Legal, CPA Advice Kept Panelists Busy at Leedom's 12th Annual Conference

LAS VEGAS — A plethora of industry experts and dealers were on hand to offer presentations, participate in roundtables and answer questions at the 12th Annual Special Finance Buy-Here, Pay-Here Conference at Caesars Palace in Las Vegas last month.

For instance, John Maxwell, founder of Injoy and Equip Steward Services, served as the keynote speaker. He is a New York Times best-selling author who has sold more than 12 million books covering all aspects of leadership.

"Believing in people before they have proved themselves is the key to motivating people to reach their potential," according to Maxwell.

The program went on to offer a variety of workshops, covering such topics as effectively managing the phone and appointment process; dominating your market by maximizing leads; special finance 101; chasing 100- units sold each month; analyzing repossessions and charge-offs; and many more.

One of the panels to take center stage in popularity was "Ask the Experts: Operations, Capital, Funding, Accounting, Legal Compliance and Technology."

The panel consisted of Chris Leedom, of Leedom and Associates, which hosted the conference; Tom Hudson, an attorney with Hudson Cook; Dave Keller, a certified public accountant with Davis, Keller and Wiggins; and Allen Dobbins, with Autostar Solutions.

Dealers in the audience received more than an hour of question and answer time with the panelists. In fact, the event was only allotted an hour and went over.

To kick off the questions, Chuck Bonanno, consultant with Leedom and Associates who served as facilitator, asked the panelists, "What have you seen change in BHPH/Special Finance the most?"

Dobbins responded, "We've seen almost 100 percent of dealers get away from taking cash at all. Prepaid debit cards have become popular. These can immediately ensure payment.

"In fact, one customer told me he has 5,000 ACH transactions a month," he added.

Meanwhile, Keller chimed in saying, "Sales have gone down, so dealers have needed to add other products to sales. Also, I've seen more lenders trying to get into the business."

As for Hudson, he noted, "Typically, five to six years ago, class-action suits brought against dealers by inexperienced lawyers would be handled or settled fairly easily.

"However, predatory litigators are entering the sector, and these people have tried class-action suits before. There are serious players who are not going away easily," he highlighted.

Leedom reiterated what Hudson pointed out, indicating, "We're seeing more good dealers get sued today than ever before. They do not mean to do anything wrong, and they're getting sued."

Another issue discussed was the mark-up many dealers charge consumers with bad credit.

Basically, a dealer asked, "Can I charge $3,000 to $4,000 over wholesale price on a regular basis?"

Hudson responded, "Can you argue pure price is so high it's an unfair and deceptive act? We've found eight to 12 cases where merchants were found liable. I expect to see this asked again and again. It's a sore point in the industry.

"There comes a point where the dealer becomes vulnerable, where, I don't know. But I suspect we'll find out," he continued.

One way to prevent class-action lawsuits in these instances is to always have an arbitration agreement, Hudson stressed. However, if a dealer does have an arbitration agreement, it should get reviewed every six months, he indicated.

"Federal law allows arbitration, so no matter what states do (legislation they may pass), they cannot banish it," he said. He went on to point out that there is a bill pending to end the ability of businesses to arbitrate disputes. That is something his law firm is keeping an eye on.

"An arbitration agreement is not bullet-proof vest," Hudson cautioned. "Pennsylvania is one of the strictest states when it comes to caps on mark-ups.

"Make sure everyone on the lot pays that cash price ... the mark-up for bad credit," Hudson explained. "Have a separate lot for BHPH and a separate for special finance so the mark-ups are the same on all vehicles on each lot."

Leedom noted that leasing can help prevent a dealer being vulnerable to getting into trouble for bad credit mark-ups. He notes that it offer a dealer more control over the vehicle.

Keller also noted that a dealer needs to be careful with how he handles a related finance company, if he has one.

"You should have an asset agreement between you and the finance company. The IRS is very specific and must have fair market value," he said. "You can have different calculations between a company and a finance company."

When approached on the topic of rent-to-own, the executives all cautioned that there is no legislation about it currently; however, this might change in the future, leaving a dealer potentially vulnerable.  

Many other topics were covered by the panel; however, the executives all made one clear point: It's best to have a knowledgeable attorney and CPA go over books and offer advice to make sure a dealership is doing everything it can to avoid a lawsuit in the future.

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