By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MOTOR VEHICLE SALES
FINANCE COMPANY
LICENSING
Docket No. 2009-11-OTSC

ORDER TO SHOW CAUSE
AND NOTICE OF INTENT
TO REVOKE MOTOR
VEHICLE SALES FINANCE
COMPANY LICENSE


In the Matter of
FAFAMA AUTO SALES, INC.
Hopedale, Massachusetts

Motor Vehicle Sales Finance Company License No. MV0548


ADMINISTRATIVE COMPLAINT

The Commonwealth of Massachusetts Division of Banks (the "Division"), by and through the Commissioner of Banks of the Commonwealth of Massachusetts (the "Commissioner "), for its Order to Show Cause and Notice of Right to a Hearing ("Order and Notice"), alleges as follows:

  1. The Division brings this action under Massachusetts General Laws chapter 255B, section 8 to revoke Fafama Auto Sales, Inc.'s ("Fafama" or the "Corporation") motor vehicle sales finance company license MV0548 and to obtain other equitable relief as may be necessary due to Fafama's failure to comply with the provisions of Massachusetts General Laws chapter 255B and failure to maintain and exercise the financial responsibility, character, reputation, integrity and general fitness to command the confidence of the public and to warrant the belief that the motor vehicle finance business will be operated lawfully, honestly and fairly, in violation of Massachusetts General Laws, chapter 255B, section 2 and the Division's regulation 209 CMR 20.03.
  2. JURISDICTION AND VENUE

  3. The Division is an agency of the Commonwealth of Massachusetts with jurisdiction over matters relating to the licensing and regulation of those engaged in the business of a motor vehicle sales finance company pursuant to Massachusetts General Laws chapter 255B, section 2.
  4. At all relevant times, Fafama has been engaged in the business of a motor vehicle sales finance company in Massachusetts.
  5. RESPONDENT

  6. Fafama is, and at all relevant times has been, a corporation conducting business in the Commonwealth with its main office located at 236 South Main Street, Hopedale, Massachusetts.
  7. Fafama is licensed by the Commissioner as a motor vehicle sales finance company under Massachusetts General Laws chapter 255B section 2. According to records maintained on file with the Division, the Commissioner initially issued a motor vehicle sales finance company license, license number MV0548 on or about November 10, 2006.
  8. REGULATORY BACKGROUND

  9. Pursuant to Massachusetts General Laws chapter 255B, section 3, the Division is authorized to inspect the books, accounts, papers, records, and files of motor vehicle sales finance companies transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255B and any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a motor vehicle sales finance company.
  10. On October 29, 2007, pursuant to the authority granted under Massachusetts General Laws chapter 255B, section 3, the Division commenced an examination/inspection of the books, accounts, papers, records, and files maintained by Fafama to evaluate the Corporation's compliance with the laws and regulations applicable to the conduct of a motor vehicle sales finance company business in Massachusetts (the "examination/inspection").
  11. The Division's Report of Examination/Inspection (the "Report"), issued to Fafama on October 6, 2008, alleged significant failures to comply with applicable state and federal laws, rules and regulations governing the conduct of those engaged in the business of a motor vehicle sales finance company in Massachusetts. The findings and conclusions of the Report are incorporated herein in their entirety by reference.
  12. On February 27, 2009, the Commissioner and Fafama entered into a Stipulation and Consent to the Issuance of a Consent Order, and the Consent Order was issued by the Commissioner, Docket No. 2009-11, (the "Consent Order") to address the matters raised by the findings of the Report. The Consent Order is attached hereto as Exhibit 1.
  13. A. Failure to Comply with the Terms of the Consent Order

  14. Fafama failed to provide required documentation, within the time-frames set forth in the Consent Order; such documentation included, but was not limited to, evidence of the payment of required monetary reimbursements to consumers. As a result, the Division was compelled to reach out to Fafama on numerous occasions in an attempt to obtain the information. In response to the Division's repeated requests, Fafama submitted information to the Division in piecemeal fashion, constituting partial compliance with the Consent Order. Fafama's final submission was received by the Division on or about August 10, 2009. Despite the Division's subsequent attempts to work with Fafama to achieve Fafama's full compliance with the Consent Order, including a visitation by Division examiners to Fafama's office location on September 14, 2009, Fafama has failed to comply fully with the provisions of the Consent Order, as further set forth below.
  15. Section 20 of the Consent Order states:
  16. Failure to comply with the terms of this Order shall constitute grounds for license suspension and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.

  17. Section 18 of the Consent Order states:
  18. Nothing in this Order shall be construed as permitting Fafama to violate any law, rule, regulation, or regulatory bulletin to which Fafama is subject.

    (i) Failure to reimburse consumers for late charges collected in excess of the amount permitted by M.G.L. chapter 255B, section 11.

