#157 - Is Your Dealership A Target Of The CFPB w/ Dennis LeVine

Hello, thank you for joining us. This episode of the Independent Dealer podcast. We've got Luke here, we've got Jeff here, and we also have Dennis Levine here to speak with us. And we're going to talk about a lot of great stuff. We cover everything from some CFPB stuff. I didn't know what the term consent decree meant. That sounded like some sort of a prenuptial thing that Luke had his wife sign, but it's not. We're going to talk about wrongful repossession and bankruptcy rulings and laws that are out there. Dennis, introduce yourself to the Independent Dealer podcast community.

Hello, I'm Dennis Levine. I'm a partner with Kelly Cronenberg, which is a statewide firm in Florida with offices also in Louisiana and Illinois. I've been practicing since 1983. I'm board certified in both business bankruptcy law and consulting consumer bankruptcy law. There's only seven lawyers in Florida who are board certified in both. I represent a lot of auto lenders and that's from the largest banks in the country to regional lenders to buy here, pay here lenders as well. I'm active in the Florida Independent Automobile Dealers association and been serving as a resource, spoken on panels for them and at numerous other conferences.

Wonderful. A lot of, a lot of great information here, Jeff, from one of the smartest guys we've had probably on the show. So thanks for being here, Dennis.

You're welcome.

Welcome to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson, a podcast by dealers for dealers. Here we go.

Well, regulation by enforcement, that's a really good question. I think that's been something, something that people have been critical at the CFPB since the beginning. But the truth is that's what they do. The CFPB does, is supposed to set forth rules and regulations so that dealers can know what the rules are and how to comply with them. But they really haven't done that. What they do is they brought enforcement actions against lenders and dealers and the consent decrees that generally come out of those enforcement actions set forth certain standards. And those are the standards that the CFPB then says this is what industry should follow. But the problem is that there hasn't been the usual process of notice and comment for rules. For example, they've done that recently with collection rules and they posted for comment and took comments. It took about a year to determine what the rule should be in terms of collections and restrictions on collections, and they roll that out. But that was really kind of something that the CFPB Normally doesn't do they normally file an enforcement action and then there's a consent decree, and then industry goes, oh, I guess these are the rules I'm supposed to follow. Nobody ever told me that.

Yeah, it's probably how a lot of us run our dealerships, right? We see that there's an issue, we come in and we crack down on it, and we get mad at employees and we tell them they shouldn't do that anymore. And then we make everyone el. Follow the same thing when it was never really laid out in the beginning or was it ever talked about.

So if, if these things are laid out somewhere where as a dealer or a lender, would we find that those, those rules they make as the, as the game goes on?

Well, the CFPB has a website. It's, it's really actually a good website. And you can find all of their consent decrees and enforcement actions. And although they're usually 30 or 40 pages long, you can generally focus on the two or three pages where they have set forth. This is the actions or steps that were taken by a lender that they found to be violative of some federal law. And this is the remedy that they've enforced, which is typically, you know, a fine, sometimes very large fine, sometimes tens of millions of dollars in fines. And then the consent decree says that the lender agrees that they're not going to do this, this, this, and this. So you take the list of the consent decree, lender agrees not to do this, this, this, and this. And those are the things that, you know, all the other lenders look at to say, well, I guess we better not do these things, because even though there's no regulation that says you're not supposed to do these things, somebody got zapped for doing them. And that's what enforcement, regulation by enforcement is.

And we hear so many of those stories. I mean, that is the big, like, you know, I don't know, the boogeyman in the closet is all these dealers are so scared. Oh, did you hear that this dealer got sales sued for $10 million for this XYZ. And I think sometimes maybe dealers just read headlines and we get scared. And so we think that we're all going to get sued or we think that everyone's doing things wrong. And it really does. You have to be smart enough to really look more specifically under the hood. What were they doing wrong? What should they have been doing? Right? And then figuring out how we can put those into our dealership.

Right.

Are we doing things out of just ignorance?

I think Fear is a really good thing for auto dealers to have of the CFPB and the government.

And that's the way motivator.

Don'T take it lightly.

