Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of Joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here morning show. Take it away, you two. Hey. Good morning from Oklahoma. Happy Friday, y'all. Yeah. Happy to have you back here with us. Y'all. Well, we're in Oklahoma. That's the speak. That's the way you talk. It's like the panhandle's half Texas. Right. Be careful. You're assuming that Texas laid claim to y'all. That's true. That is true. So I don't know that we have any evidence of that. But anyway, spoken like a former Okie, right? Yeah. No, I just am happy to have a chance to speak to the thing about our topic today is around regulatory compliance, which I didn't tee up. I'll just say now, Michelle and myself, we're not attorneys. We're going to take on a topic about the regulatory environment, but we're not speaking as attorneys. We're just speaking as people who are on the periphery of the industry and really more in the trenches, I guess you could say, of what we do and working with dealers and their everyday live so happy to do that any uh announcements come to mind for you nothing much I mean next month is uh the um stuff on capitol hill okay and then november is the dealer forum That will be in Nashville. Right, yeah, looking forward to that. I think the information is supposed to be released this week, so we'll see what their agenda looks like and kind of what their format is. But also, I just wanted to share with everybody that I started into a study this morning on... Cash analysis, you know, repo rates have been high, right? And so I had in mind for our topic today. So look for this to be kind of an ongoing thing because it just wasn't satisfied with the amount of data that I was able to pull together to tell a meaningful story. But I think one of the things we can be watchful about as coaches and analysts and just others in the industry is that Right now we're seeing a pretty heavy rate of charge offs started in twenty four and seems to be continuing in twenty five. And in doing some work with a dealer yesterday and looking through their numbers, it just kind of stimulated this idea that really need to look at also the cash impact. Obviously, there's a profitability question. There's an interest coverage question. But the cash flow, you know, could be up as a result of these repo recoveries. Depends a lot on the value of these repos that come back in. And so there's a whole there's a whole thread there to analyze, but I just, I want to wait and bring that back whenever we got more information. Okay. So shall we dive into our topic? Let's dive into our topic. Um, I, uh, ran across an article in the New York times and, um, it was from a few months ago, but we just, we discussed it this morning and, and we're like, this, this is a well discussed it further this morning. This is a good topic to, to kind of, um, in, in the, in the um the where charge offs are up repos are up this is relevant um to that story or that conversation as well and um do you want me to bring it up or I'm sure we can show it so this is I actually went with this this is not your article from the new york times instead of um picking a publication that some might have a slanted view I just went straight to credit acceptance um Press release page. And this was from April of twenty twenty four, where they spoke to the the fact that the CFPB had withdrawn their case. And so we can read it. Can you read it over there? Yes, I think you can close. Actually, I'm going to need to go to this page and read it from there. This one? Okay. Credit Acceptance Corporation announced today, this is end of April, that the Consumer Financial Protection Bureau, the CFPB, which they've been really something that's very relevant to what it is that we do, filed an unopposed motion to withdraw from a lawsuit that it had initiated jointly on January fourth, twenty twenty three with the Office of the New York State Attorney's General Office against credit acceptance in the United States District Court for the Southern District of New York. As of the filing of the CFPB's motion, credit acceptance's motion to dismiss the case on its entirety remains fully briefed and pending before the court. I didn't see anything that was an update on that, whether or not it had. Credit acceptance expects that if the CFPB's motion is granted, that New York AG would be sole remaining plaintiff and the case would thus be limited to New York consumers only. The article that I read in New York alluded to that being the case. Okay. And I think the particulars of that are less significant as much as, you know, what's happened here is obviously in the heels of a, of a Trump election and the formation of Doge and the work that's happening there and that whole climate with the changing of the guard that the CFPB, their wings clipped a little bit. They've been asked to stand down on some regulatory matters. And I think this is one that we can see that Credit acceptance is obviously in the same sphere of subprime auto finances as we are. They're a behemoth of a finance company. And so, you know, it makes sense that they would be among the more likely targets to be in the crosshair. But I think there are lessons for all of us to learn in the buy here, pay here space from what happened here, what didn't happen here. And I think as more than that, it's like, what is the future of, regulatory compliance for us? And how do we want to conduct ourselves in the meantime, you know, until regulatory compliance may require us one day to do more? I think that there's also another topic in here as well, is the New York Times article was very slanted against the industry. It was about it being very predatory and brought multiple case examples of people with very sad looking photos. And I mean, they were impactful. And about how the buy here, pay here customers of credit acceptance were being taken advantage of. And so the other part of this that I think that we can learn from is that even though we mentioned a