the same level of focus regarding regulatory compliance. We hired a chief compliance officer, consulted with leading compliance attorneys and built a robust compliance department to satisfy regulators in the same manner that we’ve always satisfied our customers, dealers and agents.”

“As far as preparing for any review, we continually audit and update our written materials, advertising and training procedures for our in-house customer service personnel to make sure we’re fully compliant regarding disclosure and compliance,” says Steenbergh.

“We have always believed in the effectiveness of our program, how it helps customers to accelerate their debt payoff, to better budget their lives, to provide structure which helps to reduce their stress,” says Simmons. “We have enjoyed enormous customer loyalty over the 26 years we have been in business, with a record virtually devoid of consumer complaints. We have always disclosed all our fees along with all our benefits. We intend to continue to provide the excellent service that our clients expect and receive from us.”

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USEA Hires Account Manager to Oversee Biweekly Loans

ORLANDO, Fla. — Billy Jackson has joined US Equity Advantage (USEA) as a regional account manager. He is responsible for servicing the company’s biweekly loan program for dealership partners in Arkansas, Colorado, Kansas, Louisiana, Missouri, Nebraska, New Mexico, Oklahoma and Texas.

Jackson has a decade of F&I experience. Most recently, he directed the F&I departments at some of the largest Ford, Chevrolet and Dodge dealerships in Oklahoma, where he gained experience selling and managing biweekly loan programs.

“Directing the F&I departments at some of Oklahoma’s largest auto dealerships, I saw first-hand the win-win benefits of biweekly payment plan programs,” said Jackson. “Customers saved money on interest charges and could afford more car or products without increasing their monthly loan payment, while the dealerships were able to increase their product indexes.”

His career also includes managing a loan servicing team for a Fortune 500 auto finance company and working as an outside sales consultant for express service for Nissan and Infiniti dealerships in the south central U.S.

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Bi-Weekly Payment Services

With the ever-growing threat of a decrease, if not the total elimination of reserve, dealers are going to have to find ways to replace that revenue. The easiest method is to increase the number of F&I products that they sell per deal. A way to accomplish this is by offering a biweekly payment service to their customers. The average deal structured with biweekly payments contains 57% more F&I product sales than a traditional finance deal. In most cases, this results in an overall PVR increase of $115 dollars. That’s overall – as in every finance deal that you sell.

One dealership that’s benefited greatly from this strategy is Copeland Toyota. The dealership currently sells 1.5 more products per vehicle and makes an additional $1,500 Per Retail Unit (PRU) with the service. Based in Brockton, Massachusetts, Copeland Toyota has been family-owned and operated since 1970. The dealership’s primary focus has always been the satisfaction of its customers, and for the last nine years, Copeland Toyota has been recognized for that commitment with the Toyota President’s Award, a prestigious award presented to dealerships that excel in customer service.

According to dealer principal, Todd Copeland, biweekly payment services benefit both the customer and the dealership, “It is all about loyalty and customer retention. It helps us maintain our core focus of making happy customers because they pay off the loan faster and they are in a better equity position when they come back.”

Copeland added, “It also allows the customer to afford more products. We have improved our customer retention while also making gross.” Currently this service adds $1,500 dollars to the dealership’s bottom line on each deal.

The dealership offers it as an option to 100% of customers 100% of the time, “I want to offer customers something that improves their situation while being completely forthright and very transparent in the deal. Our goal is to keep bringing our customers back and to sell them multiple vehicles, not just one,” Copeland said.

Copeland believes that some of the biggest advantages to this type of payment plan are the ease and accuracy of automated direct payments, and that it speeds up the loan payoff. “It facilitates the finance process and the customer leaves the office with a payment they like. Most are accustomed to being paid every other week, so this matches well,” stated Copeland.