  19. Section 5 of the Consent Order states, in part:
  20. Fafama shall establish, implement and maintain policies and procedures to ensure that the Corporation properly assesses and collects delinquency and collection charges, where the contract so provides, on each installment in default for a period of not less than fifteen (15) days, in an amount not in excess of five percent of each installment or five dollars, whichever is less, in compliance with M.G.L. c. 255B, section 11.... (a) Fafama shall conduct a review of all late charges assessed by the Corporation on or after January 1, 2005, and shall reimburse all consumers from whom a late charge was collected that was in excess of five percent of each installment or five dollars, whichever is less and/or which was assessed before fifteen days. The amount of such reimbursements shall equal the amounts collected as delinquency charges that were in excess of the amount allowed by statute. In instances where a late charge was assessed before the expiration of the fifteen (15) day period required by M.G.L. chapter 255B, section 11, the Corporation shall reimburse the consumers for the entire amount of the late fee collected. (b) .... Within sixty (60) days of the effective date of this Order, the Auditing Firm shall submit to the Division evidence of all reimbursements issued . .... Evidence of reimbursements issued shall include the consumers' names, account numbers, the amount of reimbursements and the manner in which the reimbursements were calculated, and sufficient evidence to illustrate the credits and/or refunds to each consumer. [Emphasis supplied.]

  21. To date, Fafama has failed to provide evidence of reimbursements issued to consumers for late charges collected in excess of the amount permitted by applicable law and, upon information and belief, Fafama has failed to reimburse such consumers as required under Section 5 of the Consent Order.
  22. (ii) Failure to reimburse consumers for amounts collected for returned check fees that exceeded the amount permitted by M.G.L. chapter 255B, section 11.

  23. Section 6 of the Consent Order states, in part:
  24. Fafama shall establish, implement and maintain policies and procedures to ensure that the Corporation properly assesses and collects returned check fees, where the contract so provides, in amounts not to exceed ten dollars for any check, draft or order for the payment of money submitted in accordance with said contract which is returned unpaid or not honored by a bank or other depository, in accordance with M.G.L. c 255B, section 11... (a) Fafama shall conduct a review of all returned check fees assessed by the Corporation on or after January 1, 2005 and shall reimburse all consumers from whom a returned check fee in excess of ten dollars was collected. The amount of such reimbursements shall equal the amounts collected as returned check fees that were in excess of the amount allowed by statute. (b).... Within sixty (60) days of the effective date of this Order, the Auditing Firm shall submit to the Division evidence of all reimbursements issued .... Evidence of reimbursements issued shall include the consumers' names, account numbers, the amount of reimbursements and the manner in which the reimbursements were calculated, and sufficient evidence to illustrate the credits and/or refunds to each consumer. [Emphasis supplied.]

  25. To date, Fafama has failed to provide evidence of reimbursements issued to consumers for amounts collected as returned check fees in excess of ten dollars and, upon information and belief, Fafama has failed to reimburse such consumers as required under Section 6 of the Consent Order.
  26. (iii) Failure to reimburse consumers for amounts collected as finance charges that were in excess of the Annual Percentage Rate (APR) permitted under M.G.L. chapter 255B, section 14

  27. Section 7 of the Consent Order states, in part:
  28. Fafama shall establish, implement and maintain policies and procedures to ensure that the Corporation does not charge, receive, and collect a finance charge in excess of an annual percentage rate (APR) of twenty-one per cent, inclusive of all charges incident to investigating and making the contract and for the extension of the credit provided for in the contract, in accordance with M.G.L. chapter 255B, section 14....(a) Fafama shall conduct a review of the APR charged on all loan accounts since January 1, 2005 and shall reimburse all consumers who were charged an APR in excess of 21%. The amount of such reimbursements shall equal the total amounts collected as finance charges that were in excess of the APR permitted by M.G.L. chapter 255B, section 14 . (b) .... Within sixty (60) days of the effective date of this Order, the Auditing Firm shall submit to the Division evidence of all reimbursements issued .... Evidence of reimbursements issued shall include the consumers' names, account numbers, the amount of reimbursements and the manner in which the reimbursements were calculated, and sufficient evidence to illustrate the credits and/or refunds to each consumer. [Emphasis supplied.]

  29. To date, Fafama has failed to provide evidence of reimbursements issued to consumers for amounts collected as finance charges that were in excess of the APR permitted by statute and, upon information and belief, Fafama has failed to reimburse such consumers as required under Section 7 of the Consent Order.
  30. (iv)Failure to reimburse consumers for repossession fees collected in excess of reasonable expenses incurred by Fafama

  31. Section 8 of the Consent Order states, in part:
  32. Fafama shall establish, implement and maintain policies and procedures to ensure that, in instances where the consumer pays the full amount of debt in order to regain possession of collateral repossessed by the Corporation, Fafama charges consumers only for reasonable expenses incurred upon the Corporation's taking possession of the collateral. For the purposes of this Order, "Reasonable Expense" is defined as the amount charged to the Corporation by the repossession agent. (a) Fafama shall conduct a review of loan accounts since January 1, 2005 in which the collateral was repossessed and then returned to the consumer upon payment of the default and shall reimburse the consumers for all repossession fees that were in excess of the amount charged to Fafama by the repossession agent. (b) .... Within sixty (60) days of the effective date of this Order, the Auditing Firm shall submit to the Division evidence of all reimbursements issued .... Evidence of reimbursements issued shall include the consumers' names, account numbers, the amount of reimbursements and the manner in which the reimbursements were calculated, and sufficient evidence to illustrate the credits and/or refunds to each consumer. [Emphasis supplied.]

