Category: Compliance

Categories
Compliance

CFPB Upheaval

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 defending itself. In the process of appealing the ruling from the U.S. Court of Appeals for the District of Columbia calling the CFPB “unconstitutionally structured,” the Department of Justice (DOJ) and 15 state Attorneys General joined the fray of government entities agreeing with the initial ruling.

The DOJ told the D.C. Circuit Court 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. Just recently, the American Financial Services Association (AFSA) has joined the call to curb CFPB authority when they submitted a list of suggested regulatory reforms to the Trump administration. At the top of their list, was, of course, a halt to CFPB examinations and a moratorium on the use of disparate impact theory.

Lastly, in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the Supreme Court ruled that Congress specifically intended to include disparate impact claims in the Fair Housing Act, but required plaintiffs to prove that a defendant’s policies could cause disparity. This ruling has significant implications for the CFPB in terms of how it determines disparate impact in auto finance.

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Categories
Compliance

Online Reviews and Compliance

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

Over the last few years, businesses everywhere have been working hard to establish a positive online presence beyond just their website. It’s become standard practice for lenders to be listed on websites like consumeraffairs.com, lendingtree.com, and bankrate.com. The reason behind these listings is to build trust online and develop a brand presence.

After all, it would be extremely difficult to find an industry that hasn’t been affected by the prevalence of consumers who conduct online research for products and services, including reviews, before making a decision. This tends to become more prevalent with services and purchases that could have long-term repercussions, including insurance, loans, credit cards, etc.

Now, you’re probably asking yourself, what does this have to do with compliance?

In this highly integrated world of online reviews and social media, it can be tempting for lenders to use cookie cutter, online review vendors to boost positive reviews while minimizing negative reviews. For example, one widely used tactic across all industries is to utilize contract provisions, including online terms and conditions, to penalize consumers for posting negative reviews or complaints. This specific tactic has been ruled as illegal under the Consumer Review Fairness Act (CRFA), which protects people’s ability to share in any forum their honest opinions about a business. Specifically, the CRFA makes it illegal for a company to use a contract provision that:

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Categories
Compliance

The Cost of Compliance

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