F&I and Showroom, September 2015

Developments 8 F I and Showroom September 2015 CFPB Says Santander Violated Fair Lending Laws SANTANDER CONSUMER USA REVEALED in an Aug 10 regulatory filing that it could face regulatory scrutiny from the Department of Justice DOJ regarding its dealer participation policies On July 31 according to the filing the Consumer Financial Protection Bureau CFPB notified Santander that it had alerted the DOJ to what it considers to be violations of the Equal Credit Opportunity Act ECOA The bureau alleges that the auto loans purchased by Santander from dealers contained statistical disparities in markup charged to minority borrowers The CFPB also noted that the treatment of certain types of income in the finance sources underwriting process could be at odds with the ECOA The company does not believe that there are any proceedings threatened or pending that if determined adversely would have a material adverse effect on the consolidated financial position results of operations or liquidity of the company the filing read in part Santander agreed to pay 935 million in February to resolve the DOJs charges that its vehicle repossession practices violated the Servicemembers Civil Relief Act The finance source also noted in its regulatory filing that it has received civil subpoenas from multiple state regulators noting that it is complying with the requests for information and document preservation related to its underwriting and securitization of auto loans The CFPB has targeted multiple finance sources in recent months regarding policies that allow dealers to mark up interest rates on retail installment sales contracts as compensation for arranging financing for car buyers In July Honda Finance Corp reached a 24 million settlement with the bureau and the DOJ and agreed to lower its markup caps from 225 to 125 above the buy rate for auto loans with terms of five years or less and from 2 to 1 on loans with longer terms T rueCar CEO and Chairman Scott Painter will vacate his CEO position later this year the company announced during its quarterly earnings conference call on Aug 6 Officials also reported that the car shopping site lost 147 million during the second quarter Painter will retire when his successor takes office which officials said should occur by the end of the year However the founder of the vehicle shopping site will stay on as chairman of TrueCars board of directors After a decade of building TrueCar from an idea into a public company I have come to the conclusion reached by many founders and entrepreneurs in my position It is time for a change Painter said The announcement and disappointing quarterly earnings were preceded by a conference call in July in which officials revealed the company would fall short of projected revenues and profits TrueCar adjusted its expectations to account for a drop in sales predicting revenue of 65 million for the quarter down from 68 million On Aug 6 the company reported total second quarter revenue of 653 million and a loss of 147 million or 018 per share We had enough prospects we believe to hit our unit numbers we just didnt close enough of them said CFO Mike Guthrie on July 28 We have to keep investing in the experience and in products so we can turn the nearly 900000 prospects that we had into more unit sales July was a tumultuous month for the car shopping site which parted ways with dealer giant AutoNation on July 9 At issue was TrueCars request for data covering all of AutoNations sales records including records of its customers home addresses emails and phone numbers among other information We are not interested in sharing our data on our customers with anybody else AutoNations CMO Marc Cannon said in the days following the split But TrueCar executives said the fallout with AutoNation had little effect on its second quarter results According to Guthrie AutoNation made up only 3 of the companys revenue in the second quarter It was a tough quarter in relation to our initial guidance Guthrie told callers on Aug 6 noting that new car transactions accounted for 4 of total U S retail sales during the quarter Notwithstanding that we achieved notable successes Traffic grew by 42 to six million unique visitors and TrueCar Certified Dealers transacted a total of 190358 vehicles on the platform a quarterly record The company also announced that Christopher Claus former president of USAA Financial Advice Solutions Group and current director of TrueCar was named lead independent director Claus will be at the helm of True Cars search for a replacement for Painter TrueCars Painter to Step Down