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U.S. Bank Monitoring F&I Product Pricing

MINNEAPOLIS — Dealers signed up with U.S. Bank received a notice this week containing the bank’s policy in regards to fair and responsible lending. Also detailed was the bank’s dealer monitoring program, which, according to the notice, isn’t just focused on how dealers mark up interest rates on finance contracts.

Obtained by F&I and Showroom, the notice was similar to ones distributed by other finance sources, explaining that regulators like the Consumer Financial Protection Bureau (CFPB) have interpreted fair lending laws to prohibit not only intentional discrimination, but also “certain neutral practices that have an adverse discriminatory impact on a prohibited basis (i.e., disparate impact).” But in explaining its monitoring program, the bank didn’t focus on rate markups; it focused on how F&I products are priced and sold.

“If this monitoring program finds unexplained differences in pricing or excessive add-on product financing on a prohibited basis, then we will notify you,” the notice read, in part. “We will ask you to provide any additional information that you believe we should consider regarding the matter. If you are unable to provide an explanation for the identified differences, or if the unexplained differences persist, we will consider taking further action.”

Since the CFPB issued its March 2013 guidance on dealer participation — which warned finance sources that they’d be held liable for the way dealers mark up interest rates — finance sources have warned dealers that they are monitoring their rate markup practices. But the U.S. Bank notice could be the first to add F&I product sales to those efforts.

The question is: Does the CFPB have jurisdiction over the sale of F&I products? It’s a question that has been debated during F&I and Showroom’s annual conference for the past two years.

During a panel discussion at Industry Summit 2013, Nikki Munro, a partner with Hudson Cook LLP, said she didn’t believe the bureau had jurisdiction over the F&I industry. She noted that the CFPB-creating Dodd-Frank Act contains a catch-all provision that raises more questions than it answers.

“There’s a lot of gray area there,” she said at the time. “With aftermarket products that are financial in nature — and the easiest one to refer to is GAP — we think the CFPB can exercise jurisdiction over those types of products, because they are related to the extension of credit — they pay off the extension of credit if there’s a total loss.

“With nonfinancial products like vehicle service contracts, tire-and-wheel, paintless dent repair … we’re just not sure,” she added. “The CFPB will probably take the position that those types of products offered in connection with the loan gives them jurisdiction.”

At Industry Summit 2014, Rick Hackett, a former CFPB official who now serves as a partner at Hudson Cook LLP, confirmed the bureau’s interest in how F&I products are priced and sold, saying that the regulator can’t connect how dealers price F&I protections with the value they provide consumers.

“If I found out that Walmart set the price [of their products at different levels], and they were all the same products, and they were just hoping I would buy one for $20.95 because I was a particularly gullible consumer, I’d be grumpy,” he said. “That’s the bureau’s perspective of variable pricing of ancillary products.”

Hackett offered several scenarios as to how the bureau might proceed. One of them involved the data the bureau has collected from the tens of millions of transactions it reviewed during its investigation of dealer participation. If the bureau comes up with its own determination on how F&I protections should be priced, it could say that anything above that price is a finance charge. The bureau could then say a finance source provided “reckless substantial assistance” for financing a product with an artificially inflated price, Hackett noted.

“So there’s the question,” he said. “Will the bureau try to make finance companies a cop for dealers’ pricing of ancillary products?”

U.S. Bank’s dealer notice points to a “Yes,” although a spokesperson for the bank played down its significance. “We regularly distribute updated policy notifications to our dealers across our footprint,” read a statement the bank issued to F&I and Showroom. “We have and continue to work closely with our dealership partners on changing guidance and regulation in our industry to provide the best service for our clients.”

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Hudson Cook, LLP Adds Trisha Cacciola as Partner

HANOVER, Md. – Hudson Cook, LLP, a nationwide provider of legal compliance services for the financial services industry, announces the addition of Trisha Cacciola as a partner in its Long Island, New York office. Trisha brings over 25 years experience in consumer and commercial auto finance law. Trisha will support the firm’s auto finance and compliance practices, and her experience will further enhance the firm’s ability to provide meaningful and practical advice to its clients.

“Trisha brings skills and knowledge that will fit perfectly in the Firm’s practice”, said Tom Hudson, Chairman of Hudson Cook LLP.

