Category: Compliance

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Compliance

Preparing for an End-of-Year Car-Buying Surge

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

Barely one year after the devastation that went along with Hurricanes Harvey and Maria, the U.S. is once again reeling from the effects of Hurricane Florence. As of Monday, September 24, 2018, as many as 8,000 people were still on alert for possible evacuations. According to the National Weather Service, five river gauges are still at major flood stage in North Carolina, and five others are at moderate flood stage. Parts of Interstate 40 are expected to remain underwater for at least another week. According to a recent estimate from an economic research firm, Hurricane Florence has caused approximately $44 billion in damage and lost output, which would make it one of the top 10 costliest U.S. hurricanes.

So, what does this mean for the retail automotive industry in the affected areas? Once the flood-waters recede and consumers have the opportunity to assess the damage to their homes and vehicles, we can expect those consumers to begin the process of replacing their vehicles. This will most likely coincide with the holiday car buying surge for which dealerships across the nation are already preparing.

Dealerships on the Eastern Seaboard will be hard pressed to ensure they have enough inventory to meet demand. In addition, when people flock to the stores in large groups, we can always expect identity crimes to rise. Whether that means stealing private, confidential information to use at a later date, or trying to buy products using false identification, dealers need to be prepared for every possibility.

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Compliance

We’ve Been Down this Path

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

The Consumer Financial Protection Bureau (CFPB) has been in the news a lot lately.

From Acting Director Mick Mulvany’s decommissioning of the Advisory Committee, to a federal district judge ruling its structure is unconstitutional, some might think that the CFPB’s days are numbered.

But history has a lesson to offer, compliments of the Federal Trade Commission (FTC). The FTC was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The regulatory agency opened its doors in 1915, with a mission to protect consumers and promote competition. The FTC building was finished in 1938, with President Franklin D. Roosevelt stating, “May this permanent home of the Federal Trade Commission stand for all time as a symbol of the purpose of the government to insist on a greater application of the golden rule to conduct the corporation and business enterprises in their relationship to the body politic.”

Currently, the FTC houses three bureaus:

  1. the Bureau of Consumer Protection
  2. the Bureau of Competition
  3. the Bureau of Economics

Each bureau has a set of mandates to guide its work. In the early 1970s, the agency became more aggressive in its prosecutions and sanctions. The business community and Congress criticized the FTC’s activism, claiming it had become too powerful, was insensitive to the needs of the public and business, and operated with little oversight from Congress or the president. During President Ronald Reagan’s first term, control of the FTC was moved under the president. Its direction was modified to become more cooperative with business interests, while continuing its consumer protective functions.

A Matter of Checks and Balances

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Compliance

Say Goodbye to Disparate Impact Theory

Dave Gibbs Training Manager EFG Companies
Contributing Author:
Dave Gibbs
Training Manager
EFG Companies

On Monday, President Donald J. Trump signed into law the Congressional S.J. 57 resolution repealing the Consumer Financial Protection Bureau’s (CFPB) guidance on dealer markup. Originally issued in March, 2013, the auto lending guidance quickly received negative feedback. In fact, the ruling caused several finance sources to either switch to a flat-fee compensation model or enforce lower caps on dealer markups. The ruling also prompted the CFPB to impose consent orders with several institutions resulting in millions of dollars in fines.

The retail automotive industry is cheering this move, which began five months ago when the Government Accountability Office said Congress had the power under the Congressional Review Act (CRA) to overturn the CFPB guidance. But, before you start thinking the good old days are back, consider what started the industry on this path.

The CFPB’s original guidance was designed to inform lenders that it would begin enforcing the fair lending requirements of the Equal Credit Opportunity Act (ECOA) using a theory on disparate impact. This theory refers to practices that adversely affect protected classes of individuals, even though employer rules and practices are meant to be neutral. The CFPB used this theory to make the argument that dealer markup practices could result in unintentional discrimination during the credit process, and must therefore be reined in.

While the CFPB can no longer use disparate impact theory to force lenders to reduce dealer markup, the ECOA and its fair lending requirements remain in full effect. Other federal, state and local compliance regulations also remain, which prompts me to remind our clients that remaining in compliance is still in the dealership’s best interest. And, it’s highly unlikely that lenders who invested millions of dollars into comprehensive compliance platforms will suddenly reverse all those process changes.

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