We usually start these emails by laying the groundwork and then ending with the actual Tip of the Week but this week we're going to reverse the order:
This week's Tip of the Week is to CALL US EARLY IN THE PROCESS when document and functional changes are being made and to not wait.
The stimulus for this gentle reminder is a call we got from a dealer asking about "re-financing". They've had several clients that fell behind on payments and decided to "re-finance" these accounts by entering into new Retail Installment Contracts. They've done this for a while without suspecting an issue, and they only came to question it after their capital provider objected to the practice and kicked back these new contracts. On the bright side, they brought the accounts current, but in doing so they've created a legal quagmire.
From a compliance standpoint, the issue is that a Retail Installment Contract allows a retail seller of goods or services to finance the sale over time. It is a closed-end financing agreement. The sale only happens once. It can't be reopened.
By having the buyer sign a second contract at a later date, in some cases a year or more later, many compliance issues are created. For starters, the first contract was never extinguished according to law, and there is no second retail sale. There are no taxes being paid, which the state will be curious about. Also, a deceptive practices minefield has been created. That's just the high points, I could go on, but you get the point. The correct way to proceed would have been for the dealer to enter into a simple contract modification document, not to "re-finance".
We aren't bringing this issue to your attention to focus on contract modifications and "re-finance", though. The frustrating fact is that we get calls like this far too often, calls that should have been made before a path was taken, not after. You don't have to go it alone, WE ARE IN YOUR CORNER.
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