Flex Those Compliance Muscles

The Consumer Financial Protection Bureau (CFPB) has been busy this year bringing lawsuits against auto lenders and servicers. Just this month, the agency sued the servicing arm of U.S. Auto Sales, alleging USASF Servicing cost consumers more than $10.1 million by mishandling customer refunds, double billing for collateral protection insurance and failing to apply excess customer payments to interest. The suit also alleges that USASF Servicing wrongfully repossessed vehicles at least 82 times, erroneously triggered vehicle starter interrupter “kill switches” at least 7,500 times, and incorrectly activated a 10-second series of tones meant to signal late payments 71,000 times. Imagine the consumer’s surprise when their car won’t start or begins beeping – especially if their loan was in good standing or they weren’t informed of these archaic little features when they purchased the vehicle!

Speaking of annoying entanglements, I’m sure your dealership has been busy implementing policies and procedures designed to support the Federal Trade Commission (FTC) Safeguards Rule. While these added requirements may seem burdensome, here’s an interesting way to think about those guardrails surrounding the customer’s data.  So far this year, the FTC has received 5.7 million total fraud and identity theft reports, 1.4 million of which were identity theft cases accounting for $10.2 billion in losses. According to the National Council on Identity Theft Protection, there is an identity theft case every 22 seconds in the U.S. and 33 percent of all Americans have faced some kind of attempt in their lives, with experts predicting this number could increase significantly this year.

While the CFPB and FTC are focused on lender lawsuits and other fronts, there is an opportunity for retail automotive to take advantage of the lull. Now is a great time for your dealership to flex its compliance muscles.


The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.


Documenting Processes: More than Just Compliance

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

Over the past few years, you’ve probably heard a lot about the importance of documenting your processes. Even with the changes at the CFPB, this importance is not diminished. Remember, the CFPB does not have jurisdiction over most dealerships (except Buy Here Pay Here). State Attorney Generals, the DOJ, and the FTC do. And, these government bodies haven’t undergone significant changes.

Therefore, if you haven’t already begun the process of documenting your processes, it’s time to get that project started. I’ve spoken with a lot of dealers who thought documenting processes would take an investment of thousands of dollars and a legal team. This does not have to be the case. It simply starts with taking a process that your team completes every day and writing down the steps.

Of course, with the numerous, ongoing processes in a dealership, not everyone knows where to begin. This is especially true for those processes that are simply just part of the routine. Many dealers haven’t even conceptualized how to define them beyond, “just do it”.

Just like with any big project, think about tackling this project one bite at a time. Start with the checklist on your deal jackets. Define and write down the process behind each item on the list. Each process should consist of three components:

  • What you do
  • Why you do it
  • How you do it