By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Almost 2,000 Bahamians will today start to receive a nearly-$1m collective payout as compensation for being over-charged interest on their loans by one of this nation’s largest used car dealers.

Tribune Business can reveal that the first group of Auto H&L victims were contacted last week about the payments, and to make appointments to collect their cheque, although not all will receive a cash payout. It is understood that those with outstanding loans which have yet to be fully repaid, or are in arrears or delinquent in their obligations, will instead receive an “adjustment” to the interest and balance owing on their account.

The payments are likely to take place in three groups spread out over four weeks, which means borrowers will be reimbursed for the excess interest they paid in time for Christmas and the holiday season. Auto H&L, which “miscalculated” the interest it was demanding vehicle buyers pay and, in the process, violated the Rate of Interest Act, is said to have “willingly corrected” the error.

Christina Rolle, the Securities Commission’s executive director, told Tribune Business: “I can confirm the payments are going to take place, and they’re being handled by Baker Tilly Gomez.” The accounting firm was appointed by the regulator, which supervised under the Financial and Corporate Service Providers Act 2020, to verify its conclusions about the interest breach and act as payment agent for the reimbursements.

Craig A ‘Tony’ Gomez, the Baker Tilly Gomez accountant and managing partner, declined to comment when contacted by this newspaper. However, one well-placed source, speaking on condition of anonymity, said the first group of Auto H&L borrowers have already been contacted and told which location to visit to pick up their cheques.

Only those whose auto loans have been fully repaid, though, will receive a cash payment. Those who are still repaying their debt, or are in default, will be compensated via a reduction in the balance owing on their account and will not be picking up a cheque. Giving those in arrears a cash payment was especially viewed as a ‘no, no’ because it would in effect reward their delinquency.

It is also understood that, in return for being compensated, impacted borrowers will have to sign a ‘Deed of Release’ whereby they surrender the right to take future legal action over this matter against Auto H&L, whose principal is Hal Shearer. Several sources have suggested the company, which was once one of The Bahamas’ largest used car dealerships, either plans to - or is in the process of - winding down operations.

“People were called for Monday and can show up to their appointment,” the source said, adding that those not contacted will have to wait. “The cheques are drawn and ready. If your loan is already paid, you will get a cash payment. If you have an existing loan, you’ll get an adjustment to your account; an adjustment to the loan balance and an adjustment to the interest rate going forward.

“It’s just under 2,000 people and close to $1m in interest adjustments. Not $1m, but close to $1m. They are going to be paid in at least three tranches. The people being called now are only the first tranche. It will likely take place over four weeks as they are trying to make sure this is all done by mid-December.”

The Securities Commission in May 2024 said it had identified the breaches by the auto dealer when it conducted on-site examinations in March 2022 and again one year later. While the regulator did not give specifics, the Rate of Interest Act is designed to protect Bahamians from becoming victims of predatory or usury lending.

It regulates the interest that can be charged on loans, stipulating that this must not exceed 20 percent per annum on credit of more than $100 or 30 percent on sums below $100. While the Securities Commission’s release then did not specifically say so, the fact Auto H&L was “in breach” seems to imply it was charging interest in excess of those percentages.

The auto dealer, which was based on Tonique Williams Highway, had “asserted that these miscalculations were inadvertent” and has pledged to “fully reimburse” all impacted Bahamians for the period between 2019 and 2023. However, the compensation effort was complicated because some Auto H & L client files were “irreparably damaged” by what was described as an “on-site accident”.

Tribune Business understands that Baker Tilly Gomez had to reconstruct some of Auto H&L’s via electronic means after a truck allegedly ran into the building where paper-based files were kept. “How could a big truck, a garbage truck, hit the exact spot where the records were?” one source queried. “It hasn’t been found, and no one showed up at the hospital for injuries.”

The loan amounts were relatively small, representing credit issued for the purchase of autos and other consumer items to lower and middle income Bahamians. The Securities Commission, in its May 15, 2024, statement, confirmed that Auto H&L was one of its licensees under the Financial and Corporate Service Providers Act 2020.

“Through an on-site examination conducted in March 2022, and followed-up in March 2023, the Commission became aware that Auto H&L miscalculated the interest on loans for its customers as required under the Rate of Interest Act,” the regulator said.

“Subsequent to its follow-up examination in March 2023, the Commission engaged the audit firm, Baker Tilly Gomez, to conduct an independent examination focused on interest calculations during the period 2019 to 2023. The examination confirmed that Auto H&L was in breach of the Rate of Interest Act and a final report was provided to Auto H&L in January 2024.

“In its defence, Auto H&L has asserted that these miscalculations were inadvertent and, as such, has agreed to fully reimburse all clients who were impacted,” the Securities Commission added. “Persons affected by Auto H&L’s miscalculations may include both present and past clients of Auto H&L during the years 2019 to 2023.

“However, due to an on-site accident, certain client records of Auto H&L were irreparably damaged. As such, the Commission requires Auto H&L to reach out to the public in order to ascertain, as best as possible, the full population that may have been impacted by the interest miscalculations.”

Borrowers were given until August 30, 2024, to supply proof of their identity, their loan and its terms/rate, and payments made on it to Mr Gomez and Baker Tilly Gomez. “Note that if you are unable to locate any of the above required documents, Auto H&L may not be able to disburse any owed amounts to you,” the Securities Commission warned at that time.