Category: F&I

Categories
F&I

Are You Appealing to Millennials?

Contributing Author: Steve Klees

 

Contributing Author: Steve Klees, Senior Vice President, Specialty Channels, EFG Companies

When you hear the term “Millennials” paired with the term “car,” what comes to mind? Do you automatically think, “Millennials aren’t interested in cars?” For the past few years, it seemed like a new article was published every month stating that the reason Millennials weren’t buying cars was due to personal preference.

Today, economics has proven that assertion false. According to J.D. Power & Associates, Millennials (those born between 1980 and 2004) accounted for 27 percent of new car sales in the U.S. last year. Millennials have already surpassed Generation X to become the second-largest group of new car buyers after Baby Boomers; and each year, the influence of the Baby Boomer generation recedes and Millennial buying power increases.

It turns out, personal preference had very little to do with Millennials approaching the auto industry. Rather, it had all to do with the economy, the job market, and wage growth. Most of the Millennials with buying power today entered the job market during the economic upheaval in the Great Recession. Because of the lack of prospects, some returned to school, while others moved in with parents or got roommates and stuck it out in low-paying or part-time jobs that did not utilize their post-high school training or education.

Continue reading “Are You Appealing to Millennials?”
Categories
Compliance F&I

The Supreme Court Upholds Disparate Impact. Now What?

Karen Klees, Certified Consumer Credit Compliance Professional

 

Contributed Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

June was a big month for the Consumer Financial Protection Bureau (CFPB). The Supreme Court of the United States held in the case of Texas Department of Housing and Community Affairs et al. v. Inclusive Communities Project, Inc., that “disparate-impact claims are recognizable under the Fair Housing Act.” The CFPB established their Larger Participant Rule, putting captive finance companies under their jurisdiction. And, BB&T announced the launch of a nondiscretionary dealer compensation program that prohibits dealer markup and offers a flat-fee dealer compensation program.

Right now, you can’t read the news without seeing an article about the CFPB and speculation on what the industry will look like in the coming months. Rumors abound that three captives currently under CFPB investigation, Honda, Nissan and Toyota, will cap dealer markup.

Just recently, Honda Finance Corporation reached a resolution with the CFPB and the Department of Justice, where it agreed to change its pricing and compensation system to “substantially reduce dealer discretion and minimize the risks of discrimination,” and to pay $24 million in restitution to affected minority borrowers. While the jury is still out on Nissan and Toyota, lenders have a unique opportunity to take advantage of all this activity.

Continue reading “The Supreme Court Upholds Disparate Impact. Now What?”
Categories
Compliance F&I

How are You Embracing Change?

Karen Klees, Certified Consumer Credit Compliance Professional

 

Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

Recently, U.S. Bank issued a letter to its dealer partners describing the bank’s policy with regards to fair and responsible lending. Well, that in itself is not news. Lenders have been issuing letters of this nature for the past few years. However, this letter did mark a significant milestone since the CFPB’s regulation of the retail lending industry. In this letter, U.S. Bank became the first lender to explain a monitoring program with a heavy focus on how F&I products are priced and sold.

To date, even with state regulations on F&I pricing, dealers have had substantial leeway to set their margins. While third-party administrators set risk-based costs for each product, dealers have the opportunity to set their margin based on how much money a lender will advance.

Along with potential reserve for originations, setting F&I product margins is the finance department’s primary way to generate profit. Because of this reliance, dealerships are very concerned about lending oversight. Meanwhile, U.S. Bank is taking what they believe is a proactive step to monitor pricing before any regulatory decisions are made. And, it’s likely that other lending institutions will observe this practice closely to hone their internal best practices.

Continue reading “How are You Embracing Change?”