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.
So, what can you do to protect your relationships with your dealers? You can take an often overlooked, common sense approach. Be proactive. Be transparent. Be direct.
First, be proactive rather than reactive. Before your dealers think to call and ask about your compliance procedures, send them a packet of information outlining your compliance initiatives. The packet should include your policies for safeguarding customer information and accounts, along with your anti-discrimination policies and your compliance policies specific to auto finance.
Next, be transparent. Set up a meeting to discuss compliance, and use that time to discuss both your and your dealer partner’s compliance initiatives and how you can work together going forward. Remember, this should not be an “us versus them” conversation, but rather a collaborative effort for both your institution and the dealership. One thing you will find is dealers are tired of hearing legal jargon and are looking for straight-forward answers and actionable items. Keep that in mind when developing your communication strategy. Remember, just like with consumers, the more transparent you can be, the better the relationship will be.
Finally, keep it short and simple. Dealers aren’t the CFPB. They don’t need to waste valuable time trying to decipher layers upon layers of compliance strategies. Give them broad strokes and be prepared to answer their questions in a direct fashion.
“We need to have a good comfort level with the lending institutions with whom we work every day, especially when it comes to compliance,” said Dena Moore, the finance director for the 2015 Dealer of the Year for F&I and Showroom Magazine, Davis-Moore Auto Group in Wichita, KS. “If a customer is mad at a bank, they will inevitably be mad at us. The more information a lender can provide to build trust, the easier it is for us to demonstrate credibility with our customers. While no lenders have come to my auto group with their compliance information, I would welcome the opportunity to sit down and review it. You never know, what they overlook as a routine procedure, we could take away as a selling point for doing business with us.”
Maintaining dealer relationships isn’t rocket science. But, it does take time and effort. So many businesses have fallen into the trap of simply not paying attention, thinking that the bad press of a peer won’t affect them. So, they don’t do anything. This is possibly the worst thing you could do. The fact of the matter is negative press on the scale we have seen lately is likely to affect all lenders across personal banking, business, home financing, auto lending, etc. The lenders who get in front of the elephant will be the ones with cemented business and consumer relationships when the next elephant comes along.
With almost 40 years of helping dealers and lenders expand their business, EFG Companies knows how to help lenders proactively address market challenges and foster successful, lasting relationships. Contact us today to expand your dealer relationships.