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Compliance

May I Text You?

Contributing Author: Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
EFG Companies

This might seem like a trite question in today’s digital, over-socialized world. While obtaining permission from a customer to text them has always been a legal requirement, recent court cases have reminded the retail automotive industry that indeed, dealerships must have permission prior to sending a text.  

In the past, regulators were focused on companies sending out marketing texts to customers they did not have permission to text. Now, regulations may be enforced on something as simple as a salesperson texting a customer with a follow-up message on an available vehicle.

Telephone Consumer Protection Act

Specifically, the Telephone Consumer Protection Act (TCPA) governs any dealership’s phone call or text message marketing. Let’s review the rules under the TCPA.

If you want to send a customer a text message, you must obtain prior written consent before sending anything. Written consent can include hand-written signatures or even a simple email. You can also obtain consent by including it in your contact form on your website. Simply add a checkbox asking if the customer consents to being contacted via email, phone call, or text.

You may call/text your current customers and former customers for 18 months after your relationship with them ends, even if they are on the national Do-Not-Call list. This includes both sales and service relationships, i.e., when they buy a car or even rotate their tires.

Categories
Compliance

Say Goodbye to Disparate Impact Theory

Dave Gibbs Training Manager EFG Companies
Contributing Author:
Dave Gibbs
Training Manager
EFG Companies

On Monday, President Donald J. Trump signed into law the Congressional S.J. 57 resolution repealing the Consumer Financial Protection Bureau’s (CFPB) guidance on dealer markup. Originally issued in March, 2013, the auto lending guidance quickly received negative feedback. In fact, the ruling caused several finance sources to either switch to a flat-fee compensation model or enforce lower caps on dealer markups. The ruling also prompted the CFPB to impose consent orders with several institutions resulting in millions of dollars in fines.

The retail automotive industry is cheering this move, which began five months ago when the Government Accountability Office said Congress had the power under the Congressional Review Act (CRA) to overturn the CFPB guidance. But, before you start thinking the good old days are back, consider what started the industry on this path.

The CFPB’s original guidance was designed to inform lenders that it would begin enforcing the fair lending requirements of the Equal Credit Opportunity Act (ECOA) using a theory on disparate impact. This theory refers to practices that adversely affect protected classes of individuals, even though employer rules and practices are meant to be neutral. The CFPB used this theory to make the argument that dealer markup practices could result in unintentional discrimination during the credit process, and must therefore be reined in.

While the CFPB can no longer use disparate impact theory to force lenders to reduce dealer markup, the ECOA and its fair lending requirements remain in full effect. Other federal, state and local compliance regulations also remain, which prompts me to remind our clients that remaining in compliance is still in the dealership’s best interest. And, it’s highly unlikely that lenders who invested millions of dollars into comprehensive compliance platforms will suddenly reverse all those process changes.