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Cancellation Refund for Service Contracts

May 24, 2016

The last time you turned in your car, did you remember to get the refund on your service contract?  Me neither, and I have been in this business a long time.  The only way I know to get the refund is to dig up the paper contract and phone the provider.  It’s like the “breakage model” behind rebates and gift cards.

The first time I tried, professionally, to account for the refund was at GMAC Insurance prior to the bankruptcy.  I was working on an interface to do rate quotes.  Our plan was to detect the existence of a prior GMPP contract, and then apply the refund as a discount to the new contract.

Imagine how many vehicles are traded or repossessed and never see the end of their VSA or GAP contracts.  Actually, I don’t have to imagine, because I have statistics from Rich Apicella, who runs Express Recoveries.  This is an ingenious business model, leveraging the provider relationships of F&I Express to automate VSA refunds for lenders.

In case of a repossession, the refund from a product contract will reduce the deficiency balance.  What began as found money in the recoveries department is now a compliance requirement.  It never hurts to review the CFPB Examination Manual.  This is from page 42:

Recoveries

This is a great business for F&I Express, because it’s countercyclical.  Their main business is originating product contracts and then, when times are bad, they can earn some money cancelling them.  It’s also handy as a leading economic indicator.

Disclosure:  Intersection Technologies is a client and, although I am not working with Express Recoveries, they are just down the hall.  

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