month or so ago that there was a study, a survey that went out across the nation of what industries, if they were required to tell nothing but the truth from now on, would self implode? And buyer payer wasn't even on that list. I think automotive, right? It was overall automotive or auto sales. Either way. Yeah, it was low if it was, but it didn't talk about buy here, pay here. So we've seen other bad guys, black hats, whatever, that people are paying closer attention to. But the article painted a picture that I think that we as representatives of this industry, us and all the dealers out there and the other vendors and all of that, The impetus is on us to really move forward to changing that, the way that we are perceived. And, you know, Jim has said a bazillion times, trust me, I'm a used car salesperson. And that just doesn't fly. It's through actions rather than words. that begins to change. So that's the other part of this topic that I think that we can chat about for a moment. Yeah, and I think folks know about me that I'm inclined to make sure we always incorporate the carrot approach into what we do, not just the stick. And obviously the CFPB was carrying a big stick and gonna go around and whack dealers hard or finance companies for failing to protect consumers in a certain way. And I think what I see Way being able to do in this case, and all of us in the industry who are operating from a place of principle, to be able to showcase that really these things that might be viewed as predatory, when you don't operate your business in that way, and you are operating from the place of principle, we, we have to work together to show Michelle and I do a lot of work over here and others have joined us in that, in that story and that mission to showcase that when we operate with principle, we one have a chance to be more profitable to have a chance to be around a lot longer and become good neighbors in our community. And we think that's going to be the path forward in an environment where you've got a, we can say we're slipping back into the wild west a little bit, the, the sheriff just got their badge taken away. And so now it's like, okay, so we're back to sort of wild west in the regulatory area potentially. And I think that's something that we just have an opportunity, those of us who do want to operate our businesses in a way that is, I'll use the word compliant, compliant with what, right? But in a way, if we want to be, if we want to appear scrupulous, and we want to be transparent and trustworthy, then the case that we make is that those dealers who show themselves as trustworthy are going to be the ones who win business today and tomorrow. Yeah. And you know, when I went through that article at New York times is back in April, Um, the, the examples of people being taken advantage of, there were some themes in there that I think are very, that just play to what is it that the media is looking at? One, one of the biggest ones was they sold me a car that within three months had broken down. Um, the, the, whatever it is, it was mechanical. um, issues with the vehicle and that it no longer worked yet. They were still expected to pay the loan now. Yes. I mean, that's, that's part of, that's part of the nature of what it is that, that we do. So what we through, uh, looking at it through the lens of white hat way, how are we supporting our customers? When something like that happens, what programs and opportunities do we have? I mean, do we have a service contract? Do we have a warranty? Do we have an internal side note program? I mean, what do we have that can help get people back on the road it's like collect the cash not the car um how do we what things do we have in our arsenal that can help with that and that I I think it was three or four different people that that decided these cases and that um all of them seem to have some kind of mechanical thing the other thing that they talked about was the markup and the interest rate so and again those are two things that we can't do very much about, but I believe that we can educate really well so that people understand why that's necessary and that we support people through this process. It's, it's, you know, if, if, and, and come up with ways to be able to potentially reward, um, on time payments and, and, um, and good follow through from our customers so that they can experience something that's a little bit better potentially or things like that. But so mostly it was just, it was those two, those three things, the interest rate, the markup, but all of them had mechanical issues and that's why their car was repoed. Yeah. So I think there's a lot of things in what you just talked about. I would say the mechanical element is just one, right? It's like the question is, do we have, can we show ways to support the customer? Because we know that we are going to have to continue to charge a higher interest rate. I think I found the link, but didn't get a chance to post it here in the podcast. I'll try to remember to share it across the threads after. But I did an article. It was in, I believe it said May of twenty twenty two in the Texas Dealer magazine. And it was just kind of a fun little scenario where I sort of did an imaginary lunch with the CFPB where I just said, you know, this Oklahoma farm boy gets to have lunch with the regulators at the CFPB. And it was just my way of saying if I could have. time with those folks and help them take them inside the industry that I see. The consumer side, having been a dealer, you know, having worked with dealers now and kind of seeing what they do and what they suffer through is really the thing that I would try to say from a regulatory standpoint. That's mostly what we're talking about here today is I think if you're going to regulate folks who are doing what they do, then You don't want to regulate them so much that they can no longer provide the service that they cannot financially justify the risk to provide that service. Because I think this is