Ally Bank 2014 Annual Report Download - page 171

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K
159
Ally with certain preferred provider benefits, including limiting the use of other financing providers by GM and Chrysler for their incentive
programs. We entered into a new automotive financing agreement with GM that became effective on March 1, 2014 (the GM Agreement),
which provides a general framework for dealer and consumer financing related to GM vehicles, as well as with respect to our ongoing
participation in GM subvention programs. The GM Agreement does not provide Ally with any exclusivity or similar privileges related to the
financing of GM vehicles, whether through subvention programs or otherwise. GM informed its dealers in early January 2015 that it intends
to provide lease subvention programs for Buick, GMC, and Cadillac products exclusively through its wholly-owned subsidiary, General
Motors Financial Company, Inc. Further, GM informed us on February 27, 2015 that they also intend to provide lease subvention programs
for Chevrolet exclusively through GMF.
Legal Proceedings
We are or may be subject to potential liability under various governmental proceedings, claims, and legal actions that are pending or
otherwise asserted against us. We are named as defendants in a number of legal actions, and we are involved in governmental proceedings
arising in connection with our respective businesses. Some of the pending actions purport to be class actions, and certain legal actions include
claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We establish reserves for legal
claims when payments associated with the claims become probable and the payments can be reasonably estimated. Given the inherent
difficulty of predicting the outcome of litigation and regulatory matters, it is generally very difficult to predict what the eventual outcome will
be, and when the matter will be resolved. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for the
claims.
On the basis of information currently available, advice of counsel, available insurance coverage, and established reserves, it is the
opinion of management that the eventual outcome of the current actions against us will not have a material adverse effect on our consolidated
financial condition, results of operations, or cash flows. However, it is possible that the ultimate resolution of legal matters, if unfavorable,
may be material to our consolidated financial condition, results of operations, or cash flows in a particular period.
Regulatory Matters
Ally and its subsidiaries, including Ally Bank, are or may become involved from time to time in formal and informal reviews,
investigations, examinations, proceedings, and information-gathering requests by federal and state government and self-regulatory agencies,
including, among others, the DOJ, Securities and Exchange Commission (SEC), CFPB, FRB, FDIC, Utah DFI, and the Federal Trade
Commission regarding their respective operations.
Mortgage Matters
We have received subpoenas from the DOJ that include a broad request for documentation and other information relating to residential
mortgage-backed securities issued by our former mortgage subsidiary, Residential Capital, LLC and its subsidiaries (ResCap RMBS). In
connection with these requests, the DOJ is investigating potential fraud and other potential legal claims related to ResCap RMBS, including
its investigation of potential claims under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The DOJ is also
investigating potential claims under the False Claims Act (FCA) related to representations made by us in connection with investments in Ally
made by the United States Department of the Treasury pursuant to the Troubled Asset Relief Program in 2008 and 2009 regarding certain
claims against Residential Capital, LLC or its subsidiaries at that time. We are engaged in ongoing discussions with the DOJ with respect to
legal and factual aspects of their investigations. Further, at the request of the DOJ, we have entered into an agreement to voluntarily extend
the statutes of limitations related to potential FCA claims.
We have separately received subpoenas and document requests from the SEC that include information covering a wide range of
mortgage-related matters.
Automotive Subprime Matters
In October 2014 we received a document request from the SEC in connection with its investigation related to subprime automotive
finance and related securitization activities. Separately, in December 2014, we received a subpoena from the DOJ requesting similar
information. We are currently cooperating with both the SEC and DOJ with respect to these matters.
CFPB
Further, in December 2013, Ally Financial Inc. and Ally Bank entered into Consent Orders issued by the CFPB and the DOJ pertaining
to the allegation of disparate impact in the automotive finance business, which resulted in a $98 million charge in the fourth quarter of 2013.
The Consent Orders require Ally to create a compliance plan addressing, at a minimum, the communication of Ally’s expectations of Equal
Credit Opportunity Act compliance to dealers, maintenance of Ally’s existing limits on dealer finance income for contracts acquired by Ally,
and monitoring for potential discrimination both at the dealer level and within our portfolio of contracts acquired across all dealers. Ally
formed a compliance committee consisting of certain Ally and Ally Bank directors to oversee Ally’s execution of the Consent Orders’ terms.
Ally is required to meet certain stipulations under the Consent Orders, including a requirement to make future payments should certain
remediation targets not be attained.
Each of the matters set forth above may result in material adverse consequences including without limitation, adverse judgments,
significant settlements, fines, penalties, injunctions, or other actions.