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Walker Chevrolet Inc and Dean E Walker; PO Box 308; Parsonsfield, ME 04047 - Order
December 28, 2011
Introduction and Background
When consumers purchase automobiles from dealers, the consumers frequently trade in their current vehicles as part of the transactions. If consumers still owe money on the traded-in vehicles, they trust the dealer to use a portion of the funds paid for the newer car, to pay off the liens on the traded-in vehicles.
When that does not happen, it's a cause for regulatory concern. Two years ago, the staff of the Maine Bureau of Consumer Credit Protection proved that Dean E. Walker and Walker Chevrolet had failed to pay off an existing lien or lease balance on at least three separate occasions. This hearing officer found that Walker and his dealership had violated various provisions of the Consumer Credit Code. Those violations resulted in direct harm to consumers, whose prior creditors continued to attempt to collect against the consumers. In addition, the credit reports and credit scores of those consumers were negatively impacted with notations of missed installments and unpaid late fees.
In an order dated December 17, 2009, this hearing officer revoked the dealership's ability to make credit sales, and the dealership was assessed civil penalties of more than $25,000. In addition to the payment of penalties and costs, Walker and the dealership were ordered to rectify the wrongs they had committed.
By all appearances, the 2009 order had the desired remedial effect on Mr. Walker and Walker Chevrolet. Within three months after the hearing, respondents paid off all the funds owed to the consumers' creditors, and began a regular series of payments to the Bureau for the civil penalty and costs of bringing the action. Based on the apparent reformation in the dealership's behavior, with the consent of the Bureau staff, respondents' ability to offer credit terms was provisionally reinstated, and that provisional reinstatement was memorialized in a "Post-Hearing Agreement" signed by respondents and this hearing officer.
Recent allegations
However, based on additional consumer complaints received by the Bureau, it soon became clear that Mr. Walker had not changed his ways. On September 20, 2011 the Bureau staff filed a second Petition for Administrative Hearing detailing allegations of respondents' failure to pay off preexisting loans in six additional instances, during 2010 and 2011. At a hearing held on November 29, 2011, consumers testified in four of the six cases, and proved that Mr. Walker and Walker Chevrolet had continued the illegal course of conduct within a matter of months after the dealership's ability to enter into credit transactions was provisionally reinstated in early 2010. In addition, Mr. Walker's installment payments to the Bureau of the civil penalties resulting from the 2009 hearing slowed and stopped during this time.
Under oath at the November 2011 hearing, Mr. Walker admitted to failing to pay off the liens of at least four consumers, and he admitted to lying to consumers about whether the prior loans or credit sale debts had been satisfied. Mr. Walker himself succinctly phrased the outcome of the hearing in the proposed Findings of Fact and Conclusions of Law he submitted for the hearing officer's consideration, in which he wrote that "[in] each of the four cases Walker Chevrolet misappropriate[d] money from those transactions regarding the payoff of consumer loans with various financial institutions."
Defenses or mitigating factors presented
While admitting to the substance of the allegations made against him and his dealership, Mr. Walker presented information regarding economic and personal circumstances. He stated that:
1) The dealership was started by his grandfather, and then continued by his father and now, by him;
2) One or more national manufacturing franchises had discontinued supplying his dealership with new cars, causing great hardship;
3) He had lost a great deal of his personal wealth dealing with the financial issues involving the dealership and other business ventures;
4) In effect, concerns that his actions may have harmed consumers' credit reports were overstated, since in at least one case, the consumer in question did not have a very good credit history to begin with;
5) He employs several individuals within the dealership, and they would be harmed if the Bureau took action;
6) He had just acquired a small line of credit from a bank, and if the Bureau took action it would jeopardize that line of credit; and
7) He enjoys continued personal popularity and loyalty among his customer base, demonstrated by the fact that several consumers whose traded-in vehicles he'd failed to pay off, subsequently purchased additional vehicles from Walker, or referred friends and family members to the dealership.
Discussion
The loyalty of customers, while important to a business, is not relevant to a regulatory decision. Credit regulation is required because consumers often do not make finance-related decisions that are in their own long-term best interests.
The hearing officer is particularly disturbed to have heard the statement from Mr. Walker that a consumer's credit report issue resulting from an episode of Walker?s non-payment of a lien on a traded-in vehicle, should not be given undue consideration in this decision because the consumer's credit report already reflected a spotty history of payments on other credit contracts or loans. When a creditor convinces consumers with words or attitude that the consumer should be thankful to get any credit at any cost, those are the circumstances that can and do lead to abuse of consumers at the hands of creditors.
