F&I and Showroom, May 2018

www fi magazine com 40 F I and Showroom May 2018 MAD MARV M Make no mistake about it When it comes to putting together impossible deals and turning them into gold dealership folk are among the most inventive individuals out there But sometimes that resourcefulness can go too far One of the more heated discussions Ive engaged other F I professionals in is the practice of allowing a customer to take cash out of a dealer arranged retail sales contract for any variety of reasons A common solution is to show a payoff to the customer on all sale documents including the retail installment sales contract then cut the customer a check for the payoff amount Another scenario involves a customer having equity in his or her trade after the bank payoff Rather than put the difference toward the vehicle purchase the customer wants to use it to pay off other outstanding loans So to accommodate the customer the dealer manipulates the sales agreement by either increasing the sales price of the purchased unit or the trade value Some dealers will even under allow the trade value in the amount the customer wants back and then refund the difference This process saves the customer money in the many states that allow tax credit for trade ins F I managers may believe notifying the finance companys buyer and getting it OKd in the notes or comment section covers them down the road But does it Since Im no lawyer I consulted with one of the best legal minds in the car business to get some answers That individual would be Mr Thomas B Hudson co author of CARLAW F I Legal Desk Book the widely known legal reference for F I pros and the main study material for getting certified with the Association of Finance Insurance Professionals In case you arent familiar with Mr Hudson here are just a few of his credentials Hes the founder and chairman of Hudson Cook LLP which employs more than 60 attorneys in 13 offices around the country president of CounselorLibrary com founder and editor in chief of CARLAW and a regular contributor to this magazine Hes also served as president of the American College of Consumer Financial Services Lawyers and is affiliated with legal professional groups that are too numerous to list here Suffice it to say his advice is highly sought after I shared with Tom some of the various conversations and debates Ive had with other F I pros regarding so called cash back practices And well his reply wasnt surprising A couple of thoughts My spider sense goes off any time the numbers in the deal dont really represent what they are supposed to represent Courts and regulators never like it when numbers have to be explained as something they arent he said That said Id share your concerns with all these scenarios I find that it is common for finance company reps dealing with dealers to approve all sorts of things that the finance companys lawyers would choke on he continued When both the dealer rep and the finance company rep get paid on originations theres often a real devils deal going on The dealer agreement probably has something in legalese that says the numbers reflect the deal and it also says that it the dealer agreement can be amended only in writing The wink and nod from the guy on the desk is worth nothing when its time for the finance company to shove the deal back to the dealer And heres the kicker Also these are arguably Truth in Lending Act Regulation Z violations unfair and deceptive acts and practices state sales tax violations etc by the dealer who despite the fact that most dealers dont understand it is the initial creditor in the transaction The finance company reps cant OK a dealers law violations and torts The moral of all this is if it smells like a rat then it probably is If not then why would the dealer employee be so interested in getting the buyer to OK the practice in the deal notes As with all things we tend to form opinions that suit us quickly to justify the means that lead to the desired result which in these scenarios is satisfying the customer Hey satisfying customers is one of the most difficult high wires well ever walk because theyll quickly let you know theyll head off to a competitor if you dont do what they want The wise thing to do is to explain why you cant and offer to buy their car outright pay off any loan balance and refund them the difference to do as they choose Some of you may scoff at Mr Hudsons take while others will wisely heed his warning Either way good luck and keep closing ABOUT THE AUTHOR Marv Eleazer is the F I director at Langdale Ford in Valdosta Ga Email him at marv eleazer@ bobit com Is That Legal Is manipulating a sales agreement to accommodate a customers request to cash out of a dealer arranged retail sales contract allowed His Madness gets answers from the industrys top legal mind BY MARV ELEAZER