From 1998 to 2015, Trisha served as Assistant General Counsel, and Executive Director of Chase Auto Finance. Her responsibilities at Chase Auto Finance included regulatory exam management, manufacturer partnerships, fair lending, originations, servicing, collections, defensive litigation, floor plan, marketing, e-commerce, software/vendor contract drafting/negotiation and lobbying. From 1993 to 1998, Trisha served in the legal department of Bank of America’s predecessor financial institutions, Barnett Bank and Nations Bank supporting consumer and commercial auto finance programs. Prior to Trish’s in-house experience, she was an associate for five years with the law firm of Winston & Strawn in their New York office, practicing in the Corporate, Commercial Loan, Project Finance and Bank Regulatory departments.

Trish is a graduate of New York University School of Law and New York University Stern School of Business (Accounting) and is admitted to the Bar of the State of New York.

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Hudson Cook, LLP Announces Michael Benoit’s Receipt of Auto Finance Excellence Award

HANOVER, Md. – Michael Benoit, senior partner in Hudson Cook, LLP’s automotive finance group, has been honored with a 2014 Auto Finance Excellence Award, which recognizes achievement and contribution to the automotive finance industry. The award was presented on October 7, 2014 at the Auto Finance News’ annual Auto Finance Summit in Las Vegas, NV.

Michael was cited as “an advocate who has gone above and beyond the status quo to make a substantive contribution to the auto finance industry,” by JJ Hornblass, President and CEO of Royal Media, publisher of Auto Finance News.

“We are hard-pressed to find any industry advocate who has been a greater proponent for auto finance, especially in the face of unprecedented regulatory action from the Consumer Financial Protection Bureau and other regulators,” Hornblass said. “We thank you for your tireless advocacy, for your passion for auto finance, for your expertise developed over so many years of practice and dedication, and for your leadership.”

“We’ve seen Michael’s dedication to the auto finance industry for many years,” said, Hudson Cook chairman, Tom Hudson, “and we congratulate Michael for this gratifying and well deserved recognition from the industry we serve.”

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Hudson Cook, LLP Adds Former CFPB Enforcement Deputy as Partner

Hanover, Md. – Hudson Cook, LLP, a nationwide provider of legal compliance services for the financial services industry, announces the addition of Lucy Morris as a partner in its Washington, DC office. Lucy brings 25 years experience in all aspects of consumer finance law and public policy. Lucy will support the firm’s enforcement and compliance practices, and her experience will further enhance the firm’s ability to provide meaningful and practical advice to its clients.

“Lucy brings a wealth of experience with consumer financial services regulation, from both the CFPB and the FTC, and she will be a great addition to our practice,” explained Hudson Cook Chairman Tom Hudson.

From 2011 to 2014, Lucy served as Deputy Enforcement Director in the Division of Supervision, Enforcement, and Fair Lending at the Consumer Financial Protection Bureau. Lucy’s responsibilities at the CFPB included overseeing investigations and litigation relating to consumer financial products and services, including credit cards, mortgage origination, mortgage servicing, payday lending, debt collection, credit reporting, and debt settlement. From 2010 to 2011, Lucy served as a founding member of the implementation team that organized the CFPB after passage of the Dodd-Frank Act, helping to stand up the Bureau’s enforcement, supervision, and other functions.

Before joining the CFPB, Lucy worked at the Federal Trade Commission from 1989 to 2010. She served in a variety of positions in the FTC’s Bureau of Consumer Protection, including Assistant Director of Financial Practices and Assistant to the Director. Lucy worked in the Division of Financial Practices for 18 years, where she was responsible for protecting consumers of financial products and services through law enforcement, rulemaking, policy development and public outreach. During her tenure at the FTC, Lucy supervised, litigated, and investigated complex law enforcement actions involving a variety of consumer financial products and services, including mortgage origination, mortgage servicing, credit reporting, debt collection, and debt settlement. Lucy was awarded the Chairman’s Award in 2008, the FTC’s highest award, in recognition of her accomplishments.

Before joining the FTC, Lucy practiced law for three years as a litigation associate at Betts, Patterson & Mines in Seattle, Washington. Lucy received her Bachelor of Arts degree, cum laude, from the University of Santa Clara and a Juris Doctor degree from Hastings College of the Law. Lucy speaks frequently on topics relating to the CFPB, law enforcement, litigation, and consumer financial protection.

