{"id":1474,"date":"2018-03-05T22:27:23","date_gmt":"2018-03-06T04:27:23","guid":{"rendered":"http:\/\/efgintelligence.com\/dealershipcorridor\/?p=1474"},"modified":"2018-03-06T11:04:11","modified_gmt":"2018-03-06T17:04:11","slug":"compliance-domino-effect","status":"publish","type":"post","link":"https:\/\/efgintelligence.com\/dealershipcorridor\/compliance-domino-effect\/","title":{"rendered":"The Other Side of the Domino Effect"},"content":{"rendered":"
\"Contributing
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies<\/figcaption><\/figure>\n

In July 2015, BB&T Dealer Financial Services announced the launch of flat fees as the Consumer Financial Protection Bureau (CFPB) announced the expansion of oversight to larger non-bank auto finance companies. BB&T became the third auto finance lender to change their dealer participation practices, after Chrysler Capital and Santander USA. A domino effect quickly took place, with American Honda Finance Corporation, Fifth Third Bank, and Toyota Motor Credit joined the growing number of lending institutions either reducing their cap on dealer participation, or implementing flat fees.<\/p>\n

In February, BB&T became the first auto finance company to reverse the trend<\/strong>, stating in an interview with Subprime Auto Finance News<\/em> that the bank would be abandoning its flat-fee dealer compensation program and introduce a more traditional auto pricing program mid-March.<\/p>\n

While BB&T plans to eliminate flat fees, we can still expect them to be more circumspect on the dealer participation cap than in previous years. In fact, Brian Davis, BB&T\u2019s director of corporate communications stated, \u201cBB&T remains firmly committed to the auto finance industry and to the fair and equal treatment of all consumers.\u201d<\/strong><\/p>\n

The fact of the matter is that it is highly unlikely that the auto finance industry as a whole will raise their dealer participation caps back to pre-CFPB levels. After all, the concept of treating customers fairly isn\u2019t go away.<\/p>\n

With this in mind, dealers still need to stay true to the guidelines issued by the National Automobile Dealers Association (NADA)<\/strong> in their Fair Credit Compliance Policy & Program<\/a>. As a refresh, this program outlined the following policy which dealers could use to maintain CFPB compliance.<\/p>\n

Establish a method of pricing loans with a pre-set amount for the dealership\u2019s finance reserve, such as with a fixed number of basis points over the wholesale buy rate. Then, allow for downward adjustments of that amount should a pre-determined condition<\/strong> occur, such as:<\/p>\n