part of what CF that credit acceptance was trying to make the case in their press release that this, this service is needed. Right. And I don't disagree with that. Subprime auto finance is a sector that if you removed it tomorrow, it would create a huge economic ripple. Yeah. So, I mean, the, the, the service is needed. The model may not be, you know, but the service is needed. The models vary. Yeah, definitely. Business models are definitely going to vary. And I think really the question is, do we support the customer that we serve? And do we, are we predatory? Like if we're now going to self-regulate, we're going to have to ask ourselves is what we're doing here. Predatory in nature. Are we taking advantage? Are we, creating an environment where the customer has little chance of success. So this is the part that I would say that you're going to see White Hat Way, for example, continue to showcase and try to prove out the math that shows that when we provide these solutions, I'm getting covered up by flies over here. But the idea is to make sure that we can show that we are charging what we need to charge. that we're supporting our customer's success, that we're helping them to have a chance to be successful. And then also just looking at the overall thing about, are we, because I think about there's, there's regulatory, which is going to be the agencies and you know, whether that's federal state or whatever, but then there's also civil litigation, right? Customers feeling wrong. And I remember the attorney years ago, he's long since passed, but he said, that you really just want to make sure your customers don't end up in an attorney's office suing you. And so if we just use that as a measuring stick to say, what can we do to make sure that we have had a chance to keep the customers happy and that they don't feel wronged and they don't feel like they need to go see an attorney because of those kinds of situations. And the thing you described about car broke down in three months, the customer might feel wrong and go to every day, but that's the case that the dealer is probably going to win. It's just, unfortunately they're going to have to defend themselves. Right. So, I mean, it's, it's like the reason why their car was repoed is one thing. The, and then it was painting the picture of the bad. Of, well, it got repoed, which they, you know, are you too quick on the trigger to repo? And then it's about they it was about the predatory practices of markup and interest rate and those kind of things. I think the flies are about to carry me away. We got to wrap up. But I just say in closing, I think a couple of things I would say in order for us, if we're the Wild West and we want to win customers, we want to be around and we don't want to get sued. And I would say we want to support our customers. We want to have a path to success in our structure. Okay. Do they have a chance to be successful? And then, you know, in doing all of those things, we would have a chance to educate the customer through that process, which of course will facilitate success. And so these are the things that I would be urging and that you'll see why Atway continue to urge in an environment where We aren't required to do it. We're going to do the best we can to showcase why it's still the best business practice. And, you know, we know we mentioned before at the beginning that much of this change was initiated with the change of administration. Now that is going to change again. And so it may CFPB probably is not going away as an entity. And if things swing to another side of that, it's very likely that CFPB could be given teeth. Again, so this gives us an opportunity in the meantime. So we've got a few years to just really shift the way this industry is perceived so that when or if the administrations change to an administration that is not as friendly for the industry, that we will have made whatever shifts that need to be made to really make the case that in an honest, transparent way about why we have higher interest rates, why there is a markup, and that we are, through White Hat Way and those that are working with us, that we have pathways to success and that the success of the consumer is our primary objective. And that we have some time to really shift things within our own industry so that it, I don't think it's a matter of if I think it's a matter of when someone else is, is making the decisions around what will be funded that we're ready for that. Right. Yeah. And I would say it looks like with the CFPB, some, some said, I think in our podcast description, we said, you know, whether you view this as a breather or whatever, like if you view this as a breather, I think it's still an opportunity for us to just step forward and show that we can operate with good practices. And oh, by the way, white hat dealers will still have a significant markup. They will still have a non-prime interest rate. And that's just part of what makes the business work. And so we have to keep our dealers in business. And so this is conversations I was able to have with dealers earlier in the week. So there's nothing about white hat way that says we're going to give things away. You still have to protect your business and you have to remain profitable and positive cash flow and stay around. So there's still that has to happen, but I think we certainly can educate as we go and we can make sure that we operate from principle and just demonstrating that we really want our customers to have every opportunity to be successful. Yeah. All right. All right. Anything else? It's Friday. Yep. Let's get away from the flies. Yeah, get away from the flies. I know. That is one thing about the Oklahoma panhandle flies and mosquitoes. We feel like that. But, you know, we lived in Florida. So, you know, those things happen. Hey, everybody. Thanks so much for joining. Have a great weekend. All right. We will see you guys on Wednesday with another White Hat Wednesday topic. Have a great day, everybody.
