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Compliance Government Regulations

Reducing Your Compliance Hassles

Steve Roennau Vice President Compliance EFG Companies
Steve Roennau
Vice President
Compliance
EFG Companies

Every lender that has undergone a Consumer Financial Protection Bureau (CFPB) investigation has been hit with extensive fines and a change in process. Even the most prepared and compliant lenders have found themselves reeling after an investigation. For example, after undergoing a stringent investigation by the CFPB and the Department of Justice, Toyota Motor Credit Corp (TMCC) reached a “voluntary” resolution to address alleged discriminatory practices in its loan pricing.

Of all of the lenders anticipating a CFPB investigation, TMCC was arguably the most prepared, having completed a very thorough overhaul of their compliance procedures based on CFPB industry recommendations. If anyone was going to come out the other end of a CFPB investigation unscathed, it might well have been them.

Nevertheless, it seems that the CFPB’s agenda to use lenders to regulate dealers was not appeased with anything less than sweeping caps on dealer reserve. TMCC joined the growing list of lenders to cap dealer markup at 125 basis points for loan terms up to 60 months, and 100 basis points for loan terms longer than 60 months. And, as with previous settlements with other lenders, TMCC retains the right to pay dealers a flat fee for setting up the loan in addition to the approved dealer markup.

The TMCC settlement is momentous to the industry because the CFPB appears to have settled on a way to regulate auto lending without implementing an industry-wide flat, but rather with capping dealer markup.

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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.

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Enterprise Financial News – Volume 7

Subprime V7 Cover PageGet a new perspective on how to maximize your loan volume while staying compliant with the experts from EFG Companies.

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