Seizing one opportunity after another, Robert Steenbergh applied his legal training and experience to a series of ventures that culminated with the founding of US Equity Advantage, home of AutoPayPlus, a leading biweekly payments service. Agent Entrepreneur met with Steenbergh to discuss his career path, his work with agents, and a life-changing trip to the Far East.
Bobby, where are you from originally, and how did you go from attorney to executive?
I grew up in Upstate New York, about a half hour south of Albany, and attended nearby Siena College and then Albany Law School. After graduating from law school in 1990, I moved to Manhattan, where I was a corporation counsel for the city’s family court system — basically a civil trial attorney, whereas the D.A.’s office is criminal. We handled child abuse and neglect cases.
That is heavy work.
It was. You have to deal with a lot of horrible circumstances. But you can take solace in knowing that you’re doing the right thing — taking kids out of homes where they’re abused or neglected and putting them in a safe home. Ninety-nine percent of the time, I never met the child. For the most part, we reviewed medical records and spoke to doctors and social workers. It never ceased to amaze me some of the cruelty people would inflict on a child. And this was toward the end of the crack epidemic with babies being born addicted to crack cocaine. So, like you said, it was pretty heavy.
After several years of that, I needed a mental health break, and I ended up in Daytona Beach with an ex-roommate who was running spring break.
He ran all of spring break?
He had an entertainment company that would book acts and bands. He told me, “Hang out, live at my house, decompress, and figure out what to do next.” So, I accepted and enjoyed spring break again and again for a few months.
Then, I was introduced to D. Kim Hackett, who owned Courtesy Auto Group in Orlando. He was only about 10 years older than me, a young, forward-thinking dealer who had a different way of running things. He had nine franchises, a captive finance company, and owned a few buy here, pay here lots as well.
We hit it off and he suggested I take the bar exam in Florida — I had already passed it in New York and Connecticut — so I did, and started working with him. Over the next couple years, I grew my practice to start representing other dealers.
Was it mostly contracts or disputes with customers?
Probably 25% contracts and 75% disputes. There’s just not that many contracts, and dealers don’t change things all that often. But quite often someone would accuse one of the dealerships of something.
Were they often frivolous?
Yes, and you always had to make a business decision. Kim was good that way. He wouldn’t let personal feelings get involved. Even if it was totally frivolous, he would ask, “What’s the cost of fighting it and what’s the cost of making it go away?”
A lot of the time, you could get an insurance company to cover the payout, so it came down to making the insurance coverage work a certain way. You want it to cover employee fraud and deception, and you had to prove it was a rogue F&I manager going against their training and the dealership’s policies.
That’s really where MenuVantage came into the picture. With the advent of public dealerships, suddenly there were some very deep pockets for plaintiffs to come after. Kim had put a bunch of money into a subprime software company called Wizard Finance Systems, a ProMax competitor. Sometime in the late ’90s, he was going to sell all of his dealerships to AutoNation, move to Fort Lauderdale, and go into corporate.
It doesn’t really make sense to build your own sales force in the F&I space because there’s already a very good one out there. It makes better sense to sign an agent who will take me to 50 dealers than hire a guy to knock on 50 dealers’ doors.
His software company had about 100 customers at that point. He asked me if I wanted to take it over, and I said I’d give it a shot. We built the company up to about 1,500 customers, then sold it to LeaseLink. I stayed on as director for about a year.
After that, I found myself spending time back in Fort Lauderdale with Kim and the AutoNation guys. They had just created the first version of their electronic menu that was intended to protect their dealerships from lawsuits. But they had discovered that by showing all the options, customers bought 40% more products.
After that version was done, AutoNation wasn’t going to do anything else with it, so they let go of all the developers. Mark Virig was the head developer. I asked if he could build one for me.
How long did that take?
We probably spent close to nine months developing the first version, including beta-testing with a number of dealers who Kim knew personally. We rolled it out and immediately started writing the next version. One of the things we added was biweekly payments, thinking it would create a competitive advantage.
When were you first introduced to the concept?
I first ran across biweekly when we connected with LeaseLink. I liked the concept, but the technology wasn’t quite there yet. It involved manual processes, making it inefficient to work on any scale you would care about.
What got you hooked?
We realized most people are paid weekly or biweekly, but we were quoting them monthly payments. So if you say $400, they think it’s $400 coming out of their last paycheck. But if you can pay $200 every two weeks, you can afford the car — and the service contract.
And you reduce the total cost of the loan.
Correct. By paying down the principal faster, there is less to pay interest on, and you generally shorten the term by 10%.
Did you have many competitors when you launched?
Some people had done things on Excel, but as far as full-blown software, there wasn’t much. I happened to be in the right place at the right time. And remember, Dealertrack was rapidly growing in a very similar vein. They electronically linked dealers with finance companies. No one was linking F&I providers with dealers. MenuVantage also contracted with providers so they could get contracts in real time.
They must have loved that.
They did. At that time, you could buy a car with a service contract on the second of the month and it’s not going to mail until the 31st. If the customer shows up with a problem on the 15th, they don’t know who you are. That was the back end of MenuVantage, which we eventually separated out when ADP, now CDK Global, acquired it. The Provider Exchange Network was originally the back end of MenuVantage.
Did the offer from ADP come out of left field?
