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The Commonwealth of Massachusetts Division of Banks (Division), by and through the Commissioner of Banks of the Commonwealth of Massachusetts (Commissioner), for its Cease Directive, alleges as follows:
State Road originally incorporated in Massachusetts on May 9, 1988 with the following business purpose:
To buy, sell, lease, trade, deal in and with, store and repair automobiles and motor vehicles of all descriptions, and all parts, of all kinds, models and description, all parts and accessories, and all parts and supplied used in connection therewith.
M.G.L. chapter 255B, section 2 governing the licensing requirements for entities engaged in the business of motor vehicle sales financing states, in part:
No person, other than a bank as defined in section one of chapter one hundred and sixty-seven, a national banking association, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association or credit union organized under the laws of any other state of the United States, shall engage in the business of a sales finance company without first obtaining from the commissioner a license to carry on said business in the city or town where the business is to be transacted as provided herein.
M.G.L. chapter 255B, section 1 defines a "sales finance company," in part, as follows:
"Sales finance company" ... (3) a retail seller engaged, in whole or in part, in the business of holding retail instalment contracts acquired from retail buyers...
M.G.L. c. 255B, section 1 provides that:
The term [retail installment contract] includes a chattel mortgage, a conditional sales contract and a contract for the bailment or leasing of a motor vehicle by which the bailee or lessee contracts to pay as compensation for its use a sum substantially equivalent to or in excess of its value and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of the motor vehicle upon full compliance with the terms of the contract. (Emphasis supplied).
M.G.L. chapter 255B, section 21 states:
Whoever violates any provision of this chapter or any rule or regulation made thereunder by the commissioner shall be punished by a fine of not more than five hundred dollars or by imprisonment for not more than six months, or both.
M.G.L. chapter 255B, section 14 states:
A retail seller may charge, receive and collect for any new or used motor vehicle, a finance charge not in excess of an annual percentage rate of twenty-one per cent.
M.G.L chapter 93A, section 2(a) states:
Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.
940 CMR 5.02(9) states:
It is an unfair or deceptive act or practice for a motor vehicle dealer or manufacturer to make any representation or statement of fact in an advertisement if the dealer or manufacturer knows or should know that the representation or statement is false or misleading or if the dealer or manufacturer does not have sufficient information upon which a reasonable belief in the truth of the representation or statement could be based.
M.G.L. chapter 167, section 37 states:
No domestic or foreign corporation or individual, partnership or association shall conduct the business of a savings bank, co-operative bank, savings and loan association, credit union, trust company or banking company unless authorized to do so under the laws of this commonwealth nor shall any such corporation, individual, partnership or association, unless so authorized under said laws, make use of any sign at the place where its business is transacted having thereon any name or other words indicating that such place or office is the place or office of a savings bank, co-operative bank, savings and loan association, credit union, trust company or banking company…
Based upon the aforementioned Statement of Facts, State Road has engaged in the business of a motor vehicle sales finance company without a license in violation of M.G.L. chapter 255B, section 2, and is subject to a fine of not more than five hundred dollars per finance contract under M.G.L. chapter 255B, section 21; State Road has charged unlawful finance charges in violation of M.G.L. chapter 255B, section 14; State Road repossessed at least one vehicle without providing the required notice of right to cure and right to redeem, in violation of M.G.L. chapter 255B sections 20A and 20B; and State Road has wrongfully advertised as a motor vehicle sales finance company and as a bank in violation of M.G.L. chapter 93A, section 2(a), 940 CMR 5.02(9), and M.G.L. chapter 167, section 37.
After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
ORDERED THAT State Road immediately cease engaging in the motor vehicle sales finance business until such time that State Road has demonstrated either that it is exempt from the licensing provisions of M.G.L chapter 255B; or has obtained a license issued by the Commissioner of Banks for the operation of a motor vehicle sales finance company in Massachusetts.
IT IS FURTHER ORDERED that State Road must conduct a file review to identify all Prima Facie Loans and Financed Buyout Loans originated, serviced, repossessed, or paid off in the last three years. IT IS FURTHER ORDERED that State Road must service all existing Prima Facie Loans and all loans that have been extended into being Financed Buyout Loans as though they were retail installment contracts subject to M.G.L. chapter 255B. This shall necessarily require that State Road adhere to all notice requirements and fee limitations set forth in M.G.L. chapter 255B, including:
IT IS FURTHER ORDERED that State Road must conduct a file review to identify all Prima Facie Loans and Financed Buyout Loans originated, serviced, or paid off in the last three years. State Road must identify all fees assessed and /or collected on these accounts in the last three years, and reimburse any fees not specifically allowed under M.G.L. chapter 255B, including, but not limited to:
IT IS FURTHER ORDERED State Road must conduct a review of all repossessions conducted on Prima Facie Loans and Financed Buyout Loans within the last three years. The Company must make a good faith effort to identify any instances where it repossessed borrower vehicles without providing the proper notice of right to cure and right to redeem under M.G.L. chapter 255B, sections 20A and 20B. State Road must reimburse all repossession fees on any accounts where the required notice and right to cure period and redemption period were not provided and State Road may not collect a deficiency balance on these accounts
IT IS FURTHER ORDERED that within ten days of the effective date of this Order, State Road must submit a response including the following information:
IT IS FURTHER ORDERED that State Road pay a fine of five hundred dollars for each motor vehicle sales contract it entered into within the last three years without having first obtained from the Division a license to carry on said business. Such penalty to be determined after a review of the agreements provided to the Division pursuant to sub-paragraph (a) above.
IT IS FURTHER ORDERED that State Road cease and desist using unfair or deceptive advertisements.
IT IS FURTHER ORDERED that State Road cease and desist from violating M.G.L. chapter 255B by charging consumers finance charges in excess of 21 percent.
IT IS FURTHER ORDERED that State Road shall submit to the Division evidence of all consumer reimbursements issued as a result of this Order, including but not limited to: the consumer’s name, account number, the amount reimbursed, the date of reimbursement, and the check number sixty days of the effective date of this Order. Reimbursements shall be made in the following manner.
NOTICE OF RIGHT TO A HEARING
A hearing on the charges described herein will be held at a date and time to be determined and will be conducted according to General Laws, chapter 30A, sections 10 and 11, and the Standard Adjudicatory Rules of Practice and Procedure, 801 CMR 1.01 and 1.03. State Road or their 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 its effective date, pursuant to the Standard Adjudicatory Rules of Practices and Procedures, 801 CMR 1.01(6)(d). Failure to do so will result in a default judgment against State Road. 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. All papers filed in regards to this matter 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:
Amanda B. Loring, Esq.
Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118
You are further advised that State Road has the right to be represented by counsel or another representative, to call and examine witnesses, to introduce exhibits, to cross-examine witnesses who testify against State Road and to present oral arguments.
State Road or its representative may examine any and all Division records relative to this case prior to the date of the hearing, during normal business hours, at the office of the Prosecuting Counsel. If you elect to undertake such an examination, please contact the Prosecuting Counsel, Amanda B. Loring at 617-956-1544 in advance to schedule a time that is mutually convenient.
 Generally, an extension of a lease agreement beyond six months requires new disclosures. See 12 CFR 1013.5(b). State Road has provided no documentation showing that they provided new disclosures for any of the agreements extended beyond 6 months. Therefore, even if the “lease agreements” were true leases, State Road would still be in violation of 12 CFR 1013.5(b).
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 2nd day of October, 2017
By: Cynthia A. Begin
Chief Risk Officer
Commonwealth of Massachusetts