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COMPLIANCE TIPS

high default and delinquency rates and pany will also pay just over $1 million to Subsequently, Bare’s car was stolen and
other problems, the company continued the Delaware Consumer Protection Fund. not recovered. Bare made a claim under
to fund loans through these dealers. The Under the terms of the settlements, the Innovative’s policy, but Innovative denied
company also allegedly identified a group company neither admitted nor denied ei- his claim as untimely. Bare, on behalf of a
of dealers it called the "fraud dealers," but ther state's allegations. similarly situated class of plaintiffs, sued
continued to fund loans through them. Innovative, alleging various causes of ac-
These enforcement actions are likely to tion for violations of West Virginia insur-
The Delaware settlement requires busi- have far-reaching consequences. This fi- ance law. Innovative moved to dismiss,
ness reforms by the company, including nance company will be tightening its pro- arguing that the anti-theft system’s policy
procedures to screen contracts originated cedures to eliminate dealer fraud, but you was not insurance.
by Delaware dealers to ensure that they can expect that every finance company
comply with Delaware law and meet min- hearing about the Delaware and Massa- The federal trial court granted Innova-
imum documentation requirements. The chusetts action will be doing so, as well. tive’s motion. Innovative argued that
company also agreed to prospectively because the policy was not insurance,
identify and repurchase subprime loans Case of the Month Bare’s claims that it violated West Virgin-
sold to third parties that it later deter- ia’s insurance law must fail. West Virgin-
mines do not comply with Delaware law. Justin Bare bought a car with an anti-theft ia insurance law exempts warranties. A
The Massachusetts settlement requires system manufactured by Innovative Af- warranty includes, “in relation to a prod-
$16 million in payments to more than termarket Systems, LP. As part of the uct[,] . . . an undertaking that guarantees
2,000 consumers and a $5 million pay- sale, Bare bought Innovative’s “Protection indemnity for defective parts ... or other
ment to the state. The Delaware settle- Plus” policy, which included a promise to remedial measures ... and that is made
ment requires the company to pay $2.875 pay Bare $2,500 in the event the anti-theft solely by the manufacturer, importer or
million into a trust to benefit hundreds of system did not deter theft and Bare’s car Continued on page 50
harmed Delaware consumers. The com- was not recovered.

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GIADA Independent Auto Dealer JUNE 2017 | 39