By the Division of Banks
COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
MOTOR VEHICLE SALES
Docket No. 2017-004
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
WESTERN FUNDING INCORPORATED
Los Angeles, California
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. and its wholly owned subsidiary, Western Funding Incorporated (WFI), have entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (Consent Agreement) with representatives of the Division of Banks (Division) dated July 25, 2017, 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 and WFI agree to the issuance of this CONSENT ORDER (Order) by the Commissioner of Banks (Commissioner);
WHEREAS, the Division, through the Commissioner, has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a motor vehicle sales finance company in Massachusetts pursuant to Massachusetts General Laws chapter 255B, section 2;
WHEREAS, Westlake is, and at all relevant times has been, a corporation conducting business in the Commonwealth of Massachusetts. Westlake’s main office is located at 4751 Wilshire Blvd, Suite 100, Los Angeles, California;
WHEREAS, on March 15, 2016 the Commonwealth of Massachusetts Office of the Attorney General (AGO) and Westlake voluntarily entered into an Assurance of Discontinuance pursuant to M.G.L. c. 93A, § 5 (AOD);
WHEREAS, Paragraph 20 of the AOD states that the AOD “will be binding upon Westlake and any of Westlake’s agents, subsidiaries and subdivisions, successors, assigns, and/or purchasers of all or substantially all of Westlake’s business assets;”
WHEREAS, WFI has been a fully owned subsidiary of Westlake since January 6, 2014;
WHEREAS, in Paragraph 4 of the AOD, the AGO alleged that Westlake violated M.G.L. c. 93A, §2 by charging an APR that exceeded the Massachusetts APR cap when debt cancellation coverage (GAP) premiums were included as part of the finance charge;
WHEREAS, Paragraph 11 of the AOD states, in pertinent part:
Westlake agrees that with respect to any RIC [Motor Vehicle Retail Installment Contract] that (a) was purchased by Westlake between January 1, 2008 and the entry date of this AOD; (b) included GAP; and (c) is identified as having exceeded the twenty-one percent maximum APR when the calculation accounts for GAP in accordance with the Commissioner's opinion, ("Affected Loans"), Westlake will (i) refund all finance charges paid to date, together with all delinquency, collection, and refinancing charges paid to date (collectively the "Refund"); and (ii) waive all future finance charges, together with all delinquency, collection, and refinancing charges.
WHEREAS, Paragraph 14 of the AOD states, “Affected Loans shall be identified and remediation provided in the manner described in Appendix A;”
WHEREAS, the Division alleges that from January 16, 2015 through December 20, 2016, WFI purchased 157 motor vehicle retail instalment contracts from one or more retail sellers while it was not appropriately licensed by the Division, in violation of M.G.L. c. 255B, § 2;
WHEREAS, of those contracts, 33 had annual percentage rates (APR) in excess of the 21% limit established by General Laws chapter 255B, section 14 (Affected Contracts) because WFI did not consider GAP as a finance charge for the purposes of the APR cap;
WHEREAS, accounts acquired by WFI were not included in the universe of “Affected Loans” remediated under the AOD and finance charges for WFI’s Affected Contracts were not refunded in the manner prescribed by Paragraphs 11 and 14 of the AOD;
WHEREAS, on December 20, 2016, the Commissioner and Westlake entered into a Stipulation and Consent to the Issuance of a Consent Order (2016 Consent Order) for the purpose of addressing alleged violations 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, the parties now seek to resolve by mutual agreement the matters identified above.
NOW COME the parties in the above-captioned matter, the Division, Westlake and WFI stipulate and agree as follows:
- WFI and any and all officers, directors, employees, or managers or their successors or assigns operating on behalf of WFI, will cease engaging in the activity of a motor vehicle sales finance company in Massachusetts, as those terms are defined under General Laws chapter 255B, section 1, without first obtaining the appropriate license from the Division.
- Upon execution of the Consent Agreement, WFI shall pay an administrative penalty of fifty thousand dollars ($50,000.00). The payment shall be made by a check payable to the “Commonwealth of Massachusetts”, mailed to the Division of Banks, Attn: Consumer Finance Licensing Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
- In accordance with the remediation procedures set forth in Paragraph 11 of the AOD, Westlake and/or WFI will, for the 33 Affected Contracts: (i) refund all finance charges paid to date, together with all delinquency, collection, and refinancing charges paid to date (collectively the “refund”); and (ii) waive all future finance charges, together with all delinquency, collection, and refinancing charges. Westlake and WFI will ensure that all refunds are made within 60 days of the effective date of this order.
- WFI will implement controls to ensure it does not acquire Massachusetts motor vehicle retail installment contracts 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 and/or WFI will submit to the Division evidence of all reimbursements made to the 33 Affected Contracts issued pursuant to this Section of the Consent Order.
- Evidence of any such reimbursements or credits must include, at minimum the name of the borrower; the account number; the origination date, the total amount refunded or credited, and an itemization of the total amount refunded or credited.
- Westlake and/or WFI will maintain evidence of the consumer reimbursements and will make it available to the Division’s Examiners during the next examination.
- Westlake will provide the Massachusetts Attorney General’s Office a copy of this Consent Order within one day of its execution.
- Westlake shall immediately establish, implement and maintain policies and procedures to ensure that the Company, as well as all of its agents, subsidiaries, subdivisions, successors, and assigns do not engage in unlicensed activity in the Commonwealth of Massachusetts, nor originate or purchase any loans with APRs in excess of the limits in M.G.L. c. 255B, § 14.
- No part of this agreement impacts the Commissioner’s discretion set forth within Massachusetts General Laws chapter 255B, section 2, and the Division’s regulation 209 CMR 20.00 et seq. in determining whether to issue the relevant license to WFI, provided however, that any such complete license application shall not be denied solely as a result of any of the issues resolved by this Consent Order or because WFI entered into this Consent Order or agreed to the issuance of this Consent Order. Further, the Division reserves the right to conduct a consumer compliance review of the 157 Loans acquired by WFI while unlicensed.
- This Consent Order shall become effective immediately upon the date of its issuance.
- The provisions of this Consent Order shall be binding upon Westlake and WFI and its directors, officers, employees, agents, and their successors and assigns.
- Nothing in this Consent order shall limit, estop, or otherwise prevent any other state agency or department, from taking any other action affecting Westlake, WFI, and/or any of its officers, directors, or managers.
- By entering into this Consent Order, WFI and Westlake have waived all rights of appeal that they may have.
- The provisions of this Consent Order shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Consent Order shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
- This Consent Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements, promises, representations, or warranties other than those set forth in this Consent Order.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 25th day of July, 2017
By: Terence A. McGinnis
Commissioner of Banks
Commonwealth of Massachusetts