Tag: Department of Justice

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Compliance

CFPB Upheaval

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

The Consumer Financial Protection Bureau (CFPB) had a busy first quarter of 2017 defending itself. In Q4 of 2016, the U.S. Court of Appeals for the District of Columbia ruled the CFPB “unconstitutionally structured”. In Q1 of this year, the CFPB began the appeal process and it’s not looking too good for them.

Among those supporting the unconstitutional ruling are:

  • The Department of Justice (DOJ)
  • 15 state Attorneys General
  • American Financial Services Association (AFSA)

The DOJ stated that the ruling should be upheld in its entirety, including the remedy to give President Trump full authority to remove the CFPB’s director at will. In addition, the AFSA submitted a list of other suggested regulatory reforms for the CFPB to the Trump administration.

While the CFPB has been granted a rehearing of the initial case that determined the unconstitutional ruling, the regulatory agency has still had its powers significantly curbed, specifically in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

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Compliance

The Cost of Compliance

Contributing Author: John Stephens Executive Vice President EFG Companies
Contributing Author:
John Stephens
Executive Vice President
EFG Companies

Since July 2010, the Consumer Financial Protection Bureau (CFPB) has made significant waves in the auto finance space. In 2013, they issued their bulletin titled “Indirect Auto Lending and Compliance with the Equal Opportunity Act” stating that they would regulate lenders on unanticipated discriminatory practices. With very little guidance on how to be compliant, lenders and dealers scrambled to revamp their anti-discrimination practices to little avail.

Between 2013 and 2016, the CFPB filed 13 enforcement actions totaling upwards of $165.17 million against auto financiers, such as:

  • Toyota Motor Credit Corporation
  • Fifth Third Bank
  • American Honda Finance Corporation
  • Wells Fargo Bank, N.A.
  • JPMorgan Chase Bank, N.A.
  • DriveTime Automotive Group
  • First Investors Financial Services Group

Beyond the restitution and civil penalties leveraged against lenders, the increased compliance oversight also had direct impact on dealer profit margins, consumer prices, and the national GDP.

According to a 2014 study of the auto finance regulatory environment by the Center for Automotive Research (CAR), regulations pertaining to employment, accounting and vehicle financing made up more than 63 percent of all estimated federal regulatory compliance costs. The administration of vehicle financing alone accounted for 71 percent of all vehicle finance compliance costs and 26 percent of total dealership compliance costs.

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Categories
Compliance

CFPB – A Year in Review

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

A lot has happened with the Consumer Financial Protection Bureau (CFPB) in the past year. From large settlements to court rulings, the CFPB brought itself under the spotlight.

Let’s start at about this time last year. The House of Representatives passed H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act” with a strikingly majority vote of 332-92. The piece of legislation would direct the CFPB to amend how it issues guidance to indirect auto lenders by:

  • providing a public notice and comment period before issuing the guidance in final form;
  • making publicly available all information relied on by the CFPB, while also redacting any information exempt from disclosure under the Freedom of Information Act;
  • consulting with the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Department of Justice; and,
  • study the costs and impacts of the guidance to consumers, as well as women-owned and minority-owned small businesses.

In addition, the bill would nullify the CFPB’s “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act Bulletin”. This bulletin instructed lenders to either eliminate dealer pricing discretion, or constrain dealer pricing discretion by monitoring dealership practices and using “controls” to force dealerships to adjust their practices.

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