Financial Institutions Can’t Afford Compliance Mistakes

Ally Financial has a century of industry-savvy experience that Bill Solomon leverages in the open market

Ally Financial traces its roots back to 1919 when General Motors started an auto-financing subsidiary, then known as GMAC. The firm is now approaching its 100-year anniversary, but it is in many ways a new company after a series of moves that recently culminated with its listing on the New York Stock Exchange in April 2014. Rebranded as Ally Financial in 2010, the reborn and remade company is focusing on its auto finance origins and looking to reduce costs and boost profitability during a new period of growth.

Detroit native Bill Solomon is Ally’s group vice president and general counsel. He’s been with GM, GMAC, or Ally since 1988 and served as a legal advisor during and after the recession, which hit financial-services firms hard. Now, he leads a legal team dedicated to supporting Ally’s strategic expansion and efforts to improve shareholder value. In 2006, GM sold a controlling interest of the company to Cerberus, and Solomon’s predecessor retired. Since then, he’s been working to centralize management while maintaining nine satellite offices to make the legal staff more efficient and capable of supporting what has become a complex financial holding company. Ally has approximately 7,000 employees and is a leading automotive financial-services company with a top direct banking franchise, as well as a corporate finance unit that provides financing to middle-market companies.

Over the past eight years, Solomon has worked to synchronize and coordinate legal efforts across those diverse business units. This fits in with overall company goals to streamline its operations and focus on its core auto finance and direct banking franchises. Over the past two and a half years, Ally has sold its international operations and all non-core assets. The legal department has decreased three-fold with current staff largely dedicated to auto finance and the bank, with the remainder providing legal services to the other business units and functions like HR, procurement, and capital markets, as well as handling record management, licensing, and corporate secretarial duties.

Like many banks and financial institutions, Ally Financial is facing more scrutiny than ever before. Solomon says that fact changes how he builds and deploys his legal team. “We can’t afford mistakes,” he says. “We have to make sure we have our best lawyers in the areas of our core competencies.” He adds that Ally has to be an expert and compliant in the Truth in Lending Act, Equal Credit Opportunity and Fair Credit Reporting Acts, and all other federal, state, and local consumer credit regulations.

Most of these regulations can vary by state, and many change throughout each year. How much can a company charge for late fees? When is a notice to repossess due? What can collectors say to debtors on the phone? These laws change and evolve, and they must be followed and interpreted without fail. “It starts with knowing the letter of the law and making sure you’re up to date,” Solomon says. “Then we convey advice to the business and make sure we’re there if and when problems arise.”

The legal team at Ally stays up-to-date by leveraging many resources. Solomon provides access to a good physical and electronic library, and the company subscribes to LexisNexis and Westlaw. Lawyers know what issues the Federal Trade Commission, Consumer Financial Protection Bureau, and the Federal Reserve are examining. They attend conferences, speak at seminars, and continue their education. Internally, one paralegal tracks legal developments almost full time, hunting for any issues that may impact her colleagues in legal or counterparts in business units. “We’ve added more discipline to the organization because there is so much change and growing oversight these days, especially for financial institutions,” Solomon says.

A member of the Michigan Bar and American Bar, Solomon studied at the University of Detroit, earned a master’s degree from McMaster University in Hamilton, Ontario, and graduated from law school at the University of Notre Dame in Indiana. He then clerked at the Michigan Court of Appeals and came up through Ford Motor Credit Company, Vixen Motor Company, and finally General Motors. Through learning at competitive institutions and working at large companies, his experiences have shaped who he is as a vice president and general counsel. “My bosses always empowered me and gave me the resources I needed,” he says. “I appreciated it. When I was empowered to practice law and allowed to make a few mistakes along the way, I learned.” Today, he tries to do the same for his staff. Solomon believes he should know enough to guide each attorney, but then trust his experts to know more than him in their chosen specialty.

Together, the strategies are working. Ally settles very few cases because it makes very few mistakes. “At Ally, we do things right,” he says. “I give all that credit to our good lawyers, admins, paralegals, and support staff—and especially our operations, compliance, and risk partners in the business.”

Although Ally serves nearly 4 million retail auto customers, the company has fewer than 300 lawsuits pending at any given time. Solomon has trained his team to operate within the bounds of the law and provide accurate advice to employees. “We have a very successful and profitable business,” he says. “We do it very well, and we respect the law. We’re not pushovers, but we’re not unusually aggressive in pushing the bounds of the law.”

These efforts have put Ally in a position to succeed. Ally went public in early 2014, trading on the New York Stock Exchange under the ticker ALLY. In December 2014, the Treasury sold its remaining shares in Ally, and the company exited TARP. In total, the US taxpayer was returned $19.6 billion on the $17.2 billion investment, $2.4 billion more than initially invested by the government. Lawyers at Davis Polk, Sullivan and Cromwell, and Cahill Gordon & Reindel advised Ally on the $2.6 billion common stock offering, which sold 102 million shares.

Ally has an SEC expert on staff, and Solomon previously attended board meetings late in his career at GM, which, along with the help of his experienced outside counsel, eased the transition to a public company smoothly. “We’ve issued corporate bonds since the 1920s, and we’ve been an SEC registrant since the 1930s, so we’re accustomed to public filings and regulations,” Solomon says.

Less than a decade ago, Ally Financial was a captive finance subsidiary wholly owned by GM. Now, the company has made a full transition into a successful, competitive-market financial holding company. As banks sit on piles of cash, looking for places to invest it, they are turning in bigger numbers to auto loans, which are now considered more attractive assets than mortgages, credit cards, and commercial loans. Even with added competition, Ally’s long-standing expertise in the market, strong dealer relationships, and focus on diversifying its customer base have helped it succeed in an increasingly intense field. When the company officially turns 100 in 2019, it will have many reasons to celebrate.