By the Division of Banks
COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
MOTOR VEHICLE SALES
Docket No. 2016-005
In the Matter of
WESTLAKE SERVICES, LLC.
d/b/a WESTLAKE FINANCIAL SERVICES
Los Angeles, California
Motor Vehicle Sales Finance
Company License No. MV-112801-100
WHEREAS, WESTLAKE SERVICES, LLC d/b/a WESTLAKE FINANCIAL SERVICES, Los Angeles, California (Westlake or the Company), a licensed motor vehicle sales finance company under Massachusetts General Laws chapter 255B, section 2 and 209 CMR 20.00 et seq. has entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (Consent Agreement) with representatives of the Division of Banks (Division) dated December 20, 2016, whereby, solely for the purpose of settling this matter, and without admitting any allegations or implications of fact or the existence of any violation of state or federal laws and regulations governing the conduct and operation of a motor vehicle sales finance company, Westlake agrees to the issuance of this CONSENT ORDER (Order) by the Commissioner of Banks (Commissioner);
WHEREAS, an examination of Westlake was conducted pursuant to General Laws chapter 255B, section 3 as of February 18, 2015 to assess the Company’s level of compliance with applicable Massachusetts and federal statutes, rules and regulations governing the conduct of those engaged in the business of a motor vehicle sales finance company in the Commonwealth;
WHEREAS, the Report of Examination (the Report) issued pursuant to the Division’s examination of Westlake alleged substantial non-compliance with applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a motor vehicle sales finance company in the Commonwealth;
WHEREAS, Westlake entered into an Assurance of Discontinuance (the AOD) with the Massachusetts Attorney General’s Office on March 15, 2016 for settlement purposes only, and without admitting any fact or non-compliance with any state or federal law, rule, or regulation, to resolve allegations that it had purchased motor vehicle retail installment contracts (RICs) with annual percentage rates (APRs) in excess of the 21% limit established by General Laws chapter 255B, section 14 because it did not consider debt cancellation coverage (GAP) premiums as a finance charge for the purposes of this limit; and
WHEREAS, the parties now seek to resolve by mutual agreement, the matters identified in the Report.
NOW COME the parties in the above-captioned matter, the Division and Westlake, and stipulate and agree as follows:
- Westlake must immediately cease acquiring Massachusetts RICs with APRs in excess of the 21% limit established by General Laws chapter 255B, section 14 when considering GAP premium charges as finance charges for the purpose of determining the APR.
- Westlake must establish, implement, and maintain procedures to ensure accounts acquired with debt cancellation coverage (GAP) going forward are tested to verify that treating the GAP premium as a finance charge does not result in an effective APR over 21%.
- In accordance with the AOD and in conjunction with the Massachusetts Attorney General’s office, Westlake conducted a portfolio review to identify any RIC with GAP purchased by Westlake between January 1, 2008 and the entry date of the AOD, where treating the GAP premium as a finance charge resulted in an effective APR over 21%. As a result, Westlake issued refunds or applied credits to identified borrowers in accordance with Appendix A of the AOD.
- Westlake will create and maintain all records necessary to demonstrate Westlake’s compliance with its obligations under the AOD for review by the Division at its next examination and will provide such request to the Commissioner upon request.
- Westlake must immediately cease assessing repossession “close” fees on Massachusetts accounts with defaults that are cured prior to repossession pursuant to General Laws chapter 255B, sections 20A and 20B.
- Westlake must establish, implement and maintain procedures to ensure that it does not assess or collect repossession “close” fees, or any similar fees on accounts where the default was cured prior to the repossession of collateral.
- Westlake must conduct a review of all Massachusetts accounts subject to repossession attempts since April 30, 2012, the date of licensure, to identify all repossession “close” fees, or any similar fees, assessed on accounts where the default was cured prior to the repossession of collateral. The Company must refund each debtor charged a repossession “close” fee or any similar fees when the default was cured prior to repossession.
- Evidence of any such reimbursements or credits must include, at minimum: the name of the borrower; the account number; the amount of the fee assessed; the date each fee was assessed; the date each fee was collected; the date of any refund issued in response to the findings of this examination; and the check number and the dollar amount of each refund.
- Westlake must maintain sufficient information evidencing the refunds in the Company’s books and records for review by the Division at its next examination.
- Westlake must develop, implement and maintain an effective compliance management system including but not limited to adequate oversight of the Company’s compliance program by senior management with sufficient resources dedicated to the administration of the compliance program. The compliance program must include adequate policies and procedures, effective internal monitoring on an ongoing basis, sufficient training to ensure management and employees are familiar with statutory and regulatory requirements. An effective compliance management system must also include periodic independent audits of Westlake’s programs and operations with sufficient scope and depth to determine whether the Company is operating in compliance with applicable consumer protection requirements. The compliance management system must incorporate compliance with Massachusetts specific consumer protection requirements.
- Westlake must address all matters requiring attention set forth in the Report within the time frames contained therein. Westlake must also adopt and implement any corrective actions discussed in the Report that are not specifically addressed by the provisions of this Order.
- By the thirtieth (30th) day after the end of each calendar quarter following the effective date of this Order, Westlake must furnish written progress reports to the Division, which address and include the following:
- A description of the form, content, and manner of any actions taken to address each Section of this Order and the results thereof; and
- Written findings prepared by Westlake detailing a review of management’s and staff persons’ adherence to the policies, programs, and procedures adopted pursuant to this Order and to applicable statutes, regulations, and rules addressed in the Report, as well as a description of any operational changes implemented during such quarter which are intended to improve Westlake’s compliance condition in Massachusetts with respect to the issues contained in the Order and Report, and the results thereof.
- The reporting requirement to the Division referenced in Section 5 of this Order will remain in effect and must not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this Order from the Commissioner.
- The provisions of this Order shall not limit, estop, or otherwise prevent the Division, or any other state agency or department, from taking any other action affecting Westlake, its successors or assigns, if Westlake fails to fully and promptly comply with the above provisions.
- Nothing in this Order will be construed as permitting Westlake to violate any law, rule, regulation, or regulatory bulletin to which the Company is subject.
- In consideration of the foregoing Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Westlake’s motor vehicle sales finance company license under General Laws chapter 255B, section 8, while this Order is in effect.
- Failure to comply with the terms of this Order will constitute grounds for license suspension and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
- This Order will become effective immediately upon the date of its issuance.
- The provisions of this Order are binding upon Westlake, its owner, officers and directors, and their successors and assigns.
- The provisions of this Order will remain effective and enforceable except to the extent that, and until such time as, any provisions of this Order will have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
- This Order and the Consent Agreement are the complete documents representing the resolution of this matter and shall supersede and replace all previous agreements between the Division and Westlake. There are no other agreements between the Division and Westlake.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 20th day of December, 2016