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Hudson Cook, LLP, Announces Formation of New Practice Group to Address the Growing Government Scrutiny of the Collections and Recovery Industry

Hanover, Md. – Hudson Cook, LLP, a nationwide provider of legal compliance services for the financial services industry, announces that it has added as partners two nationally-recognized collections attorneys, Gary Becker and Barbara Sinsley, to its existing collections practice. Gary and Barbara will join current Hudson Cook attorneys in creating a new practice group to focus on lender oversight and regulatory compliance for third-party debt collectors, debt buyers, collections law firms, and creditors collecting their own debts.

  • Gary W. Becker is an attorney and entrepreneur who has worked in the collections industry for nearly 30 years. He is the former CEO, Chairman and General Counsel of national collection agency DCM Services; a founding partner of Balogh Becker, one of the nation’s largest collection law firms; and a founding board member of the National Association of Retail Collection Attorneys. Gary is an innovator in the application of technology to collections and a recognized leader in applying legally compliant customer-centric approaches in collections and recovery. He received his law degree in 1978 from Ohio State University College of Law.
  • Barbara A. Sinsley is considered one of the nation’s leading attorneys in the area of debt sales and consumer collections regulatory preparedness and compliance, with over 24 years of experience. She previously served as General Counsel of DBA International (formerly the Debt Buyers Association). Over the course of her career, both as an outside attorney and in-house counsel, Barb has assisted dozens of large and small collections businesses in coming into compliance with state and federal laws, and has represented numerous industry members before the CFPB, Federal Trade Commission, state attorneys general, and in the courts. She received her law degree in 1989 from South Texas College of Law.

Gary and Barb will be joining several current Hudson Cook attorneys, including Joel Winston (former head of the FTC’s debt collection enforcement program), Chuck Dodge, Ron Gorsline, Eric Johnson, Blake Sims, and Tom Buiteweg, in a group that focuses on compliance as it relates specifically to the regulated aspects of lenders’ collection and recovery; creditor supervision of third-party debt collection by agencies and law firms; and the sale of consumer debt.

Tom Hudson, Chairman, Hudson Cook, LLP, said, “Gary and Barb bring to the table a wealth of experience and knowledge, allowing us to increase the breadth and depth of our collections and debt buying practice. They will develop and offer broad-based solutions, including compliance audits, for businesses trying to “stay ahead of the curve” as the government increases its enforcement and regulatory efforts in this area. By leveraging new technologies, we can provide these services in the most efficient and cost-effective way possible. In addition to counseling businesses on the specific concerns they face, we believe we best serve our clients by helping them be prepared in advance, if and when the regulators come calling. We are very pleased to welcome Gary and Barb to the firm.”

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Hudson Cook, LLP Announces Lifetime Achievement Award for Partner

WASHINGTON D.C. – Hudson Cook LLP, a nationwide provider of legal services for the financial industry, announced that the American College of Consumer Financial Services Lawyers has recognized Anne P. Fortney with the prestigious Senator William Proxmire Lifetime Achievement Award. The award is given periodically to a person who has made significant contributions in the field of consumer financial services over that person’s career. The College presented the award on Saturday, April 12, 2014, at its annual dinner, this year held at the California Club in Los Angeles, California.

The award includes a $3,000 donation from the College to be directed to an organization that promotes the public interest in the area of consumer financial services. Ms. Fortney named the Navy-Marine Corps Relief Society because it provides emergency financial assistance and financial counseling for Navy and Marine Corps personnel and their families. Ms. Fortney’s husband, retired Rear Admiral Richard A. Riddell, is a former Navy submariner.

Ms. Fortney is a nationally-recognized expert in the Fair Credit Reporting Act and other consumer financial privacy laws. A partner in the firm’s Washington, D.C. office, Ms. Fortney provides legal assistance in the areas of regulatory compliance, legislative developments and litigation. She has testified as an invited expert before Congress regarding the operation of various consumer protection laws and frequently serves as an expert witness in litigation. She is the immediate past Chairman of the Conference on Consumer Financial Services Law and has held a number of leadership positions in the American Bar Association’s Consumer Financial Services Committee. Ms. Fortney is a frequent speaker and author on consumer financial services law. A graduate of Mary Washington College, Ms. Fortney received her law degree from the Georgetown University Law Center.

Robert Cook, managing partner of Hudson Cook LLP, said “I’m both proud and pleased that the College has selected Anne for this award, and the firm is honored by her selection. The College is comprised of the finest consumer financial services lawyers in the nation. To be recognized as a leader by the College is of particular significance.”

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