Category: Compliance

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Compliance

Consumer Privacy in Auto Lending

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

Do you know someone who was affected by the Equifax data breach? How about the Verifone hack or, the breach within the Internal Revenue Service (IRS)? According to the Identity Theft Resource Center® (ITRC) and CyberScout®, 1,579 data breaches occurred in 2017, representing a 44.7 percent year-over-year increase.

A study of more than 10,000 consumers by Gemalto, a data security firm, stated 70 percent of consumers would stop doing business with a company if it experienced a data breach. And, 69 percent feel businesses don’t take security of consumer data very seriously.

As a lender, you’ve probably paid very close attention to your policies and practices when it comes to securing consumer data, especially as you’ve migrated your business model to a mostly digital platform. However, your dealer partners have not felt the same pressure to ensure their data compliance. After all, it’s only been in recent years that auto dealers have begun to take fuller advantage of the digital resources available to store their documents and manage their customer relationships.

So, here’s my question for you. If a data breach occurs within a dealership and all the consumers they sent your way were affected, does that look bad on you? After all, the consumer thinks of you as their lender, not the dealership. While they may have filled out the loan application in a dealership, they most likely consider you the source of truth for their information. If a consumer has their identity stolen from their loan application and they place blame on you and the dealership, what are you to do?

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Compliance

Compliance: Not Dead Yet

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

Sighs of relief turned into sighs of frustration this past December when the Department of Defense (DOD) issued a new interpretation of the Military Lending Act (MLA), potentially resulting in severe implications for all dealers who sell or have sold vehicles to active duty members of the U.S. armed forces and/or their dependents.

It seems that even the holiday season can’t put the brakes on compliance initiatives. As of December 14, 2017, creditors providing credit-related products and services, like GAP, Credit Life, Credit Disability or cash-out financing, must now comply with a full range of duties and restrictions imposed by the MLA. While this interpretation didn’t go into effect until December, it applies to all transactions going back to October 3, 2016.

Auto lenders and dealers are now spending the first month of the new year consulting with their legal counsel to determine whether to continue to offer such products and services to active duty military consumers and their dependents, and if so, what actions must be implemented to comply with MLA requirements.

History of MLA

Congress passed the MLA in 2006 to help protect active duty service members and their dependents from predatory lending. Since 2015, the DOD has been slowly amending the final rule to expand the scope of the MLA to include the majority of closed and open-ended loans.

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Compliance

CFPB in 2017

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

In January of this year, President Trump issued an Executive Order which required agencies like the Consumer Financial Protection Bureau (CFPB) to re-address how they issue new regulations. The order required agencies to eliminate two regulations each time they issue a new one. Because of this, we saw very little activity coming out of the bureau on issuing new regulations.

In addition, criticism of the CFPB reached a tipping point, forcing politicians to take a hard look at the powers granted the bureau. A good example of this is the Arbitration Rule that the CFPB tried to force through Congress in the third quarter. While the rule initially passed Congress, it was nullified by President Trump in November.

The latest news surrounding the bureau focuses on the change of leadership, as Richard Cordray stepped down from the position of Director. With the CFPB embroiled in internal politics, we can expect another year of limited activity. However, it is no longer a fiscally sound or viable idea to return to the auto lending practices of yesterday.

Regardless of any legislative changes, compliance will continue to be in the spotlight in the coming years. Whether or not the CFPB functions under more strict parameters, we can expect a heightened level of oversight from the Department of Justice, the Federal Trade Commission, and consumer advocacy groups.

For this reason, it’s important that you foster a collaborative compliance platform for your dealer partners. Ask yourself:

When discussing compliance with a dealer, do I ask about their compliance goals and best practices? Or, is the discussion more of a lecture on how I expect dealers to comply with my compliance goals?

The path forward in compliance is by cultivating a dialogue with dealers on how to work together towards shared compliance goals.

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