With a biweekly payment, customers pay every other week. Because a year has 52 weeks, paying every other week means 26 biweekly payments or the equivalent of 13 monthly payments in a year. The extra payments are applied to the loan principal, so the loan can be paid off faster. That reduces the amount of interest paid over the life of the loan, potentially enabling customers to buy additional F&I products, such as extended service contracts.

While the benefits to the dealership can be huge, before signing with any biweekly service provider, be sure to do your due diligence. The first item on your checklist should be to determine that the company is licensed and bonded to do business in your state. Biweekly services are deemed “money transmitters” under state and federal law and are required to have strict anti-money laundering protocols. Not adhering to these protocols can have serious ramifications to dealers and their customers.

If well managed, the flexibility of these biweekly payment plans allow the F&I manager to satisfy the needs of each sales situation. They may offer it as an option for the customer to automate their payments and benefit with early loan payoff; as a way to reduce the monthly payment for the customer; or so the customer can afford more product and keep the payment and term from increasing with the increased loan amount. The advantages to the customer are term reduction; accelerated equity; reduction in vehicle wear and tear and mileage as a result of earlier trade-in potential; convenient automated drafting for easy payment; and the ability to benefit from significant interest saved and total debt reduction.

Most dealers are not including biweekly payment options in F&I product indexes. Instead, they are being used as another payment option for budget-conscious customers who balk at having their loan terms stretched to meet their payment requirement.

If you have a customer who is interested in a vehicle service contract but doesn’t want his payment or term to exceed $500 dollars or 60 months, the F&I manager can set the VSC term at 63 months and sign the customer up for the biweekly option. His payment won’t exceed that $500 cap, and the customer will pay off his loan in 58 months.

The dealer gets to sell something additional, the customer gets something that benefits them, and it still fits in their monthly budget.

If your F&I manager were to ask every customer “How often do you get paid?” they would find most are paid every 14 days, aka “biweekly”. The next question should be, “Can I show you how our accelerated payment plan can help you budget better for your purchase, improve your credit and pay off your loan sooner?”

The mechanics of these payment strategies make budgeting for the loan easier for your customer. For example, a $500 monthly payment split into two small payments of $250 each, every 14 days is easier to budget – and more affordable, psychologically and in practicality.

This payoff strategy is not a new idea. Homeowners have practiced it for years to retire their mortgages earlier. Today, software-administered plans make this option a real budget-saver for many buyers.

Professional, new-generation accelerated payment plan services are safe for the dealer and safe, secure and prudent for the buyer. The dealer can offer a plan best suited to the customer.

For example:

Biweekly – Payments are electronically withdrawn from the consumer’s checking account every two weeks, for 26 half-debits each year. This gives the customer one extra payment toward the principal balance each year and can save him or her thousands of dollars in the long term on interest.

Weekly – Payments are electronically withdrawn once a week for a total of 52 weekly debits equaling the same total of 26 half-debits each year. Similar to biweekly, this schedule also creates one extra payment toward the principal balance each year and provides the same savings in term and interest as the biweekly plan.

Bimonthly – Payments are withdrawn on two fixed dates in a month for 24 debits. In order to see savings in interest and term, this plan requires that the debit amount is more than a half-payment.

Monthly – If a customer has unique needs or serves in the armed forces, monthly may be their best option. This plan requires that the debit amount is more than the required payment.

In summary, these plans are a win-win for BOTH the customer and the dealer – they can help the customer build equity in their vehicle faster, repair their credit, and retire the loan sooner. And the goodwill a biweekly payment plan can create between dealer and customer helps to retain customers’ loyalty and bring in new customers.

And let’s not forget that the average deal structured with biweekly payments contains 57% more F&I product sales than a traditional finance deal. In most cases, this results in an overall PVR increase of $115. With the looming threat of the decrease or total elimination of reserve, biweekly payment services are well worth looking at as a way to replace that revenue.

