Powersports lenders need to be cautious and constantly “reevaluate” repossession practices, particularly in relation to the Servicemembers Civil Relief Act, following the recent case against Wells Fargo & Co., said John Redding, partner at BuckleySandler LLP.
The SCRA is an area that compliance is expected, regardless of the company’s size or level of resources, Redding told Powersports Finance.
Wells Fargo was fined more than $24 million in September by federal regulators for alleged violations of the SCRA. The lender agreed to pay $4.1 million to resolve allegations it improperly repossessed 413 cars owned by members of the military without obtaining a court order, according to a Department of Justice press release. Separately, Wells Fargo was fined $20 million by the Office of the Comptroller of the Currency for violating the same act.
“The SCRA is an issue that has been out there for as long as the market has been around,” Redding said. “It’s a matter of looking at the policies around the repossession process, and looking to make sure that when you are engaged in the process of repossession, you are checking — for instance — the DMDC [Defense Manpower Data Center] website for military status.”
While most powersports lenders are not as large as auto finance institutions and don’t have the same amount of resources to dedicate to compliance practices, they still need to perform regular compliance checks, Redding said. “They [checks] are going to be important, regardless of size of the institution, because getting it wrong — the outcome is the same. In other words, the risks are the same, no matter the size of the institution,” he added.
Repossession will always be an area that presents risk to a company, Redding said. To avoid regulatory investigation, lenders should “periodically review the various notices with repossessions — whether it’s a pre-repo notice, which exists in certain states; whether it is the notice of repo; or whether it is the notice of sale,” he said. It can also be helpful to monitor public consent orders to get an idea of regulatory expectations, he added.