Category: Compliance

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Compliance

The Cost of Compliance

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

Since July 2010, the Consumer Financial Protection Bureau (CFPB) has made significant waves in the auto finance space. In 2013, they issued their bulletin titled “Indirect Auto Lending and Compliance with the Equal Opportunity Act” stating that they would regulate lenders on unanticipated discriminatory practices. With very little guidance on how to be compliant, lenders and dealers scrambled to revamp their anti-discrimination practices to little avail.

Between 2013 and 2016, the CFPB filed 13 enforcement actions totaling upwards of $165.17 million against auto financiers, such as:

  • Toyota Motor Credit Corporation
  • Fifth Third Bank
  • American Honda Finance Corporation
  • Wells Fargo Bank, N.A.
  • JPMorgan Chase Bank, N.A.
  • DriveTime Automotive Group
  • First Investors Financial Services Group

Beyond the restitution and civil penalties leveraged against lenders, the increased compliance oversight also had direct impact on dealer profit margins, consumer prices, and the national GDP.

According to a 2014 study of the auto finance regulatory environment by the Center for Automotive Research (CAR), regulations pertaining to employment, accounting and vehicle financing made up more than 63 percent of all estimated federal regulatory compliance costs. The administration of vehicle financing alone accounted for 71 percent of all vehicle finance compliance costs and 26 percent of total dealership compliance costs.

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Compliance

Keep On Keeping On

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

The Consumer Financial Protection Bureau (CFPB) has not come out unscathed in the wake of the Wells Fargo scandal. While some say the CFPB’s enforcement action demonstrates a need to strengthen the agency, others use the scandal as a case study to demonstrate the bureau’s inept and over-reaching practices. What’s behind the controversy surrounding the CFPB on this case? The L.A. Times broke the story of Wells Fargo deceptive practices in 2013, yet it just recently got the attention of the CFPB. Regulators are now asking the CFPB to account for this lapse.

In the background of all this, the Senate is scheduled to vote on legislation that could curb the CFPB’s independence. While both dealers and lenders avidly await that decision, it’s important to remember that the legislation does not dismantle with the bureau. And, with everything still up in the air, the best practice to undertake is to keep on overhauling your own compliance practices.

Regardless of any legislative changes, compliance will continue to be in the spotlight in the coming years. Whether the CFPB functions under more strict parameters or continues to have free reign over lending practices, we can expect them to continue to work to expand their influence.

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Compliance

Eating an Elephant One Bite at a Time

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

Let’s talk about the elephant in the room. Our nation’s lending industry has once again made headlines for deceptive consumer practices. While this negative press is highlighting one main lender, it is also affecting general consumer sentiment about the lending industry as a whole. And, this negative sentiment is bleeding in to auto finance.

With the CFPB’s heightened focus on auto finance, lenders have been under pressure to demonstrate dealership compliance. To date, lenders have put the onus on dealers to provide compliance documentation that they can then provide the CFPB. However, with these latest developments, it’s becoming clear that both consumers and businesses of all shapes and sizes will require lenders to demonstrate their compliance procedures to keep their business.

Dealers are now concerned with the negative repercussions they can receive from sending customers to noncompliant lenders. Remember, your reputation can have a direct correlation to a dealer’s reputation, especially if you’ve been their preferred lender.

Hypothetically, if a dealer’s preferred lender relationship was with a lender of suspect, the customers who purchased vehicles through that dealer may refinance, which equals lost profit and chargebacks to the dealership. With the chance of reduced unit profit, increased chargebacks, and a potential hit to dealership credibility, it makes sense for dealers to want some assurances from their lenders that everything is above board.

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