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NADA Puts Biweekly Payment Providers in the Spotlight

In May, NADA issued a memo stating that it had come to their attention that the FTC had recently issued civil investigative demands to dealers in connections with bi-weekly payment programs in the F&I office. They advised dealers to “exercise caution when offering such products to their F&I customers,” and gave an example of a 60-month auto loan in the amount of $27,342.96 financed at 8% over 60 months. The results were cited as a five-month reduction in term and an overall savings to the customer, after fees, of only $43.11. The NADA stated that, “Any situation where a dealer is offering a product of marginal value creates a risk that the product will be heavily scrutinized.” The memo stated, “If accurately presented to your customers, with full disclosure of the costs and optional nature of the product, such bi-weekly payment plans are not inherently ‘illegal’ or noncompliant with federal law. As with any other product or service, however, if presented to consumers improperly, or in a misleading fashion, dealers could face numerous compliance risks.” It went on to say that biweekly products can be “particularly susceptible to UDAP (unfair or deceptive acts or practices)” because the costs of the program can easily exceed the potential benefits.

Citing the example of the loan with only $43.11 in savings to the customer, the NADA pointed out that if F&I personnel had promoted the program as offering “substantial savings” or used similar wording, then it could be viewed as an unfair or deceptive practice. They warned that the program’s benefits not be overstated by F&I personnel. The sole customer benefit of biweekly programs cited by the NADA in their memo was interest savings.

Needless to say, biweekly providers were immediately on the defense. David Engleman, CEO, SMART Payment Plan, says the most disappointing thing was the NADA’s neglect in doing proper research and due diligence. He says the true and accurate facts were not presented in their memo. “We want to make sure that all of the dealers who are selling SMART are being compliant. We provide thorough training and full disclosure of fees. It is disappointing that the NADA wouldn’t have reached out to ANY company in order to review sales and marketing materials, contracts, etc., before issuing an advisory or opinion memo regarding a service.” Engleman says dealers should expect more from the NADA – including accurate portrayal of facts and conducting necessary research before issuing legal and regulatory opinions.

Engleman, along with Michael Hull, CEO, Equity 4 U, Inc., Lynn Simmons, president, Economic Advantages Corporation, and Robert Steenbergh, CEO, US Equity Advantage, – none of whom had been contacted by the FTC – issued a joint response stating that the NADA memo “raised undue alarm” and missed much of the true value of their services, such as “convenience, ease of budgeting, improved cash flow, faster loan payoff, reduced negative equity, the elimination of late fees and the significant interest savings when consumers add additional loan payments.” In addition, the providers were upset by the NADA’s failure to communicate with any of them prior to issuing the memorandum.

In a separate letter to the NADA, Hull states that the NADA’s omission of the full benefits of the program greatly skew the decision making process for the dealer. His letter states, “If I were a dealer with average knowledge of biweekly payments or payment acceleration, I would believe the only net benefit, as you [the NADA] stated, is interest savings. If that were the case, then I wholeheartedly agree it [would be] difficult to find a positive net benefit for every customer.” He goes on to say that fortunately, their customers and partners “understand the FULL benefits of the program, which includes a better equity position.”

All the Benefits of Biweekly…

Simmons says, “The original memorandum really did not do justice to our industry. Everyone agrees that the NADA did not do any due diligence. Their memo just made people nervous! Nobody needs that. …This is a great product and a revenue generator. There is no reason to stop selling it. As long as you do your job and disclose things properly, there is no problem.” Economic Advantages Corporation issued their own letter to the NADA and Simmons listed the following additional benefits omitted by NADA:

  • Accelerated equity – significant reduction in the loan amount due at payoff
  • Automated payments – offering the consumer an easy, effortless payment method
  • Increased trade-in value – resulting from earlier payoff, reduced wear and tear and less mileage
  • Flexible budgeting – smaller periodic debits which can be customized as needed
  • Structured discipline – ensures timely payment which can improve credit standing
  • Customer support – professional service reps who assist the customer in communicating with their lender, with which they often do not have the experience
  • Online account access – enabling the customer to track their payments and easily communicate with the company day or night
  • Additional debt – ability to add mortgage, credit card, student loan and other debt types for even greater savings and convenience

While the companies are referred to as “biweekly” payment programs, Simmons pointed out that in reality, biweekly providers tailor their services to the customer’s preference. “We can debit our clients on any schedule they like – whether its weekly, twice monthly, monthly, or biweekly. It started out many, many years ago as a biweekly product but it has evolved – the name just stuck.”

