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BP Business Economic Loss Claim Appeal 2017-695:Claimant Fails Customer Mix Test–Discounts Earned Nat An Expense Item

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The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms

Claimant appeals the denial of its Start-Up business claim. Claimant failed the Customer Mix portion of the Upturn Revenue Pattern test.
Claimant raised a number of issues on appeal. First, Claimant argues that “Discounts Earned” should be treated as an expense rather than as revenue. This Panel asked the Program to explain why this was done. The response was as follows: The Claimant recorded Discounts Earned as a contra expense whereas the Settlement Program considered Discounts Earned as revenue. In this case, the Claimant buys used car loans for less than the face value of the loan. The difference between loan
face value and the amount paid by the Claimant is additional yield, or interest income, on the loan. According to the Claimant, “In other words, they are paying 70 cents per dollar of principal purchased. Therefore, with each payment collected, 30% of the principal portion of that payment goes to ‘discount earned’ as that is additional income to XXX.  Additionally, the Claimant also classifies “Discounts Earned” as Other Income on its income tax returns. As such, the Settlement Program does not agree with the Claimant’s contention that Discounts Earned should be recorded as an expense item.
This Panel agrees with the Program’s rationale. Second, Claimant argues that if the Program is going to treat “Discounts Earned” as revenue, then “it is incumbent upon the Claims Administrator to seek to zone this additional revenue in connection with its customer mix analysis.” Claimant correspondence dated 2/13/17.
In response, this Panel asked the Program to comment. Its response was as follows:
Because the account “Discounts Earned” was considered
revenue by Program Accountants, the individual amounts that
comprise that account each month were designated with a
Zone. Each amount provided by the Claimant was associated
with a customer and zoned according to the customer’s
address. After zoning “Discounts Earned” and including them in
the Customer Mix calculation, the Claimant still fails the
Customer Mix Test.
Based on its response, it appears that the Program complied with Claimant’s request.
Lastly, Claimant argued that the Program gave the wrong Zone to some of its customers. Claimant was requested to prepare a chart/spreadsheet showing the corrections that Claimant contended should be made. That information was forwarded prior to the 3/7/17 Summary of Review. Even with the corrections, it appears that Claimant would still fail the Customer Mix test.
In light of the above, the denial of this Claim is upheld.

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