Four auto lenders exited the sector this year, pressured by tough market conditions and faltering profits. Three of the four had billion-dollar portfolios, opening the door for some shuffling among top industry players.  

While some lenders quit indirect auto lending — opting to keep originating direct loans — others shut their doors completely.  

Regions Bank  

At the beginning of the year, Regions Bank shuttered its indirect auto lending business, choosing instead to focus on direct loans. The Birmingham, Ala.-based bank informed its dealer network in January of the impending exit and continued to fund loans through April 1. Regions Bank’s portfolio has been declining since 2016, closing out last year with $3.1 billion of loans outstanding. 

Fidelity Bank  

In May, Fidelity Bank exited indirect auto lending after nearly 30 years in the business. Fidelity Bank had been steadily retreating from the auto finance space, withdrawing from 10 states starting in late 2017. “Throughout 2018, we have focused on executing our business strategy to rebalance our loan portfolio with higher-yielding commercial credits and deemphasize indirect auto lending, which is dependent on our growth,” the company stated in a 10-K filing with the Securities and Exchange Commission. The Atlanta-based bank had a $1.6 billion auto loan portfolio at yearend 2018, down from $1.7 billion in the prior year, according to Big Wheels Auto Finance Data. 

SNAAC 

In August, subprime lender Security National Automotive Acceptance Co. stopped purchasing auto contracts and liquidated its portfolio after three decades in operation. “The risk-adjusted returns in today’s market do not meet the thresholds SNAAC had set to ensure profitable and sustained growth which led us to this decision,” the lender told AFN in an email. A few months later, SNAAC transitioned its portfolio to Westlake Financial’s servicing subsidiary, Westlake Portfolio Management. 

Bank of the West 

San Francisco-based Bank of the West closed down its indirect auto lending business in November and subsequently laid off its East Coast sales staff. The bank shuttered its indirect auto lending business to focus on its marine and RV business. Bank of the West’s auto portfolio had been slipping the past two years. Outstandings dropped 6.7% to $4.1 billion at yearend 2018, on the heels of a 19% decline in 2017, according to Big Wheels Auto Finance Data. Bank of the West was ranked 37th in the Big Wheels ranking of the nation’s top 100 financiers. 

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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Throughout this year, more than 20 cases of auto loan fraud in the U.S. have racked up millions of dollars in fake loans and stolen cars.  

The list of lenders nailed by fraud schemes in the past 12 months include Ally Financial; AmeriCredit; Capital One Auto Finance, Navy Federal Credit Union; Pentagon Federal Credit Union, PNC Bank, Santander Consumer USA, USAA Bank; and captives Ford Motor Credit; Hyundai Capital America; and Nissan Motor Acceptance Corp. Independent financiers Exeter Finance, Global Lending Services and Skopos Financial were also victims of auto fraud in the past year. 

Here are the highest-priced fraud schemes of 2019.  

Reagor-Dykes defrauds Ford Credit with floorplan scheme  

So far, 11 Reagor-Dykes Auto Group employees have pleaded guilty this year to their roles in what Ford Credit dubbed “the largest floorplan financing frauds in the history of the U.S.,” according to court documents. The breakdown of the fraud is as follows: 409 vehicles worth $13.8 million were absent from the dealership chain’s inventory; 352 vehicles were sold and funded, totaling $11.6 million; and 37 vehicles worth $1.6 million were “double-floored.” 

The dealership chain is currently awaiting approval from the United States Bankruptcy Court on its $14 million restructuring plan – a proposal Reagor-Dykes hopes will keep some of its locations in operation. GM Financial, another floorplan financier for the Lubbock-based dealer group, is fighting the plan in court, calling it “inadequate.” Meanwhile, the 11 guilty employees await sentencing hearings, which are scheduled for 2020.  

FBI busts Porsche dealer in $3M fraud scheme 

A former dealer for Pompano Beach, Fla.-based Champion Porsche pleaded guilty to a fraud scheme racking up $3 million.  The fraudster, Shiraaz Sookralli, pleaded guilty to conspiracy to commit mail fraud and wire fraud. He faces a maximum sentence of 20 years in prison, according to the U.S. Attorney’s Office of the Southern District of Florida.  

To facilitate the scheme, Sookralli sold non-existent exotic Porsche models to 30 customers. He required the buyers to provide deposits in the form of wire transfers, bank checks and cash that he later deposited into his shell company’s bank account. Sookralli opened the shell company in 2017 with a name similar to the Champion Porsche dealership, for which he worked, in order to trick buyers, according to the Department of Justice’s press release.  

NMAC wins $2.5M in floorplan fraud case 

A federal judge ruled in favor of Nissan Motor Acceptance Corp. after it was determined a used-car dealership defrauded the captive on its floorplan loan by selling vehicles out of trust. 

Helena, Mont.-based Robert Allen Nissan owes NMAC $2.5 million, plus attorneys fees and costs incurred by NMAC to date, according to a Nov. 5 filing with the Helena Division of the U.S. District Court of Montana. According to a Feb. 22 complaint filed by NMAC, the dealership sold vehicles out of trust for months by keeping the proceeds – totaling $795,584 for 25 vehicles – and failing to pay them to NMAC.

FBI arrests fraudsters in $1.7M auto scam 

In August, the Federal Bureau of Investigation arrested six fraudsters for falsely obtaining millions of dollars in auto loans. The scammers operated three fake dealerships — called Premier Luxury Motors, Platinum Motors Auto Sales, and 5-Star Motorsports — which had no employees, inventory, or licenses. 

The perpetrators secured 80 fraudulent auto loans worth $1.7 million, though they attempted to secure $2.7 million in loans, according to the Northern District of Georgia Attorney‘s office. The conspirators applied for auto loans with banks and credit unions, supplementing their applications with fake vehicle purchase orders. Lender-issued loan checks would be deposited into financial accounts opened by the conspirators and held in the names of the fake dealerships. The conspirators would split the money rather than repay the lenders. The scheme spanned about four years, the investigation discovered.  

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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The U.S. Supreme Court has determined that the statute of limitations for offenses against the Fair Debt Collection Practices Act begins when the offense occurs, not when the offense is discovered by the borrower.

Provisions within the law allow borrowers to sue debt collectors for FDCPA infractions within one year of the violation. In the case of Rotkiske v. Klemm, the borrower sued the debt collector in 2015 for improper debt collection practices in 2009 after his mortgage application was denied. The borrower contended that his FDCPA infraction claim was valid because the lawsuit was filed within one year of learning about the violation — also known as a strategy used to extend the statute of limitations by applying the “discovery rule.”

However, in an 8-to-1 decision, the Supreme Court upheld the Third Circuit Court of Appeals‘ finding that the language in the FDCPA was explicitly clear about the statute of limitations: one year from when the infraction occurred.  Borrowers could not apply the discovery rule to extend the statute of limitations unless there was proof that the debt collector purposefully hid the violation.

You can read the Supreme Court’s full opinion, along with Justice Ruth Bader Ginsburg’s dissent, here.

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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