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Righting a Wrong

The editor gets called out by a reader about a cash-conversion technique he detailed in the magazine’s June issue.

July 6, 2016

It landed in my email like a box of rocks that would weigh on me for most of the month. A reader had called me out about a technique I was reminded of at May’s F&I Think Tank and wrote about in last month’s editorial. “I was alarmed that you printed this without vetting the cash conversion with any of your experienced trainers or your legal experts,” the reader wrote.

Having been behind the keyboard since 1997, my skin is as thick as my passion for what I do. But this one hurt, mainly because I’ve been so careful not to call attention to an industry that really doesn’t need it.

I thanked the sender for keeping me honest and asked if I could run the email in this month’s Letters section. The individual refused, not wanting to offend the F&I manager who shared it. But as a responsible journalist and industry advocate, I couldn’t let it go.

“When I graduated from journalism school back in the Dark Ages, even with an editorial, we did a lot of fact-checking before we printed something as important as this,” the reader continued.

I appreciated the reader’s passion for the business, and said as much in my response. And the individual was right; I did not check with my legal contacts — mainly because many of them were in the room when the technique was shared.

What the presenter did was get the cash customer to put his money into an Ally money market account, put down $5,000, and take advantage of GM Financial’s subvented financing offer. He did so by showing the customer how much money the money market account would earn over five years vs. what he would pay in interest on his auto loan.

Yes, it’s not a new technique. And, truthfully, I’ve never been a fan of it. So why did I write about it? Well, it wasn’t because the presenter told a good tale. Heck, he admitted it wasn’t a huge victory. I wrote about it because it was a good example of why you should never give up on a deal. And the audience loved his message.

The part I liked was the presenter’s use of Ally’s webpage to disclose the bank’s offering. Heck, he even helped the customer set up the account and got GM Financial to auto-debit the Ally account.

“I would venture to bet that the F&I manager did not disclose to the customer that there may be a penalty for early withdrawal …” the reader charged.

Here’s what Ally’s webpage — the same one he showed his customer — says about that: “With a money market account, you don’t have to worry about an early withdrawal penalty when you access your funds. You just need to stay within federal withdrawal and transfer limits.”

“… or that when the money is matured and the customer cashes out of the investment, there may be a capital gain to be paid,” the reader continued, noting that F&I managers are not licensed financial advisors.

And herein lies the danger. Since the presenter wasn’t doing a step-by-step, I can’t say whether that was discussed with the customer.

The reader brought up something else: Apparently, the Federal Trade Commission (FTC) had weighed in on this technique sometime between 1986 and 1994. According to the reader, the regulator asked one of the major software providers to remove a cash-conversion tool imbedded in its system.

I Googled the reader’s claim but found nothing. So I ran it by one of my legal sources, one of the most respected legal minds in our industry. He said he had never heard of the FTC weighing in on a specific F&I technique. But he did me a solid and ran the reader’s claim by one of his partners, who had been with the FTC for more than three decades before joining my contact’s firm. And, well, he hadn’t heard of it, either.

I did email the company that supposedly removed the conversion tool from its system, but I never received a response. One of my F&I manager contacts, however, agreed with the reader, saying that he heard that an F&I product company got in trouble with a state insurance regulator for pushing that technique.

I had intended for this to be an “I screwed up” editorial, but you’re going to have to settle for an “I may have screwed up” piece. But I would like to get to the bottom of this, so please email me any links or documentation on this. In the meantime, I encourage you to consult with your legal counsel if you decide to dust off this old cash-conversion technique.

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