You know, I read an article that you published not long ago and there was a, I think there was some consent orders I guess inside of that article that you touched on. And one of them I thought was interested, was interesting to me was talking about repossessions and wrongful repossessions and how that really I guess probably would put you on the radar at the cfpb. Two questions I found in there. Something that you wrote was does the CFPB expect us not to repossess a customer until their past 60 days due? That was number one. And I think the other thing was just I read that some lenders were repossessing even though they had payment arrangements with customers. Can you talk about how important it is to live up to arrangements you make with customers as well as that 60 day number? What does that mean?

Well, I don't think that the CFPB made a finding in that incentive creed that there's a requirement to not repossess a car unless someone is 60 days past due. I think that that's generally something that's subject to state law. Just as an aside, what I will tell you is be very careful. If you've made payment arrangements with customers in the past where they've been in default and you said, okay, I'm not going to repossess the car if you make these three payments and then they make those three payments and then they fall behind again. If you go out and repossess that car when they fall behind again without telling them that, you know, I gave you a chance before but I'm not doing that anymore. You need to strictly comply and you need to make a payment by X date. If you don't do that, you go pop the car, you are in danger of being sued for wrongful repossession. What's the reason? Because you established a course of conduct with the customer, the customer was in default, you didn't repo their car, you came to an arrangement with them and the customer could reasonably expect that when they fell behind again, they were going to be able to make arrangements with you and you weren't going to repossess the car. So that's something that's really important. I think that all dealers need to know when they're looking at repossessions, if they've made a prior deal, if they're not going to live by those arrangements going forward and not going to give people a chance, you need to tell them. And my recommendation is you tell them in writing. You sent them a letter and said, I know we had a prior arrangement, but that hasn't worked out. So this is what we're going to do going forward. And that's going to protect you from being sued for wrongful repossession. What the consent decree in the case involving Nissan that talked about repossessions, there were a couple of really important points. The first one had to do with the fact that repossession agents are your agent, and that means that you are responsible for what they do. And in a lot of cases, repossession agents did bad things, and because you hired them, you were responsible for them. So you want to look in your contract with your repossessing agents, make sure you have an identification clause. But still you need to be careful because those agents out there are you. With regard to repoing cars that after you had a payment arrangement or in a current payment arrangement. There's a little bit of a different twist than what I said before. And what the CFPB said is that's an unfair, deceptive trade practice where you have an arrangement with somebody and they're making payments and you repo the car anyway. And they found that that was something that violated the federal law with regard to unfair and deceptive trade practices. You would think that people would know that, but obviously for years there were lots of cases where that was happening. The third thing in that consent decree that was interesting is that customers were allowed to make payments by phone and use other third party arrangements, but there were fees involved in using that. And the lender did not either disclose the fees or did not disclose to the consumer that there were other ways they could pay online where the fees would be less.

That was interesting to me because all of us have had to try to enact fees to help with credit card processing, because, I mean, essentially we're in a cashless economy to this point or at this point. Is it all about disclosure? When it comes to fees and I guess state regulations, when it comes to.

Fees and credit cards, it's all about disclosure. I think everything's about disclosure. Whether it's you're gonna have a GPS in the car or, you know, whatever the case may be, having a disclosure or having it signed by the customer as a separate document is always going to be the safest thing you can do.

Okay, back to that, the repo thing. Arrangements are so important in the buy here pay industry, I think that's really how we get a customer from having their car repossessed to getting them across the finish line and helping improve their credit. You know, sometimes you, sometimes you make that arrangement and then you have to go back on. You talked about, I mean, not go back on that arrangement, but later on when you're trying to really get them back down, you have to, you have to turn the screws a little bit. I guess the only way to do that properly is to send a letter. Is that what you're saying, saying, hey, we let you go 90 days last time, we can't do it this time. Is that, do you have to go out and actually physically write them that letter?

