Categories
Compliance

Keep On Keeping On

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

The Consumer Financial Protection Bureau (CFPB) has not come out unscathed in the wake of the Wells Fargo scandal. While some say the CFPB’s enforcement action demonstrates a need to strengthen the agency, others use the scandal as a case study to demonstrate the bureau’s inept and over-reaching practices. What’s behind the controversy surrounding the CFPB on this case? The L.A. Times broke the story of Wells Fargo deceptive practices in 2013, yet it just recently got the attention of the CFPB. Regulators are now asking the CFPB to account for this lapse.

In the background of all this, the Senate is scheduled to vote on legislation that could curb the CFPB’s independence. While both dealers and lenders avidly await that decision, it’s important to remember that the legislation does not dismantle with the bureau. And, with everything still up in the air, the best practice to undertake is to keep on overhauling your own compliance practices.

Regardless of any legislative changes, compliance will continue to be in the spotlight in the coming years. Whether the CFPB functions under more strict parameters or continues to have free reign over lending practices, we can expect them to continue to work to expand their influence.

Categories
Compliance

Eating an Elephant One Bite at a Time

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

Let’s talk about the elephant in the room. Our nation’s lending industry has once again made headlines for deceptive consumer practices. While this negative press is highlighting one main lender, it is also affecting general consumer sentiment about the lending industry as a whole. And, this negative sentiment is bleeding in to auto finance.

With the CFPB’s heightened focus on auto finance, lenders have been under pressure to demonstrate dealership compliance. To date, lenders have put the onus on dealers to provide compliance documentation that they can then provide the CFPB. However, with these latest developments, it’s becoming clear that both consumers and businesses of all shapes and sizes will require lenders to demonstrate their compliance procedures to keep their business.

Dealers are now concerned with the negative repercussions they can receive from sending customers to noncompliant lenders. Remember, your reputation can have a direct correlation to a dealer’s reputation, especially if you’ve been their preferred lender.

Hypothetically, if a dealer’s preferred lender relationship was with a lender of suspect, the customers who purchased vehicles through that dealer may refinance, which equals lost profit and chargebacks to the dealership. With the chance of reduced unit profit, increased chargebacks, and a potential hit to dealership credibility, it makes sense for dealers to want some assurances from their lenders that everything is above board.

Categories
Compliance Government Regulations

Reducing Your Compliance Hassles

Steve Roennau Vice President Compliance EFG Companies
Steve Roennau
Vice President
Compliance
EFG Companies

Every lender that has undergone a Consumer Financial Protection Bureau (CFPB) investigation has been hit with extensive fines and a change in process. Even the most prepared and compliant lenders have found themselves reeling after an investigation. For example, after undergoing a stringent investigation by the CFPB and the Department of Justice, Toyota Motor Credit Corp (TMCC) reached a “voluntary” resolution to address alleged discriminatory practices in its loan pricing.

Of all of the lenders anticipating a CFPB investigation, TMCC was arguably the most prepared, having completed a very thorough overhaul of their compliance procedures based on CFPB industry recommendations. If anyone was going to come out the other end of a CFPB investigation unscathed, it might well have been them.

Nevertheless, it seems that the CFPB’s agenda to use lenders to regulate dealers was not appeased with anything less than sweeping caps on dealer reserve. TMCC joined the growing list of lenders to cap dealer markup at 125 basis points for loan terms up to 60 months, and 100 basis points for loan terms longer than 60 months. And, as with previous settlements with other lenders, TMCC retains the right to pay dealers a flat fee for setting up the loan in addition to the approved dealer markup.

The TMCC settlement is momentous to the industry because the CFPB appears to have settled on a way to regulate auto lending without implementing an industry-wide flat, but rather with capping dealer markup.