The Bureau did what it could the first time Mr. Walker betrayed his customers' trust, taking away his creditor registration and the accompanying ability to offer credit terms. The Bureau also gave Mr. Walker a second chance, reinstating that credit-granting authority when it appeared Mr. Walker understood the nature of his violations and his commitment to avoid future problems.
However, in believing that Mr. Walker could be trusted with the ability to offer credit in an honest manner consistent with the provisions of the Consumer Credit Code and fair business practices, the Bureau was as betrayed as were Mr. Walker's customers.
Conclusions of Law
Quoting from Mr. Walker's own proposed Conclusions of Law:
1) The respondents violated 9-A MRSA ?5-115, in that the respondent induced consumers to enter into consumer credit transactions by misleading conduct; namely, by asking the consumers to turn over possession of their trade-in vehicles in reliance on the false misrepresentation that Walker Chevrolet would pay off the existing obligations of the consumers. [Respondents] should have known that they currently did not have the financial ability to pay off the existing obligations of the consumers.
2) The respondents violated 9-A MRSA ?5-117, ?Misrepresentation,? in that the respondents misrepresented a material fact relating to the terms or conditions of the sale in the transactions relating to [Consumer R., Consumer D. and Consumer M.]. [Respondents] should have known that they currently did not have the financial ability to pay off the existing obligations of the consumers.
3) The respondents violated 9-A MRSA ?5-117 ?False impressions,? in that respondents allowed consumer to believe that Walker Chevrolet would pay off their existing obligations. [Respondents] should have known that they did not currently have the financial ability to pay off the existing obligations of the consumers. 4) The respondents violated 9-A MRSA ?5-117 ?False promises,? by promising that Walker Chevrolet would pay off their existing obligations. [Respondents] should have known that they did not currently have the financial ability to pay off the existing obligations of the consumers.
Sanctions and remedies
1) Effective 40 days from the date of this order, the credit-granting authority of Walker Chevrolet, Inc. is revoked. This 40-day period will provide sufficient time for Mr. Walker to convert to a cash-only business in which consumers are required to seek their own independent sources of funding to finance the purchases of automobiles.
2) All existing liens on trade-in vehicles must be paid within 5 days of the date of the transaction. Each file must contain a document, signed personally by Mr. Walker, listing the date of the transaction, the date of payoff and the check number. This documentation must remain in each transaction file for future review by compliance examiners from the Bureau of Consumer Credit Protection.
3) During the hearing, Mr. Walker stated that he has started another business entity, "Walker Sales and Service." Since this administrative action named as co-respondent Mr. Walker individually as well as Walker Chevrolet, this order governs Mr. Walker?s activities as principal of the new entity, Walker Sales and Service. Although Mr. Walker in his proposed remedies states that the lower average price of vehicles to be sold by Walker Sales and Service will mean fewer temptations for him because fewer of the traded-in vehicles will be taken in to the dealership with money owed on them, this hearing officer is not convinced that Mr. Walker will not be able to find a way to once again act in a dishonest manner to the detriment of customers of the newly-established used car dealership. For that reason, the Bureau?s approval of any registration of Walker Sales and Service as a general creditor is conditioned on submission of a satisfactory plan to minimize to the extent possible the risk if further recidivism. For example, the Bureau would favorably consider a plan under which Walker submits an accounting each Friday to a CPA, attorney or other independent professional detailing the number of automobiles sold, trade-ins taken in, the identity of the lien holders for each vehicle, the date of the payoff and proof of the payoff. The independent professional can then certify to the Bureau that such payoffs have been made. In addition, each file at the new dealership, Walker Sales and Service, must contain a written certification personally signed by Walker, as detailed in Remedy #1, above. Walker is ordered to prepare and submit such a plan to Eric Wright, staff attorney for the Bureau within 40 days of the date of this order.
4) Respondents Walker and Walker Chevrolet are ordered to fully satisfy the balance of the civil penalties remaining from the 2009 hearing and order, within 40 days of the date of this order. Respondents are ordered to pay the reasonable costs of the most recent hearing, totaling $3,500, within 40 days of the date of this order.
It is so ORDERED.
| Date: December 28, 2011 | /s/William N. Lund |
| William N. Lund | |
| Hearing Officer |
(See following page for appeal rights.)
NOTICE OF APPEAL RIGHTS
Any party aggrieved by this decision may appeal to the Superior Court pursuant to 9-A M.R.S.A. ?6-108(1) and 5 M.R.S.A. ?1001 et seq. within 30 days of receipt of this decision. Any other person aggrieved shall have 40 days from the date the decision was rendered to petition for review.
| Date: December 28, 2011 | /s/William N. Lund |
| William N. Lund | |
| Hearing Officer |