That would be my strong recommendation for folks to do. You know, a lot of my clients have systems where they keep notes of their conversations with customers and they even record calls with customers. But you don't want to really go to that extent if you want to, you know, bring in proof in court. And frankly, you want to stay out of court. So, you know, if you get a lawsuit and the customer maybe didn't tell the lawyer that, oh, by the way I signed this agreement, or oh, by the way, I did get this letter that said no more deals or didn't give him copies of the package of documents they signed. And so when you get a demand letter from a lawyer who says, wait a minute, you improperly repossessed the car because you made arrangements with them and then you went back on it, you've got that document that you can send them and say your client probably forgot to tell you that they signed this document so that our repossession was proper. So having that document.

So should we have a, should we have a written letter every time we do an arrangement that's out of ordinary with a consumer?

Well, I think the, the important thing is if you're going to repossess a car after you've had an arrangement, I think you have to have some documentation. Now, in the best of worlds, yes. Can you, should you send a letter that says, you know, you're 90 days behind and this is our agreement by which, you know, we're going to allow you to keep the car if you're going to pay back this, this and this, and you know, the time limits that are set forth in this agreement are strict. Time is of the essence, so you can't be late. And if you're late, then we're, unfortunately, we're going to have to take action to repossess the car, we're not going to call you and tell you you're late. This is our agreement. So having all that spelled out in writing is I think the best protection you can have.

Very good personal property. I found that interesting in that repossession part of that, too. We all repossess cars and never hear from customers and then for some reason, six months later they show up and say, hey, where's my stuff? Where should we be on this? I understand keeping somebody's stuff for a period of time, but we don't have the room to keep it indefinitely. What do we do here?

Well, most, most states with regard to personal property that's left in the car. Most states have laws with regard to abandoned personal property. You see that a lot of the landlord tenant world. But I think those laws also can apply to people who leave personal property and cars that you repossess. So I think you have to be aware of what your state law requirements are. And in a lot of states, there's a requirement for you to send written notice that says, we have your personal property, you left it behind, you have 15 days to come get it, and if you don't come get it, then we're going to dispose of it. So I think you got to look at state law and if that's the case again, I always recommend putting it in writing so that you don't have somebody come back. But talk to your dealers, should talk to their counsel and find out what their obligations are under state law for abandoned personal property that's left in a car that's repossessed.

So this typically is a state by state issue and if not followed in, the CFPB would hop in there.

Yes, it's a state by state issue. I mean, I think in this case the issue was that Nissan had some communication with their repo agents and Nissan was found to be responsible for the actions of the repo agents. Again, as I said before, you're the principal, they're your agent. And if the agents were saying you got to pay $50 for we're going to give you your stuff back, and that was something that was against state law, then you, as the lender can be held responsible for that. My advice to clients all the time is people come, they want their stuff back, give them their stuff.

Yeah, I mean, I don't understand how you don't do that.

So many of those repo companies want to charge you a fee to get your stu and I don't know where that came in. Is that probably a state thing?

But that's a state thing. I tell my clients if they have a repo agent who says they're only going to release the items to the customer if the customer pays them $50, my advice to them in every case is what you need to do is tell your repo company either A, release it without charging them or B, send me the bill. Me, the lender, send me the bill for $50. I'll pay the $50.

Interesting.

Yeah. Can you demand keys to get that for to release? Where do you think a line is there? Because I know some places say, hey, we'll give you your stuff as long as you bring us the key. Because sometimes we don't have the key. I mean that, you know, that's a.

Real asking for keys in exchange for giving personal property. I think it's something you can ask and maybe in most cases people will voluntarily do it. Whether or not you should withhold the personal property if they don't bring you the keys is a closer call, I think.

Right. Okay. Okay. Ready? I saw the article too. This blew my mind. And I'm sure some dealers do this, but they were extending, they were trying to. If they had a different arrangement and an extension agreement, I guess that in an extension agreement, they were limiting someone's ability to file bankruptcy. I mean, who does that, right?

Well, you see those clauses in workout agreements all the time, whether it's in a workout agreement for a used car or a workout agreement for a $20 million shopping center. And it's been tested in court a lot, and most of those are not enforceable. There are certain circumstances where it might be enforceable, but I think on the buy here, pay here side, you know, it's really not going to be enforceable at all. You know, if customer filed bankruptcy, then you'd have to file a motion to dismiss the bankruptcy and argue that they said they weren't going to file bankruptcy. And I can tell you most bankruptcy judges are just going to shake their heads. That's not going to work.

