Tag: CFPB

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Compliance F&I

Prepared for F&I Product Compliance?

Steve Roennau Blog Headshot

With the Consumer Financial Protection Bureau (CFPB) quickly ramping up its influence over auto-finance, it is widely expected that F&I products will be the next area of scrutiny. As a lender, there are a few ways to proactively prepare your institution for this next step in CFPB regulation.

The first, and most obvious step is to set limits on how much you’ll fund for the sale of F&I products. Be aware, however, that as the CFPB is reducing the dealer profit from rate markup, dealers will be looking to maximize profit from F&I product sales. They will be looking for lenders who are competitive with their funding options. Look at your entire compensation plan to ensure that it not only promotes consistent pricing, but also fairly and competitively compensates the dealer for the business.

As with all of the vendors that a lender uses, the CFPB is likely to require lenders to vet all product administrators. Savvy lenders are reviewing the contracts to get a better view into the product administrator’s practices, and their customer service standards.

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Compliance F&I

Are You Taking Advantage of the Domino Effect?

Karen Klees, Certified Consumer Credit Compliance Professional

 

Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

In December 2013, the Consumer Financial Protection Bureau (CFPB) ordered Ally Financial to pay $80 million in civil penalties over Ally’s allowance of dealer markup, representing the federal government’s largest auto loan discrimination settlement in U.S. history.

Throughout 2014, the auto finance industry was on the edge of its seat to see who would be next. Rumors flooded the industry of CFPB investigations, but no news came out about another settlement. Meanwhile Chrysler Capital, Santander Consumer USA proactively took action and lowered their cap on dealer participation in October 2014.

We then waited another eight months before another lender felt the sting of the CFPB. In June 2015, BB&T announced the launch of flat fees as the CFPB announced the expansion of oversight to larger non-bank auto finance companies.

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Compliance F&I

The Supreme Court Upholds Disparate Impact. Now What?

Karen Klees, Certified Consumer Credit Compliance Professional

 

Contributed Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

June was a big month for the Consumer Financial Protection Bureau (CFPB). The Supreme Court of the United States held in the case of Texas Department of Housing and Community Affairs et al. v. Inclusive Communities Project, Inc., that “disparate-impact claims are recognizable under the Fair Housing Act.” The CFPB established their Larger Participant Rule, putting captive finance companies under their jurisdiction. And, BB&T announced the launch of a nondiscretionary dealer compensation program that prohibits dealer markup and offers a flat-fee dealer compensation program.

Right now, you can’t read the news without seeing an article about the CFPB and speculation on what the industry will look like in the coming months. Rumors abound that three captives currently under CFPB investigation, Honda, Nissan and Toyota, will cap dealer markup.

Just recently, Honda Finance Corporation reached a resolution with the CFPB and the Department of Justice, where it agreed to change its pricing and compensation system to “substantially reduce dealer discretion and minimize the risks of discrimination,” and to pay $24 million in restitution to affected minority borrowers. While the jury is still out on Nissan and Toyota, lenders have a unique opportunity to take advantage of all this activity.

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