Engleman pointed out that 80% of Americans get paid weekly, biweekly or twice a month. “There have been three recent surveys that indicate that up to 77% of Americans are living payday-to-payday. Understanding that makes it obvious why a service that matches bill payment to a payday would be so popular. It’s the convenience, the ease of budgeting, and the improved cash flow that makes our service popular with Americans. It’s not interest savings! Interest savings is one of about ten benefits and not the most important one. When we survey our clients, not a single client has ever responded that interest savings was important to them or that savings was a factor in the enrollment in our services. The overwhelming service from our clients is that they love our service – and they use the term ‘love’ – for the convenience, ease of budgeting and improved cash flow.” As an example, he explains that the average American makes $4000 a month. They receive a paycheck for $2000 at the beginning of the month and another one in the middle of the month. The government takes $500. The average rent or mortgage is $1000. The average car payment is $400. Often times those are both due at the first of the month, leaving the individual with only $100 left to live on after paying those bills, until their next paycheck. “People are not buying interest savings, they are buying ease of budgeting and convenience and cash flow.”

Biweekly customers can reap even greater benefits by rolling additional outstanding loans into the program they enroll in with their auto loan. Hull says, “Think about your home. Imagine that you are using a biweekly payment schedule and decide to sell your house and move after ten years. At that point, because of your biweekly payments, you will have thousands of dollars more available to you when you sell your home and repurchase a new one. You can either buy a similar home for less money or you can buy a bigger house. The same goes for cars. In five years imagine you trade in a vehicle that you still owe a couple of thousand dollars on. If you had not been on the biweekly program, you might have owed four to five thousand! That’s a huge equity benefit.”

Training and Compliance

The one thing that biweekly providers all emphatically agreed with was the NADA’s recommendation for proper training of F&I personnel and the importance of adequate disclosure. In fact, the biweekly providers we spoke with say they already go above and beyond in this area. Steenbergh says their focus on compliance is top priority. “There are no hidden fees whatsoever. We don’t apologize that we charge a fee for our service. There is no reason to hide it.” He reports they comply with all 50 states’ licensing laws and are registered with Financial Crimes Enforcement Network (FinCEN), which is a federal regulatory agency. They passed internal audits by the MSD compliance divisions of their banking partners, comply with all federal bank secrecy acts and anti-money laundering statutes, which are required by the state licensing authorities as well. In addition, they have operated with externally audited financials for a number of years. Steenbergh says, “We are not afraid of anyone challenging whether or not we do something in an honest and compliant manner because we think that is a competitive advantage for us. We don’t spend all this money on licenses and compliance because it is an income source!”

As far as dealership training, the biweekly providers we spoke with take that very seriously also. Steenbergh says maintaining control of the training is a important part of keeping things consistent and teaching the importance of disclosures and compliance to dealers. “We don’t have other people train our dealers. Even though we work with agents across the country, we send our own people in to do the actual dealership training. This ensures that it is done in a compliant manner and that each training is the same as the last. Our trainers work with dealers on the proper way to present the program, how to handle objections, and they specifically tell them how NOT to present it.”

