Category: Compliance

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Compliance Dealership Training

Juggling the Compliance Acronym Soup: CFPB, ECOA, FCRA

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

Compliance has been a hot topic going on three years in the auto finance space. Lenders, such as Ally Financial, Toyota Motor Credit, and the American Honda Finance Corporation, have reached resolutions with the CFPB based upon dealership practices. We’ve all known that the CFPB has been trying to regulate dealerships through lenders. With this heightened sensitivity to compliance, other regulatory bodies that have jurisdiction over automotive dealerships, such as the FTC, are now turning their gaze to dealership practices.

While everyone is frustrated with the ambiguity of the CFPB, there are some well-defined actions dealerships can take to ensure compliance with entities like the FTC. With this in mind, now is the time for dealers to brush up on their F&I practices to ensure compliance, starting with this simple question: When a dealership sells a car and secures financing, who is the creditor at the time of sale?

If you said the dealer is the creditor, you would be correct. However, many F&I managers often think that the lender is the creditor. This mindset opens the door for non-compliant behavior as the F&I manager could think that their actions have fewer repercussions. As a dealer who knows about the legal repercussions, wouldn’t you rather have an informed staff that takes accountability for their actions?

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Compliance

Impact of the Toyota Settlement

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

After undergoing a stringent investigation by the Consumer Financial Protection Bureau (CFPB) and the Department of Justice, Toyota Motor Credit Corp (TMCC) reached a “voluntary” resolution this past January 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

Prepared for an FTC Investigation?

Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

 

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

Earlier this month, the Federal Trade Commission (FTC) announced a planned study on the auto buying and financing experience. Since 2011, the FTC has brought more than 25 cases challenging illegal practices in the area of dealership business. These cases, combined with the Consumer Financial Protection Bureau’s (CFPB) investigation into auto financing, have most likely caused the FTC to take a close look at the retail automobile industry.

While the CFPB does not have jurisdiction over auto retail, it has created waves in the industry through auto finance regulations. Now that an agency with authority over the industry is taking a deeper look at dealership practices, it’s more important than ever to recognize and act upon the fact that it’s time for more transparency in the auto buying process.

The good news is the FTC is still in the exploratory phase of the study, asking for public comments and feedback from interested parties on how the study should be conducted. Meaning, they have a ways to go before they conduct the study, compile the results, and formulate an action plan based on those results. Dealers have time to take a closer look and tighten their processes before a large-scale investigation ensues.

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