  33. To date, Fafama has failed to conduct a review of loan accounts in which the collateral was repossessed and then returned to the consumer upon payment of the default and has failed to reimburse consumers for repossession fees that were in excess of the amount charged to Fafama by the repossession agent.
  34. (v) Failure to comply with other provisions of the Consent Order

  35. In addition to the deficiencies set forth above, Fafama has also failed to comply with Sections 3, 4, and 14 of the Consent Order.
  36. VIOLATIONS

  37. NOW, THEREFORE, the Division hereby sets forth the following Charges against Fafama:
  38. The Division hereby re-alleges and incorporates by reference Paragraphs 1 through 21 of this Order and Notice as though fully set forth.
  39. CHARGE ONE: By failing to comply with the terms of an executed Stipulation and Consent to the Issuance of a Consent Order and by engaging in the practices set forth above, Fafama has failed to demonstrate that its financial responsibility, character, reputation, integrity and general fitness are such as to command the confidence of the public and to warrant the belief that the motor vehicle sales finance business will be operated lawfully, honestly and fairly, in violation of Massachusetts General Laws chapter 255B, section 2 and the Division's regulations 209 CMR 20.03.
  40. CHARGE TWO: By charging and collecting delinquency charges from consumers in excess of five percent of each installment or five dollars, whichever is less, Fafama has violated M.G.L. c. 255B, section 11.
  41. CHARGE THREE: By charging and collecting returned check fees from consumers in excess of ten dollars for any check, draft or order which is returned unpaid or not honored by a bank or other depository, Fafama has violated M.G.L. c 255B.
  42. CHARGE FOUR: By charging and collecting repossession fees in excess of reasonable expenses incurred by Fafama in taking possession of the collateral, Fafama has violated M.G.L. chapter 255B, section 20A(c).
  43. CHARGE FIVE: The facts and conditions set forth in Paragraphs 1 through 21 present sufficient grounds for the revocation of Fafama's motor vehicle sales finance license pursuant to Massachusetts General Laws chapter 255B, section 8.
  44. PRAYER FOR RELIEF

  45. WHEREFORE, the Division, by and through the Commissioner , prays for a final decision as follows:
    1. For a final Agency decision awarding temporary and preliminary injunctive relief, and any other ancillary relief, as may be necessary to protect the public interest during the pendency of this matter.
    2. For a final Agency decision in favor of the Division and against Fafama for each Charge set forth in this Order and Notice.
    3. For a final Agency decision revoking Fafama's motor vehicle sales finance company license MV0548, to conduct business as a motor vehicle finance company in Massachusetts.
    4. For costs and fees of the Division's investigation of this matter.
    5. For such additional equitable relief as the Administrative Hearing Officer may deem just and proper including, without limitation: an order directing Fafama to issue the reimbursements to Massachusetts consumers as set forth in the Consent Order.

    NOTICE OF HEARING

  46. You or your authorized representative are required to file an Answer or otherwise respond to the Charges contained in this Order and Notice within twenty-one (21) days of the effective date of this Order and Notice, pursuant to the Standard Adjudicatory Rules of Practice and Procedure, 801 CMR 1.01(6)(d). Failure to file an answer may result in a default judgment against you. The Answer, and any subsequent filings that are made in conjunction with this proceeding, shall be directed to the Administrative Hearings Officer, Division of Banks, with a copy to Prosecuting Counsel.
  47. You are hereby notified that hearing on this Order and Notice will be scheduled at a time and date to be determined. You will be provided with at least 10 days' prior written notice of the time and location of such hearing, in compliance with M.G.L. chapter 255B, section 8. The hearing will be conducted in accordance with M.G.L. chapter 30A and the Standard Adjudicatory Rules of Practice and Procedure, 801 CMR 1.00 et seq. Failure to appear at the hearing will result in the entry of an order of default, summary decision and/or decision on the pleadings against you for the relief requested in the Order and Notice.

All papers filed with the Division shall be addressed to the attention of:

Administrative Hearings Officer
Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118

Prosecuting Counsel for this matter is:

Valerie M. Carbone, Esq.
Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118

Dated at Boston, Massachusetts, this 27th day of April, 2010

By: Cynthia A. Begin
Senior Deputy Commissioner
Non-Depository Institution Supervision