Normal
0
false
false
false
EN-US
X-NONE
X-NONE
MicrosoftInternetExplorer4

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

SACRAMENTO, Calif. — Regulatory and judicial actions against
the buy-here, pay-here industry are gaining significant momentum as legislative
debate heats up in California, Ohio's attorney general reveals lawsuits and the
Consumer Financial Protection Bureau begins to probe a nationwide BHPH store
chain.

The latest development came Tuesday when the California
Senate's Judiciary Committee spent part of a its weekly meeting discussing SB
956, the Buy-Here-Pay-Here Automobile Dealers Act. Sen. Ted Lieu, the bill's
author, again testified before the committee, reiterating his stance on how
BHPH stores prey on economically disadvantaged consumers.

"My measure, Senate Bill 956, would regulate this
unregulated industry." Lieu told the committee. "SB 956 contains numerous
consumer protections, such as capping the interest rate, putting these
dealerships under the regulation of the Department of Corporations and subjecting
the dealership to the protections of the California Finance Lenders law.

"Buy-here, pay-here dealers are the Wild West of used-car
dealerships, and it is time they are brought under control," he added.

When the committee allowed a brief opportunity for opponents
to voice opposition, one BHPH advocate asked this question:

"How can you have one entity licensing two entities —
used-car dealers or buy-here, pay-here dealers and commercial finance lenders —
but the commercial finance lenders aren't regulated for interest caps but the
used-car dealer is? I don't understand the equity in that. I'd like to find out
what that's all about," the questioner told the committee.

Before the committee's latest meeting, bill opponents made
their case against the measure in nonpartisan analysis delivered to the Senate.
The analysis contained comments from BHPH stores as well as the National
Alliance of Buy-Here Pay-Here Dealers and the National Independent Automobile
Dealers Association.

Both NABD and NIADA tried to inform legislators about the
nature of the business, how the federal funds rate plus a 17-percent interest rate
cap would stifle the efforts of finance companies that offer credible, alternative
financing programs to unbankable consumers. 

"Losses sustained by traditional BHPH dealers are enormous,
due to their high credit risk consumers," the organizations told the California
Senate. "The average gross dollar loss rate as a percentage of the principal loan
amount was 38.61 percent.  In other
words, dealers operating
near these benchmarks expect to lose nearly 40 percent of the principal amount
they lend. 

"BHPH dealers write off non-performing contracts at an
average rate of approximately 30 percent. Dealers know that nearly one in three
deals they finance will end up as a charged-off account due to nonpayment by
the customer," the organizations went on to say.

Comments from undisclosed California BHPH dealers reiterated
the points raised by NABD and NIADA.

"Small buy-here, pay-here auto dealers are the only
competition for large subprime auto lenders," one dealer said. "This bill
crushes the small businessman and hands all of this market to big corporate
finance companies."

Another store manager added, "When the independent dealer is
no longer able to sell cars, where will the credit-challenged buyer purchase their
car?  Answer: He will buy junk from the
unlicensed dealers on the street corners that pay no tax or DMV fees."

CarMax Testifies at Committee Meeting

One specific dealer company briefly spoke to the California
Senate Judiciary Committee Tuesday. A representative of CarMax insisted
California's definition of BHPH stores follows the wording crafted at the
federal level by the Dodd-Frank Act, which created the CFPB and other financial
regulatory actions.

"We apologize for the late opposition," CarMax's
representative stated. "We are simply opposed to the definition of the buy-here,
pay-here dealer in the bill in the most recent version. We have spoken with the
author's office, and we believe we will be able to work through that definition
so that it's something we can live with as well. We don't believe CarMax is the
target of this bill. It's a good actor in California, employing thousands of
employees.

"The latest definition includes the Dodd-Frank definition and
that unfortunately includes us," she added.

CarMax has 15 rooftops in California.

"We think we can work with (CarMax) to address their issue,"
Lieu stated later during the meeting. "The bill inadvertently captures them.
They're not the intended target."

DriveTime Eyed by CFPB

Meanwhile at the federal level, the CFPB is looking into the
business practices of DriveTime Automotive Group, a BHPH store chain with 88
rooftops nationwide.

DriveTime acknowledged the development in its latest Form
8-K to the Securities and Exchange Commission.

"On April 12, the Consumer Financial Protection Bureau delivered
a Civil Investigative Demand to DriveTime Automotive Group, requesting that
DTAG produce certain documents and information and answer questions relating to
certain components of the business of DTAG and its affiliates," company
officials stated.

"The CFPB has not alleged a violation by DTAG of any law and
DTAG is cooperating with the CFPB's requests for information," they added.

Ohio Attorney General Sues Two BHPH Stores

And in other developments, Ohio attorney general Mike DeWine
recently announced lawsuits against Keep It Moving Auto of Cleveland and Auto
Finance/Auto Finance South of Columbus. The lawsuits charge the dealerships and
their owners with multiple violations of Ohio's consumer laws.

"In both of these cases, we found blatant violations of
consumer financing laws," DeWine asserted. "The purchases were often one-sided,
heavily favoring the dealer and lacking required disclosures."

Keep It Moving Auto has lots at 8941 Broadway Ave. in
Cleveland and 8948 State Route 14 in Streetsboro, Ohio.

After several consumers filed complaints against the
rooftops, the attorney general's office indicated that it discovered numerous
violations with the dealers such as failing to notify consumers of payment due
dates, failing to notify consumers of the total cost of credit, and including
an acceleration clause for consumers who defaulted, meaning the total amount
consumers owed would be due immediately without notice.

The lawsuit, filed in the Portage County Court of Common
Pleas, charges Keep It Moving Auto, owner Ronnie Simmons Jr., and employee
Chester Leonard with violations of Ohio's Retail Installment Sales Act,
Consumer Sales Practices Act, Odometer Rollback and Disclosure Act, and
Certificate of Motor Vehicle Title Law.

A second lawsuit, filed in the Franklin County Court of
Common Pleas, charges Auto Finance LLC, Auto Finance South, and owners Donald
O'Connell and Christopher Allison with multiple violations of Ohio's Retail
Installment Sales Act, Consumer Sales Practices Act, and Certificate of Motor
Vehicle Title Act.

In the last two years, the Ohio attorney general's office
said it has received more than 50 complaints against Auto Finance of 3178
Cleveland Ave. or Auto Finance South of 1414 Parsons Ave., both in Columbus.

According to the attorney general, store managers failed to
give consumers proper disclosures about their financing and failed to obtain
certificates of title in the time required by law, among other violations.

In both lawsuits, the attorney general seeks injunctive
relief, civil penalties and consumer restitution.

"Consumers need to understand their full financial
obligations when buying from a buy-here-pay-here dealer," DeWine said. "In some
cases, consumers' vehicles are repossessed within days or weeks of the purchase
because the dealer didn't clearly disclose when their payments were due."

The lawsuits from Ohio's attorney general were applauded by
Lieu, the author of the bill in the California Senate.

"I commend Ohio Attorney General Mike DeWine for suing
predatory buy-here, pay-here used-car dealers," Lieu said. "His action confirms
that these dealers are often unscrupulous and take advantage of desperate
consumers through the use of one-sided, blatantly unfair contracts with
interests of up to 30 percent."