Our previous, we had a previous kind of the policy agreement that kind of outlined our. All of how we work and how we do things and that get to know you form. And in there we had a little paragraph that said, you have not filed bankruptcy, you have no plans to file for X amount of time, blah, blah, blah, blah, blah. And we put it in there knowing that it wouldn't hold ground in court, but just maybe to plant that seed in the customer's mind that, hey, don't think you're going to Buy my car and then run out here and file a chapter 13 on me, like, so maybe a strategy, maybe, hopefully not a bad legal idea that wouldn't get us in trouble. But as long as we don't try.

To really push it, I think those are all good ideas. And you see those in a lot of standard loan applications or loan agreements, whether it's big or small lenders. And I do think it has some utility. And let me tell you why you have situations where someone may finance a car, Then file chapter 13 shortly thereafter and go in and say, hey, I want to value that car. I paid $12,000 for it, but it's really only worth 7,000. So I want to pay $7,000, which, you know, a cram down is what they call it. And you can do that in chapter three. Well, there's a number of cases. I've been involved in those cases, and there's a good case law in Florida, in fact, that says that if you were contemplating filing bankruptcy when you financed a car, that if you file a plan that says, I want to cram down the value, that you can object to that plan as the creditor and say that plan was filed in bad faith. And what happened in those cases, the judge said to the debtor, says, you have two choices. You can either pay the claim based upon the contract at the contract rate of interest and the contract amount, or I'm going to dismiss your case. So now the next question is, well, how far back can you go, Dennis? Like, I understand, you know, two days after they finance the car, but what about two months or six months? And there's no magic bullet. But I certainly think, you know, having something where they sign that says, I have not spoken to a bankruptcy lawyer about filing bankruptcy. I'm not contemplating filing bankruptcy.

And you're saying there is some judge somewhere that actually sided with a lender?

Yes. Yeah, there's several judges who did in that case. And so I've used that case law a lot in other situations in bankruptcy cases. And what happens a lot of those cases is they get settled, so someone will file three months later and they'll pay it in full. But they want to cram down the interest rate, which was 22%. Say I'm going to pay 6%, and you file an objection and maybe you settle the case and they'll pay 15% interest.

Yeah, I've had a couple of those that.

I've got one guy who is a pro at it. He. He is. He is an absolute pro at this. And we've been dragging it out for almost two years while he'll file, get to the notice of the creditors, drop it, refile, go kick it down the can, you know, kick it down the road a few months, refile. So, and I don't know if this might not be the conversation to have today, but how, as a dealer, how do we get smart on that stuff? Do we need to just be sending our bankruptcy cases out to a professional to handle them and sell that case right when it happens? Or do I just need to find someone that can educate me to know what my rights are when this guy can't just drag me along for three years and never actually follow through with the bankruptcy case?

I think both I educate a lot of clients, and I tell clients, I want to teach you how to do things yourself, and I want to teach you things you can do, teach you things you can't do, and more importantly, kind of give you an idea of when you need to call me about a case. So kind of understand the rules and what you can do and what you can't do. For example, what I just talked about in terms of someone files bankruptcy two months after they finance a car, I think that's something you need to get your lawyer involved to make sure that your rights aren't going to get stripped. A really important case for the U.S. supreme Court that I want to talk about on the bankruptcy side of things is about a month ago, the Supreme Court decided a case called Fulton versus the City of Chicago. And that case involved the City of Chicago impounding cars, which they do all the time. And apparently they get 15% of their budget from charging people to get their cars back. The city makes a lot of money. So what people were doing is they filed bankruptcy. They say, okay, I filed bankruptcy. Got to give my car back. And about five years ago, the city said, we're not giving your car back. We're not violating the automatic stay by just holding onto your car. Passive possession of your car. It's not an actual stay. That case went all the way up to the U.S. supreme Court. And the U.S. supreme Court last month in the Fulton case said, we agree with the city. Passive possession of a car is not an act that violates the stay. So that's a really important case for myherapay here, lenders, any lender to know. Because in a lot of cases, you pick up a car and two days later you get a call, hey, we just filed chapter 13. You got to give us a car back. And the law was different in different jurisdictions, different circuits had different law, and the Supreme Court had to decide a conflict in those cases. So as of now, that's the law. You don't have to automatically give a car back after you repossess it and your customer files bankruptcy. So I think that's something that's really important for everybody in your audience to know. If they have questions about it, they should call their attorney and see if that's something that they can live by.

