Category: Compliance

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Compliance

Rolling with the Times!

Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

 

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

Recently, U.S. Bank issued a letter to its dealer partners describing the Bank’s policy in regards to fair and responsible lending. Well, that in itself is not news. Lenders have been issuing letters of that nature for the past few years. However, this letter did mark a significant milestone in the CFPB’s regulation of the automotive 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, dealers have had substantial leeway with F&I pricing practices. The only minor cap dealers have as far as marking up products is concerned, is how much money lenders are willing to fund. So, it’s natural for dealers to pucker when a lender like U.S. bank says they are watching for potential discriminatory practices in F&I.

However, from a lender standpoint, U.S. Bank is taking proactive steps to protect itself before any regulatory decisions are made. And, it’s possible that other lending institutions may follow suit, especially those who’ve already felt the influence of the CFPB.

As a dealer, you could simply say “Good Riddance!” to any lender who tries to restrict F&I product markup. However, you could be losing quality lenders in the process. And, then there’s the potential eventuality that the CFPB will have all lenders monitor F&I product pricing. Rather than purely reacting, a better option might be to begin the process of preparing your dealership now for industry trends that could impact your business.

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Compliance F&I

Are You In Control of Your Profit Potential?

Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

 

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

If you’ve been paying attention to industry news, you probably know about the Federal Trade Commission once again setting its sights on add-on products. While large industry players expected this on the heels of the CFPB’s increased oversight into auto lending practices, many dealerships looking to make up for lost dealer reserve with the sale of F&I products are looking to tighten up their policies and procedures.

If you haven’t already begun re-evaluating your compliance procedures, now is the perfect time! While there are many elements to consider as you review your current policies and procedures for your existing product offerings, there is an upside. When sold in a compliant manner, F&I products provide dealers the ultimate control in their profit potential.

This being said, applying compliance standards and scrutiny to your policies and procedures is growing in importance.  A recommended starting point, as you evaluate your product offering, is to ask a simple question:  Do your products’ benefits fulfill a real and mathematically calculable customer need? 

Starting with this premise, here is a checklist to perform due diligence:

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Categories
Compliance

Compliance in 2015

Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

 

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

2015 is here and the CFPB is keeping up the pressure on compliance regulation. Everyone is wondering what the year will look like. Will more lenders implement flat rates? Will the CFPB find a way to extend their influence into the F&I space? Will Congress step in and impose restrictions on the CFPB? With so much up in the air, dealerships and lenders alike are waiting with baited breath to see what 2015 has in store.

Instead of waiting, it’s time to focus on and hone your operations. While many dealers have already begun decreasing their reliance on finance reserve and pushing for more product sales, you can bet that the CFPB is looking into how to branch into that area. In fact, in 2014, the CFPB reached a consent agreement with an F&I vendor and a lender, where each entity was required to issue reimbursements to contract holders for using ambiguous language in the product sales process, such as “This product will only add a few dollars to your monthly payment.” The CFPB stipulated that the exact price of the product is necessary in the product presentation, not generalities.

While the CFPB’s influence lies primarily with the lending community, they have been clear that lenders are also responsible for the actions of the vendors and partners with whom they choose to do business. This applies to who they use to service and collect their loans, as well as who originates them. So far, they have focused for the most part on rate administration as it relates to origination, but as we saw in 2014, they also took issue with the sales practices of ancillary products. To protect your dealership and keep operations running smoothly, take a deep look at your F&I product presentation with your legal team and address any issues that may arise.

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