Michael Lickfeld, vice president, Lawly Automotive in New York has been doing field training for Equity 4 U for almost nine years. He says he has never had any calls from the BBB, attorney letters, lawsuits or other problems since he has been selling Equity 4 U’s products. When training dealers, he takes the F&I chair and gives the presentation to the F&I manager as if they were the customer, going through every step of the process, including fees and benefits and highlighting key areas on the paperwork. He returns to his dealers one to four times per month, depending upon their size, to conduct ongoing training. On these follow up visits, he sits in the customer chair and has the F&I manager present to him. He provides tips and ensures they are fully and accurately representing the product. Lickfeld says the key is, “putting yourself in the customers place – or view them as if they were your mom or dad or a relative. How would you treat them? You have to make them aware that there are fees and there are benefits and fully explain both to the customer. You are putting them in an accelerated equity position on their loan.”

Rick Christopher, regional account manager, US Equity, did business with US Equity for eight years before working for them. He says he never had any customer or dealership issues, such as customers not knowing what they were getting once they signed up, or problems with the program once they were enrolled. He says there is no way an F&I manager can overstate the benefits if they use the tools provided to them. “When we train – new accounts or new F&I managers, we stress full disclosure, especially of fees. We want the customer to understand that the benefits far outweigh the fees. All the fees are on our disclosure form in bold. I train F&I managers to have customers actually initial fees section of the enrollment form as a best practice. We stress for them not to overstate the benefits of the program because we have a tool on our website and a tool in MenuVantage that states the benefits to the customer very clearly in a printable format. This includes the interest savings (if there is any), the additional equity they will have available to them in 42 months, and the term reduction on the loan if they stay on the program. It shows the customer clearly what their savings will be after the $399 enrollment fee.”

“I think what’s important here, is we really are no different than any other product in the marketplace,” says Simmons, “With any product F&I sells, it’s up to them to present it properly and it’s up to the provider to train F&I to present it properly. We make sure our agents are well aware of how our product works and then together with the agents we work to keep the dealers educated on our product.”

All the providers we spoke with conduct regular training – in person and online with webinars and tutorials. They provide training materials and offer online and phone support for dealers as well as customers and have a variety of calculators, tools, debit calendars and account information on their websites. Their goal is having customers for life. They emphasize providing quality customer service in order to earn long-term business from their customers.

A Silver Lining?

While no reputable company enjoys having to defend itself against accusations that they are not operating above board in their business practices, the biweekly providers we spoke with are being positive in light of the recent press they have received due to the NADA’s memorandum. They say they are using the opportunity of being put in the spotlight to refocus and to share the benefits of their products within the F&I industry. “Equity 4 U and the other providers,” says Hull, “have been providing payment acceleration services for over a decade, with predominantly positive customer feedback. We know how to sell, train and market the services because we have the experience to do it. If the FTC or for that matter, NADA has any input as to the process of biweekly payments, I would be more than happy to listen and makereasonablemodifications to our services.”

Hull says they are using the opportunity to refocus and reinforce the items that need to be brought up so the customer has an accurate understanding of the services they are signed up for – even with their experienced F&I managers – to ensure that nothing has fallen through the cracks. “I don’t think anyone is out there intentionally misleading anyone. A lot of the principles that are inherent with our program are not new. People have been doing this with their mortgages for decades and biweekly has been offered at the dealership level for over a decade.”

Engleman say that if anything, the NADA has provided a podium to inform the marketplace of the very important and critical details of their service. “It is what it is,” says Engleman, “We at SMART do not want to focus on the NADA memo. We are very happy that we are getting the press and the media attention. It gives us opportunities to discuss all the facts, the details of our program, our focus on compliance, adequate training, and accurate fee and benefit disclosures.”

At the end of the day, while they disagree with the recent memo, Engleman says reputable biweekly payment services are directly aligned with the NADA’s ultimate goal. “We want dealers to be compliant, we want them to use legal, compliant sales practices and we want to make it possible for car buyers to interact with dealers in a high trust environment and to be able to buy vehicles, products and services that make it easier to own vehicles and help those buyers return to dealers in a more right-side up position.” So despite the reason biweekly payment services were put in the spotlight, he views it as an “opportunity for the industry as a whole” – to educate dealers about the benefits of their services and to let the industry know just why payment services that align payments with customers pay days are so popular with the public.

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