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EFG Companies

What a New CFPB Director Means for Auto Dealers

On September 30, the U.S. Senate confirmed a new Director of the Consumer Financial Protection Bureau (CFPB). Rohit Chopra, formerly with the Federal Trade Commission, brings an enforcement mindset to his new role.

Chopra, 39, will serve a five-year term at the helm of the Bureau. He has a long history with the organization, which was created in the aftermath of the financial crisis of 2007 to 2008. He worked closely with Senator Elizabeth Warren on establishing the Bureau, then joined it in 2011 to investigate industry abuses in the student lending market.

His appointment comes at an interesting time for automotive dealers and lenders. As FTC Commissioner, Chopra actively pursued auto dealers perceived of implementing discriminatory practices. He also was a vocal proponent for more protections for consumers, specifically regarding auto lending abuses of all minority demographics and military families.

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Compliance

The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.

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Industry Trends Training

Compliance Training Counts

We are nearing the end of the first full month with the new Administration and there has been a lot of activity from Washington. Vaccine distribution is rolling out, COVID-19 cases are trending down across much of the country, and Congress has a stimulus package to address. All of these actions bode well for the retail automotive industry, which is eager to ramp up sales.

There have been some notable actions around compliance. Former Federal Trade Commission (FTC) member Rohit Chopra has been nominated to head the Consumer Financial Protection Bureau (CFPB). During his tenure with the FTC, Chopra was active in pursuing abusive and discriminatory lending practices. Specifically, Chopra has signaled interest in establishing more protections against auto lending abuses, specifically for members of the military, Black and Hispanic consumers. If confirmed, Chopra would replace current CFPB head Kathy Kraninger.

And, while recent efforts on the virus front look positive, consumers have become accustomed to shopping online and this trend is likely to continue. Dealers who have successfully pivoted to a more digital sales model are expected to continue to see success. But an increased focus on compliance from federal, state, and local entities calls for a solid compliance training refresher for dealer sales and F&I staff.