Yeah. So help me understand that around my brain around that a little bit more. You said the case was what, again.

It was called Fulton versus The City of Chicago.

Okay. Fulton versus Chicago.

And it was several cases together. And the debtors were saying that by the city holding onto the car after they filed bankruptcy and refusing to return it to them, they were violating the automatic stay because they contemplated that as a collection action. Refusing to give me my car back is a collection action, even though that.

Was a civil type. You got your car impounded because you parked it in the wrong spot. I didn't take your car because it's not a repossession. It was an impound.

Correct. It was an impound.

So does that apply to us as car dealers that would say, hey, I'm repossessing your car because you haven't paid?

Yeah. The same interpretation of the automatic stay in section 362 of the Bankruptcy Code would apply whether it's passive retention, whether after you impounded a car or passive retention after you repossessed.

So, Dennis, in that, is there any precedent? Probably not yet from that law. But what could we hold it for at that point, fee wise? I mean, can we hold it for, you know, past repossession fee and past due? Is that where we are, you think?

Well, that's a really good question. So what advantages can the lender have by using the Fulton case and not giving the car back? And I think what it does is it shifts the leverage to the lender. So under the Bankruptcy Code, as a secure creditor, you're entitled to adequate protection. And the issue is the debtor has to give you adequate protection in order to get the vehicle back. And if you can't make an agreement with the debtor for adequate protection, the debtor then goes to the court and said, judge, I'm going to do this, that, and the other, and that's adequate protection. You should require them to give my car back, which the court can do, as long as they find that your interests are adequately protected. That may, at a minimum, be proof of insurance it may be repo fees, could be other things. So. But that really shifts the leverage because it requires the debtor and his lawyer. They have to file something in court, and that's going to cost them time and money. And so a lot of debtors, I think, are going to want to take the easy way and say, how do I get my. They're going to call their lawyer and say, how do I get my car back tomorrow? Don't tell me that you got to file a motion and we're going to get a hearing in 30 days. Like, I don't hear that. I got to go to work tomorrow. I got my car back tomorrow. And so then the debtor's lawyer is going to call the creditor's lawyer and say, how does my client get his car back tomorrow? You're going to tell him, well, you need to do this, this, and this, and we'll give you your car back tomorrow. I love it.

I love it.

That makes me smile because I tell you, years ago, it seemed like you could charge them the repossession fee. And so that we had an outward lay of cash, we could get it back. But then for some reason in the last couple years, we're just out the money we used to repossess that car, which we can add it into the claim, but I tell you, it's been a. It's cost us thousands of dollars because of that simple thing right there.

Right. I think it's a really important case for auto dealers, but is it a situation?

And maybe that's. I don't know if I just feel this way or if a lot of dealers feel this way, but when you get a call from one of your customers attorneys that says they just filed bankruptcy and you can't repossess that and you have to give it back now, or we're dragging you in front of the judge and blah, blah, blah. And it's an intimidation factor from these bankruptcy attorneys that start barking at you to give back the car and just bow down and do whatever you want. Like, have we just been pushed? Because as dealers, we're not willing to push back or we're not educated to be like, actually, no, that's not right. You. He has to do X, Y and Z to get the car back and you can take it to the judge.

Well, we have this case.

Hey, guys, sorry to interrupt the podcast real quick. Our sponsor this week is Independent Dealer Podcast guys, so be sure you are, A, sharing this with a friend and B, leaving us a review on Spotify or The Apple Store, right, Luke?

Yeah. And just. Jeff, it is so important that we, that we get out there, right. Dealers need education. So we're not doing this for us. We're doing this to try to help. So if you ever need us, to reach out to us, if you ever need us for anything, we probably know somebody that can help or we can help. So we're here to help y'.

