Tag: EFG Companies

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Business Growth Economy

Choose: Compete or Manage Risk

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

Remember when you were shocked that average loan terms had increased to 62 months, then 68 months and so on? While the industry is no longer shocked by loan terms that last more than five years, lenders are now grappling with the reality that their borrowers are up-side-down on their loans for much longer periods of time while still making record-high loan payments.

According to Experian’s latest State of the Auto Finance Market report, the average new vehicle payment increased to $506 in Q4 2016, with an average loan term of 68 months and an average amount financed of $30,621.

Within 68 months, what do you think is the likelihood of a consumer experiencing something that would affect their ability to make their auto loan payment? Maybe their car breaks down or they lose their job. Your algorithms can probably tell you that the likelihood is pretty high. That’s why Experian has seen 60-day delinquencies rise in almost every State of the Auto Finance Market report issued in the past few years.

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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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Uncategorized

CFPB – A Year in Review

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

A lot has happened with the Consumer Financial Protection Bureau (CFPB) in the past year. From large settlements to court rulings, the CFPB brought itself under the spotlight.

Let’s start at about this time last year. The House of Representatives passed H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act” with a strikingly majority vote of 332-92. The piece of legislation would direct the CFPB to amend how it issues guidance to indirect auto lenders by:

  • providing a public notice and comment period before issuing the guidance in final form;
  • making publicly available all information relied on by the CFPB, while also redacting any information exempt from disclosure under the Freedom of Information Act;
  • consulting with the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Department of Justice; and,
  • study the costs and impacts of the guidance to consumers, as well as women-owned and minority-owned small businesses.

In addition, the bill would nullify the CFPB’s “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act Bulletin”. This bulletin instructed lenders to either eliminate dealer pricing discretion, or constrain dealer pricing discretion by monitoring dealership practices and using “controls” to force dealerships to adjust their practices.

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