Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies
For the past few months, the Consumer Financial Protection Bureau (CFPB) has made headlines with the implementation of their Larger Participant Rule. Now that more lenders are feeling the pressure, dealers can expect the shadow of the CFPB to creep over their operations, starting with documentation.
If you haven’t implemented a version of the National Auto Dealer Association’s (NADA) Fair Credit Compliance Guidelines, now is the time to do so. Expect to have banks, captives, finance companies, etc. asking for your written policies and procedures, as well as documented training, within the next few months as they prepare for CFPB investigations.
The CFPB initially preferred the establishment of a flat rate that does not change from one customer to the next, resulting in a flat fee or a fixed percentage of the amount financed for dealership compensation. However, in their recent settlement with Honda, they allowed for NADA’s guidelines to be implemented.
NADA discusses establishing a pre-set amount for the finance reserve, like a fixed number of basis points over the wholesale buy rate. Then, allow for downward adjustments of that amount should a pre-determined condition occur, such as “the customer has a better offer somewhere else.”
It is highly encouraged that dealerships work with their legal counsel to implement a version of NADA’s guidelines to protect their relationship with the majority of auto lenders. Once a course of action is plotted out, dealerships will need consistent documentation and comprehensive training to ensure the compliance initiatives are put into practice.
With regard to overall compliance measures, one of the best training programs available is Association of Finance and Insurance Professionals (AFIP) certification. AFIP is the nonprofit, non-aligned, sanctioning body for in-store sales and financial services personnel and select lender and aftermarket vendor personnel in the United States. AFIP certification curriculum focuses solely on the federal and state laws that govern in-dealership financial services.
AFIP’s primary objective is to protect dealers by ensuring that in-dealership F&I practitioners and sales executives are fully aware of the applicable state and federal regulations – and take responsibility for their actions. Regulatory knowledge, coupled with personal accountability, keeps thousands of dealers out of harm’s way. With a field team of fully AFIP-certified professionals, EFG Companies is equipped to provide AFIP training and certification.
Lastly, it’s important to remember that working with lenders to implement CFPB-compliant practices does not have to mean money lost. It is possible to maximize your profit potential through the sale of strategic F&I products.
Determine if you have the right products in place by evaluating your customer base, your top-selling model vehicles, and your product penetration rates. Along with compliant training, give your F&I managers the right tools to succeed with ongoing training and follow-up to increase their productivity levels. Supply your team with a strong product administrator, like EFG Companies, to provide an all-encompassing approach to increasing F&I income. Our intensive client engagement model includes working with dealerships to benchmark and meet performance goals with targeted products, and ongoing training and support, including AFIP certification.
Contact EFG today to prepare your dealership for a new chapter in auto retail.