All. Huge. And Our email is infoheindependentdealer.com it's in all the show notes. You guys know that we are not vendors. We're not here to sell you anything. We're not trying to pitch a product or some CRM or DMS or marketing strategy or something that's going to fix it all. We are literally just dealers helping dealers. We wanted the education, so we asked the pros and you guys get to listen in on the conversation. So we're always open to new ideas. If you have anything you specifically want us to cover recover, going deeper, just send us a quick email and say, guys, talk to so and so or hey, get this dealer on. They're doing this great. And if you are a dealer who is doing something great and you just want to get on and chitchat, we would love to have you on the podcast. We don't want to have to talk to vendors all the time. We would love to talk to other dealers and share their experience with the world.

And Jeff, we do a Clubhouse thing every once in a while too, right?

Yeah. This is going to date the episode because Clubhouse probably won't be a thing in another six months. But as of February 2nd, this recording. Yeah. If you have an iOS phone at this point and you're on Clubhouse, we're going to try to do some follow up chats and conversations, which is just a fun little 20 group. It's like a miniature 20 group that we can do live weekly. And we've had a couple great get togethers with other dealers and we just talk about whatever topic anyone wants to bring up. It's been great motivational stuff. So, Luke, should we get back to the episode?

Let's do it.

Doma. I think it's both. I think dealers need to be educated and they need to know what their rights are and they need to push back. And they should have access to a bankruptcy lawyer who they can call and say, this is the situation. What do you think? Let me give you a great example. Before the Fulton case in Florida, there was a case that basically said you could keep a car that you repossessed before they filed bankruptcy. And that law was based on the interpretation of the Florida title statute. The case was called colter. It's a 2001 case and basically said when you repossess a car, you as the lender, become the owner. And so the debtor, once he files bankruptcy, doesn't really have any rights in the vehicle anymore. And what you found is that some debtors lawyers didn't know about the Kalter case. They had gone to conferences and they'd been told, well, when someone files bankruptcy, you just call the creditor and say, give me the car back and they have to give you the car back. And I get calls from debtors lawyers from time to time or emails and you know, I send them the case. I said, I tell clients either A, they haven't heard about the culture case, or B, they hope you haven't heard about Bamboozle. You know, and that's a black and white thing. So if you call me in a Florida case and say, do I have to give you the car back? You know, I can tell you 100% clear cut. As long as it's a Florida titled car, that's the only prerequisite you don't have to get a car back. Period.

Wow, that's awesome.

I bet 90% of Florida buy here pay heres. Don't know that. 95% don't know that.

Well, I wrote an article about it in the Florida Independent Automobile Dealers association newsletter, and certainly I would urge all of your members to look at their state organizations and become involved in those because they're great resources, you know, for education on issues just like this.

Yeah, Dennis, if, if we do happen to wrongfully repossess someone's car, we just screw up. And that happens from time to time. They didn't make a payment. Somehow they didn't get blocked from making a payment. You know, what do we do at that point? What's the best course of action for a dealer if that happens?

Sometimes you'll have a situation where you'll repossess a car after they file bankruptcy, but you didn't have notice of the bankruptcy and the fact that you didn't know about the bankruptcy doesn't matter. Right. And so in every one of those situations, my advice to clients is you need to get the car back and you need to do it promptly. Now, if it's a situation where it's a skip and you've been looking for this car for 10 months and you repossess it and you find out they filed bankruptcy last week, but you didn't.

Know.

Or you know, it's an egregious situation like that, I might advise the client to file an emergency motion for stay relief and go to the court and say, judge, yes, I know we repossessed it after he filed bankruptcy, but we didn't know that he was in bankruptcy, number one. Number two, it's a first payment default, and he's been hiding the car for 10 months. So it's unreasonable for you to require us to give the car back without some kind of adequate protection. And I'm not sure, Judge, what adequate protection that would be, but certainly just giving him the car back with a promise that he's going to start making payments and he can dismiss the case tomorrow, in my mind, Judge, would not be adequate protection. So there is something that you can do in egregious situations. But in almost every other case, I tell clients, unfortunately, you got to give the car back.

