F&I and Showroom, July 2016

www fi magazine com 6 F I and Showroom July 2016 LETTER FROM THE EDITOR I It landed in my email like a box of rocks that would weigh on me for most of the month A reader had called me out about a technique I was reminded of at Mays F I Think Tank and wrote about in last months editorial I was alarmed that you printed this without vetting the cash conversion with any of your experienced trainers or your legal experts the reader wrote Having been behind the keyboard since 1997 my skin is as thick as my passion for what I do But this one hurt mainly because Ive been so careful not to call attention to an industry that really doesnt need it I thanked the sender for keeping me honest and asked if I could run the email in this months Letters section The individual refused not wanting to offend the F I manager who shared it But as a responsible journalist and industry advocate I couldnt let it go When I graduated from journalism school back in the Dark Ages even with an editorial we did a lot of fact checking before we printed something as important as this the reader continued I appreciated the readers passion for the business and said as much in my response And the individual was right I did not check with my legal contacts mainly because many of them were in the room when the technique was shared What the presenter did was get the cash customer to put his money into an Ally money market account put down 5000 and take advantage of GM Financials subvented financing offer He did so by showing the customer how much money the money market account would earn over five years vs what the he would pay in interest on his auto loan Yes its not a new technique And truthfully Ive never been a fan of it So why did I write about it Well it wasnt because the presenter told a good tale Heck he admitted it wasnt a huge victory I wrote about it because it was a good example of why you should never give up on a deal And the audience loved his message The part I liked was the presenters use of Allys webpage to disclose the banks offering Heck he even helped the customer set up the account and got GM Financial to auto debit the Ally account I would venture to bet that the F I manager did not disclose to the customer that there may be a penalty for early withdrawal the reader charged Heres what Allys webpage the same one he showed his customer says about that With a money market account you dont have to worry about an early withdrawal penalty when you access your funds You just need to stay within federal withdrawal and transfer limits or that when the money is matured and the customer cashes out of the investment there may be a capital gain to be paid the reader continued noting that F I managers are not licensed financial advisors And herein lies the danger Since the presenter wasnt doing a step by step I cant say whether that was discussed with the customer The reader brought up something else Apparently the Federal Trade Commission FTC had weighed in on this technique sometime between 1986 and 1994 According to the reader the regulator asked one of the major software providers to remove a cash conversion tool imbedded in its system I Googled the readers claim but found nothing So I ran it by one of my legal sources one of the most respected legal minds in our industry He said he had never heard of the FTC weighing in on a specific F I technique But he did me a solid and ran the readers claim by one of his partners who had been with the FTC for more than three decades before joining my contacts firm And well he hadnt heard of it either I did email the company that supposedly removed the conversion tool from its system but I never received a response One of my F I manager contacts however agreed with the reader saying that he heard that an F I product company got in trouble with a state insurance regulator for pushing that technique I had intended for this to be an I screwed up editorial but youre going to have to settle for an I may have screwed up piece But I would like to get to the bottom of this so please email me any links or documentation on this In the meantime I encourage you to consult with your legal counsel if you decide to dust off this old cash conversion technique Righting a Wrong The editor gets called out by a reader about a cash conversion technique he detailed in the magazines June issue BY GREG ARROYO HAVING BEEN BEHIND THE KEYBOARD SINCE 1997 MY SKIN IS AS THICK AS MY PASSION FOR WHAT I DO BUT THIS ONE HURT MAINLY BECAUSE IVE BEEN SO CAREFUL NOT TO CALL ATTENTION TO AN INDUSTRY THAT REALLY DOESNT NEED IT I THANKED THE SENDER FOR KEEPING ME HONEST AND ASKED IF I COULD RUN THE EMAIL IN THIS MONTHS LETTERS SECTION