Ignite Consulting Partners
This one cuts close to home because the dealer in question is local to us at Ignite Consulting Partners, and I fear that a significant number of BHPH dealers are similarly vulnerable. And now, there is yet another case on the books that casts BHPH dealers in a negative light.
Without losing a lot of you by going into too much legal and procedural detail, the fact surrounding this case are that in February 2014, Ms. Watson purchased a vehicle from Yates Brothers Motor Co. The contract required her to keep the vehicle insured. There was a dispute regarding coverage, and Yates repossessed the vehicle in early April. It initially claimed that the lack of insurance was the sole reason for repossession. After the repossession, Watson provided written proof that she did have insurance at all times. Nevertheless, Yates sought a $500 repossession fee and when Watson did not pay it, Yates sold the vehicle.
In the lawsuit and trial that followed, Ms. Watson was awarded actual damages of almost $3,000, other damages of almost $8,500 and $87,000 for her attorney’s fees. Who knows how much the dealer had to pay to its own lawyers. You read that right. A $500 dispute turned into a verdict of almost $100,000 and again, that doesn't include its own attorney’s fees.
Many of the reported facts in this case come directly from my nightmares. I’m paraphrasing a bit for the sake of brevity, but if you want to research the case, it’s Yates Brothers Motor Company, Inc., v. Donna Watson, and it was decided by the Court of Appeals in Texas in March.
The allegations of the lawsuit included that BHPH dealer:
• Used a tow truck its employee had access to in the repossession
• Charged customer $500 for repossession even after it was provided proof of insurance
• Claimed one reason was lack of insurance for repossession and then added other reasons later
• Didn’t follow its own policies
• Didn’t have adequate processes for the recording of administrative tasks
• Installed a GPS device in vehicle without obtaining customer consent or providing notice
To these allegations, I’ll add one more of my own: It sure seems like the dealer failed to honestly evaluate the situation it was in. Unfortunately, I think that happens a lot in our business. Hoping that the customer can’t afford a lawyer or nobody will scrutinize your practices closely is not a safe strategy.
I’m compelled to write about this case because this is the danger all BHPH dealers face. Don’t simply read this post and move on to the next chore. Ask yourself whether your dealership could withstand this type of attack. Ask yourself whether you have the resources to defend yourself.
Perhaps most importantly, ask whether you pro-actively protect your business and take compliance seriously.
Steve Levine is chief legal and compliance officer of Ignite Consulting Partners, which offers compliance, technology, process improvement and cyber security guidance to car dealers and finance companies. The combined experience of the Ignite team allows them to develop strategy, overcome internal obstacles and implement meaningful change. Contact [email protected] to learn more. You can follow Steve on Twitter @LawyerLevine for compliance and industry-related content.