And if the customer wasn't in bankruptcy and you repossessed wrongfully, where does that fall, you think?

Well, I'm a big believer in resolving disputes and not litigating cases. That's just from my experience of cases and representing Buy Here, Pay Here dealers over the years and people coming in to me and saying, I'm right, the customer's wrong, I want to fight. And then as you peel the onion away and more facts come in, there are things that they forgot to tell you or perhaps things that they told you which weren't true. And those cases turn into nightmares. So if there is even a colorable issue out there, I'm telling my clients, you need to resolve the case. Because what's going to happen is, especially with some, there are some really good consumer protection lawyers out there, people I deal with all the time. And what are they going to do in that situation? They're going to. Well, Dennis, I don't know. Maybe there's a question about whether the repossession was wrong or not. But I want the dealer jacket. I want to look at every document that you have my client sign, because I'll bet you, I'll bet you that you violated some federal statute somewhere or some state statute somewhere. And there's an attorney's fees provision for that. So I'm going to get you on that, right?

And then guess what? I'm going to go out and solicit all your other customers because I know you missed this document for the last last 10 years, and I'm going to get you on all of them.

And I had a client do that where they situation like that, where they let their license to operate in Florida lapse and they had a dispute with customer and it was really, it was a very, one of the top notch protection lawyers. And he figured that out. And the basis of the lawsuit wasn't that issue. It became you were unlicensed when you made this loan. And part of the settlement was we had a confidentiality agreement so that you wouldn't go solicit our other customers.

There was one thing you mentioned or somebody mentioned when I read something about cfpb, it was mentioned that they may at some point in the future require a CFPB lending license. Do you think that might be on the horizon?

I'm not as concerned about that as I am about state regulations. You know, you look at California, which you know is kind of on the forefront of consumer protection and what they're doing in terms of clamping down on buy here pay here dealers with payday lenders, I think you have to really look at state law. I don't think that the CFPB is going to go to that extent.

Good. Because there's too many license, I mean just in the state of South Carolina, I've got to have four or five license to lend. You know, you're afraid every December 31st that you're going to forget to file one and then you're in a mess again. Right. So I just don't see how we need anymore.

And I'm not sure that the, you know, the CFPB is really going to take a focus on buy here lend, buy here pay here lenders per se. But they are going to be looking at, like I said, you know, payday lenders. And they're going to be looking at auto finance and the rules that may come out of that or the rules from enforcement that come out of that are going to be things that the buy here pay here dealers, you know, should know about.

So buy your pay here stores is not big enough in general for the CFPB to concern themselves with?

I don't think so. You don't know? You know, I think they're, they're focused more on going forward. I think they're focused on payday lenders. I think they're focusing on collections. I think they're going to be focusing on, you know, on mortgage foreclosures. And as we come out of a lot of these moratoriums with the pandemic, there were some provisions in the CARES act that was passed last year that I think the CFPB is Going to want to make sure that what you call maybe snapback, you know, when the lenders go like, okay, I'm free to go after these people, they haven't paid me in nine months. You know, what can I do and what can I not do?

There's got to be a mess of that coming. As soon as all this moratorium comes on with evictions and all that, that's going to be a mess, I think.

You know, it's interesting, I wrote an article last summer for one of our business magazines and the question was, when is the bankruptcy wave coming? And I wrote later than sooner. And I based that upon looking back at the 2008 Great Recession and bankruptcy filings really lagged about a year and a half behind that. And this crisis is different for several other reasons. First, there's government assistance to borrowers in cash payments that are being given to borrowers and probably more coming in the near future. Then you had moratoriums by states, you had moratoriums by the federal government on student loans, on government backed foreclosures. Those were all things that you didn't see in 2008, 2009. So I don't really see the bankruptcy wave coming until the third or fourth quarter of this year. And I can tell you as a bankruptcy lawyer, which is a lot of my practice filings last year were the lowest since 1986. So people just aren't filing bankruptcy. And the reason is because they're not being forced to. And what forces people to file bankruptcy? A foreclosure, an eviction, a lawsuit, a tax lien, something like that. And you're just not seeing those actions being taken to push people.

