Categories
Compliance

Compliance: Not Dead Yet

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

Sighs of relief turned into sighs of frustration this past December when the Department of Defense (DOD) issued a new interpretation of the Military Lending Act (MLA), potentially resulting in severe implications for all dealers who sell or have sold vehicles to active duty members of the U.S. armed forces and/or their dependents.

It seems that even the holiday season can’t put the brakes on compliance initiatives. As of December 14, 2017, creditors providing credit-related products and services, like GAP, Credit Life, Credit Disability or cash-out financing, must now comply with a full range of duties and restrictions imposed by the MLA. While this interpretation didn’t go into effect until December, it applies to all transactions going back to October 3, 2016.

Auto lenders and dealers are now spending the first month of the new year consulting with their legal counsel to determine whether to continue to offer such products and services to active duty military consumers and their dependents, and if so, what actions must be implemented to comply with MLA requirements.

History of MLA

Congress passed the MLA in 2006 to help protect active duty service members and their dependents from predatory lending. Since 2015, the DOD has been slowly amending the final rule to expand the scope of the MLA to include the majority of closed and open-ended loans.

Categories
Business Growth

What’s Your Value Proposition for 2018?

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

When you walk into a dealership, what value do you bring to the F&I office besides another loan for which their customers may qualify? In 2018, F&I managers across the country are concerned with three hot buttons:

  • Maintaining compliance
  • Maximizing profitability
  • Shortening transaction time

With a myriad of compliance procedures and paperwork on hand, F&I managers have a difficult job when it comes to balancing compliance, profitability and time management. The best way to separate your loan from the competition is to help them with this balance. How do you do this?

Provide clear standards for loan approvals. This not only helps with compliance, but helps F&I managers ensure that they submit well-qualified customers for your loans. You know your qualifications, but how well do F&I managers know them? Look at how often you deny auto loans. If that number is high, it could be because your standards are unclear to the F&I officer.

Categories
Economy

Protecting Your Loan Portfolio from Auto Defaults

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

According to recent data from the S&P Dow Jones Indices and Experian, auto defaults rose by 9 basis points in August, and by 10 basis points in September, 2017. These represent the largest month-over-month increases since December 2011. In addition, September’s auto defaults represent the highest level analysts have seen since February 2015.

With these numbers in hand, it’s no surprise that more banks are pulling out of the subprime auto finance space to retool their credit algorithms. As credit unions and captives scramble to capture that market share, lenders everywhere are evaluating how to securely expand their auto loan portfolios without significantly increasing risk.

We’re seeing more lenders looking into alternative data to expand their algorithms and better qualify consumers. Among other criteria, lenders are increasing the importance of income verification, employment tenure, pay frequency and the possibility of employment disruption in their qualification process.