When you’re on your second automotive software company, you’ve learned you can only get to a certain size and certain number of dealers before you start attracting attention. At some point, someone is going to come in and give you the “Are you with us or against us?” speech. You know your exit strategy is to sell to a big player. My other partner in MenuVantage, Phil Battista, who now has Darwin, ran sales, and he got us to that level very quickly.
Due to Phil’s connections, we had been partnered tightly with ADP from the mid-2000s, and it was just a given that they would eventually acquire everything. That finally happened in 2009.
Did you stay on with them?
Just for a year. They didn’t want to acquire the biweekly company, so I stayed on during the transition while I started growing US Equity Advantage.
Did you have to separate those companies?
It was always a separate company for tax and liability reasons. Everyone knew us as MenuVantage’s biweekly company. It was just a matter of changing some branding and marketing to a wider base.
How is biweekly regulated?
We operate as a licensed money transmitter. We get a license in all the states where we do business, which subjects us to oversight by state departments of banking and finance. The majority of our competitors run through sponsor bank relationships, so the bank is the regulated entity, not the biweekly company.
What was the dustup in Texas over?
Apparently, Texas had some history with biweekly mortgage companies that got ugly. They were making things difficult for us and [SMART Payment Plan’s] David Engelman. Both of us had exited the state because it wasn’t worth the aggravation, and then NADA issued its guidance.
I remember talking with David around that time, and we agreed that was ultimately a good thing for the segment.
It definitely was. One of the biggest problems biweekly had was that some of the early companies got dealers in trouble. It left a bad taste in the dealer’s mouth that was difficult to overcome. The fact that NADA elevated it to a national conversation is good thing. If you’ve got nothing to hide, there’s no such thing as bad press.
Is there room left to innovate in biweekly?
I think there’s a lot of room for innovation. Again, because of the way biweekly started, a lot of people view it simply as just another F&I product. There’s kind of this engrained standard fee and commission structure. But biweekly is really a service that allows the customer to more easily afford their car payment or buy additional F&I products.
If we can get people to focus on that as opposed to any commission, we will do much better in the long run. The short answer is a much more flexible pricing structure and extending the service to where it’s seen more as a retention tool than an F&I product.
You asked about innovation. We are developing the second version of our customer portal that will provide even more useful information — TransUnion credit bureau, Kelley Blue Book values, recalls — and the ability to add additional loans and services to help customers budget and know when it’s time to get back to dealership. As this second version builds out, we’ll incorporate banking information and eventually become a portal for all the consumer’s loans. It will also work as a mobile application which is where we see the greatest interaction with our current portal.
They can add their home loan, student loans …?
Absolutely. For the first six months after enrollment, they can add as many loans as they want for no additional fee. Home loan, student loan, credit card, IRS judgment. We give them credit monitoring and pay as many loans as they want. We’ll add budgeting tools to it and it will be dealer-branded. Our Time to Trade feature will direct them back to the selling dealer when they near an equity position. Whatever you can do as a dealer to give customer a positive experience, that’s what they’re going to talk about.
Does USEA sell exclusively through agents?
Yes, we work exclusively through our agent network. And the benefit to the agent is that it’s not just another F&I product. We’re a service that allows them to enhance the rest of their core business. If you’re in the business of selling F&I products, and you don’t have to pay for it, why wouldn’t you do it?
When did you first encounter agents?
Certainly, I met agents when I was a dealer attorney, but MenuVantage always sold through an independent agent network. It doesn’t really make sense to build your own sales force in the F&I space because there’s already a very good one out there. It makes better sense to sign an agent who will take me to 50 dealers than hire a guy to knock on 50 dealers’ doors.
Most of whom will ask their agent if it’s a good idea.
Exactly. No sense even thinking about that battle.
Are you looking for more agents?
Sure. We sign up new agents every month.
What do you do when you’re not working?
Family time, mostly. My wife, Danielle, and I have been married for 18 years now. She is a part-time travel agent and stay-at-home mom. We have a 17-year-old son and 14-year-old twins, a boy and a girl. So our weekends are usually spent at some softball field or lacrosse field. Also, I just started playing golf again after having both shoulders surgically reconstructed.
Bone spurs. I’ve been dealing with the surgeries and rehab for about three years until just a few months ago when I finally felt 100%. It got to the point where I couldn’t lift a gallon of milk. It’s amazing how much strength and size I’ve been able to put back on now that I can work out again.
You mentioned your wife is a travel agent. Any trips planned?
Actually, we just got back from 10 days in Japan. I could not recommend going to any place more. We were in Tokyo for five days and realized we hadn’t heard one car horn. It’s the cleanest, most polite, most organized city you can imagine. You can’t find a trash can on the street because there is no trash. No graffiti, no crime, unemployment is about 1%. The bullet trains leave every six minutes and go 185 miles per hour with absolutely zero vibration. It’s unbelievable.
It was an amazing place to visit. I could easily live there. We were in midtown Tokyo, but it was stress-free — never crowded, never loud. After Tokyo, we went to Kyoto where you can really see a lot more of the traditional Japanese culture and the bowing deer of Nara.
Why not start a biweekly company there?
You can’t. The minimum amount of income they save is 20%. And that’s the minimum. They don’t like debt. They also use a lot of public transportation. Out in rural areas, you have to have something, but we didn’t see a lot of dealerships. You’d think a Honda or Toyota dealership in Tokyo would be huge. It looked like a single-point store.