That's interesting. Well, Jeff, you got anything else?

No, I think that's it. Dennis, anything else to share with us? Things that independent dealers need to be looking out for. It seems to me like there's a handful of stuff that we get a little bit scared about. Obviously, like you said, as the industry of used cars, I'd be really interested. And this may or may not go down, but if people start defaulting on some of these loans that they're getting from some of these subprime lenders that we think is ridiculous. A $700 a month payment for this guy that makes $2,000 a month. And some of these deals that I'm not doing that my competitors or some of these big stores are doing, man, does someone get in trouble for that down the road where they say, hey, you put that guy into a loan that you knew he couldn't or should have known he could not fulfill.

Well, it's interesting because, you know, the CFPB had proposed some regulations on payday lenders, you know, and that was sort of you needed to verify your customer's ability to pay and you could be in violation of law if you didn't do that. And those regulations got scrapped. I don't think they'll come back. But it certainly is something that the government was looking at. But I think those are just losses that lenders are going to take. There is one other thing that I've been doing a lot of work on and I'd like to talk about a little bit, and that is repair shop and towing and storage lien fraud. And you see a lot of that in Florida, and particularly in south Florida. And there are all kinds of permutations on that. Whether, you know, it's a straw buyer, whether it's, you know, you pay someone $1,000 to take their car, you take it to a friend's shop, and then, you know, they don't do work, but they send out a notice saying that $14,000 worth of work. And I've been involved in some changes in the Florida state statute that have tightened some of those loopholes. I've been working with the Florida Department of Highway Safety and Motor Vehicles on that issue. I've been working with law enforcement in South Florida and in fact got somebody arrested last month and had an article published in the Subprime Times about that case. We got somebody arrested. So what I would tell, you know, the buy here, pay here folks. I know the cars may not be, you know, high end. They might not have a lot of value. You may not be targeted for lien sale fraud, but it's out there and you get a lien sale notice. The most important thing is to do something quickly. Don't wait around, because in Florida, if you don't show up at the lien sale, they have a lien sale, your lien on the title gets wiped out. And so there are people out there who are trying to steal your cars every day. And it's not unusual that if you have a car that's worth $9,000 that you, you're going to get a lien sale notice that said they did $10,500 in repairs on a car, just coincidentally a little bit more than what the car's worth, you know, but you do a little due diligence, like, you know, you call the customer, I can't find the customer. Well, that's the first Red flag. Now you look at Carfax cars, never been involved in an accident. Second red flag. So what can you do in Florida? You can post a bond. You go get the car before the lead sale. And we do that a lot for our clients. And in most cases, the shop never makes a claim on the bond. They have 60 days to make a claim on the bond. 60 days go by, they don't make a claim on the bond. Why? Because they never did the work.

I love that. I love that.

But that's something I think every buy here, pay here, lender needs to know. And the laws are different in different states, but I think in general, if there's unpaid towing or storage or repairs and they send you a notice, they're going to sell that car. Your lien's going to get stripped if you don't do anything.

Yeah, that's great advice. And I wish we had some type of law like that in South Carolina with the bond, because that is, that's. I really dislike dealing with tow yards.

Well, I'm in fact working now. Our legislative sessions, probably too late, starts in March, but there's some more loopholes that I think need to be tightened up. And I've actually written legislation. I'm working with a Florida bar committee and actually going to talk to a lobbyist on Friday to try to close some of those loopholes. So if you can get industry behind you. And the 2019amendments on the towing and storage industry, we actually get industry to support the bill because what they were seeing is that the bad apples were giving them a bad name.

Yeah.

And that is so true.

So see if you can find some legislators that you know and maybe talk to the industry association in your state and see if you can cooperate with them. Cause if you get industry on your side, you're gonna have a lot better chance to get things like that done.

I agree.

It's huge. Dennis, thank you so much. How can people get ahold of you if they have more questions and want to follow up or get some counsel? Sure.

I'm a partner of the Tampa office of Kelly Cronenberg and I can be reached at 813-223-1697 is my office number. My cell number is 813-601-0683 and my email address is dlevine d l e v I n e@kklaw.com awesome. Thank you, Dennis.

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