{"id":1108,"date":"2024-05-30T13:40:18","date_gmt":"2024-05-30T18:40:18","guid":{"rendered":"https:\/\/efgintelligence.com\/lendingcurve\/?p=1108"},"modified":"2024-05-30T13:40:18","modified_gmt":"2024-05-30T18:40:18","slug":"here-to-stay","status":"publish","type":"post","link":"https:\/\/efgintelligence.com\/lendingcurve\/here-to-stay\/","title":{"rendered":"Here to Stay"},"content":{"rendered":"<p>Recently, the Supreme Court reversed a decision by a federal appeals court in Louisiana, rejecting a challenge concerning the constitutionality of the funding structure of the Consumer Financial Protection Bureau (CFPB). The case originated from a challenge by industry groups to a \u201cpayday lending\u201d rule issued by the CFPB in 2017. By approving the CFPB\u2019s funding from the\u00a0Federal Reserve, rather than through the congressional appropriations process, <strong>the ruling protects the agency from future funding threats.<\/strong><\/p>\n<p>Reinvigorated by the Supreme Court\u2019s decision, the independent agency, which is responsible for enforcing consumer finance laws, has shown signs that it intends to move forward with all activities\u2014rulemaking, investigation, and enforcement\u2014at full speed. <strong>Agree or disagree with their role and existence, the CFPB is here to stay<\/strong> and credit union leaders should make sure they are in full compliance.<\/p>\n<p>In a recent interview with <a href=\"https:\/\/www.npr.org\/2024\/05\/19\/1252350817\/the-supreme-court-ruled-to-protect-the-cfpb-heres-why-it-matters-for-your-money\">NPR<\/a>, CFPB director Rohit Chopra provided some insight into the agency\u2019s mission, approach to consumer protection and fraud investigation. Born out of the Great Recession, the CFPB receives over 200,000 consumer complaints <u>each month<\/u> and works to address financial scams and fraud. In fact<strong>, the agency plans to issue a delayed auto lending report,<\/strong> outlining the results of its inquiry into the portfolios of nine auto lenders. While the specific details regarding the content of the report are not yet available, <strong>anticipated topics will include affordability, practices in loan servicing and collections, as well as competition among subprime lenders.<\/strong><!--more--><\/p>\n<p>Earlier in the year, the agency sent out a mandatory request for auto financing data. The request was two-fold:<\/p>\n<ul>\n<li><u>Comprehensive data from large lenders<\/u>. Lenders originating over 20,000 auto loans in the previous year will submit comprehensive loan-level data, mirroring\u00a0<a href=\"https:\/\/files.consumerfinance.gov\/f\/documents\/cfpb_auto-finance-loan-1022-sample-order_2023-02.pdf\">the original order\u2019s scope<\/a>.<\/li>\n<li><u>Limited data from smaller lenders<\/u>. Lenders with 500 to 20,000 loan originations will report on specific metrics like the number of vehicles repossessed and the number of loan modifications.<\/li>\n<\/ul>\n<p>With an estimated 4,000 auto finance companies who operate in the subprime space and offer vehicle add-on products, <strong>the CFPB is focused on rising auto prices and the impact it has had on borrowers\u2019 loan amounts, monthly payment amounts, delinquencies and repossessions.\u00a0<\/strong>These types of data gathering actions are often a precursor to formal rulemaking. While this specific request is focused on a certain type of auto lender, <u>all<\/u> auto lenders should pay heed.<\/p>\n<h3>Compliance violations can be costly<\/h3>\n<p>Let\u2019s take a quick review of the key federal compliance regulations impacting credit unions and their auto loan portfolios.<\/p>\n<ul>\n<li><strong>FTC CARS Rule<\/strong> \u2013 while the <a href=\"https:\/\/www.ftc.gov\/news-events\/news\/press-releases\/2023\/12\/ftc-announces-cars-rule-fight-scams-vehicle-shopping\">Federal Trade Commission\u2019s Combating Auto Retail Scams (CARS) Rule<\/a> is targeted primarily at auto dealers, lenders should be well informed about the regulation. Effective July 30, 2024, the rule prohibits misrepresentation about material information, requiring dealers to clearly disclose the offering price, excluding only government charges. It also makes it unlawful for dealers to charge consumers for add-ons that don\u2019t provide benefits and requires dealers to obtain consumers\u2019 express, informed consent for certain charges.<\/li>\n<li><strong>NCUA Fair Lending Examinations<\/strong> \u2013 the <a href=\"https:\/\/ncua.gov\/regulation-supervision\/letters-credit-unions-other-guidance\/ncuas-2024-supervisory-priorities\">National Credit Union Administration<\/a> (NCUA) will perform fair lending examinations this year for federal credit unions meeting specific conditions. Even if you are a smaller credit union or fall outside the indirect auto loans to total loans ratio, adhering to the general framework is good business.<\/li>\n<li><strong>Truth in Lending and Consumer Leasing Rules<\/strong> \u2013 based on the <a href=\"https:\/\/www.consumerfinance.gov\/about-us\/newsroom\/agencies-announce-dollar-thresholds-for-applicability-of-truth-in-lending-and-consumer-leasing-rules-for-consumer-credit-and-lease-transactions\/\">dollar thresholds<\/a> issued by the Federal Reserve Board and the CFPB, consumer credit transactions or consumer leases of $65,000 or less are subject to <a href=\"https:\/\/www.consumerfinance.gov\/rules-policy\/regulations\/1026\/\">Regulation Z<\/a> (Truth in Lending) and <a href=\"https:\/\/www.consumerfinance.gov\/rules-policy\/regulations\/1013\/\">Regulation M<\/a> (Consumer Leasing) requirements. Given the high cost of both new and used vehicles these days, it\u2019s likely that most auto loans will fall under these regulations.<\/li>\n<\/ul>\n<p>In addition to these federal compliance regulations, it\u2019s likely that your state and local entities have additional rules that must be followed.<\/p>\n<p>Now, let\u2019s consider the cost of being out of compliance. At this point in the year, your credit union has likely had to provision more resources to loan loss reserves to cover deteriorating consumer credit quality and at-risk assets. While most of those declines are due largely to credit card delinquencies, <strong>many credit unions are beginning to see defaults on auto loans as consumers face unemployment, rising inflation and depleted savings.<\/strong><\/p>\n<p>With reduced reserves, a smaller credit union might look for ways to trim other expenses such as compliance-related training, audits, exam preparation, etc. Don\u2019t do it! Trust me \u2013 the cost of being involved in an expensive compliance audit, legal fees, potential negative judgements \u2013 and the risk to your reputation \u2013 are not worth the risk.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently, the Supreme Court reversed a decision by a federal appeals court in Louisiana, rejecting a challenge concerning the constitutionality of the funding structure of the Consumer Financial Protection Bureau [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1109,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[79],"tags":[2,80],"class_list":["post-1108","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-compliance","tag-cfpb","tag-compliance-2"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/efgintelligence.com\/lendingcurve\/wp-content\/uploads\/sites\/4\/2024\/05\/Brien-Joyce-Author.png?fit=1050%2C350&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7ht2K-hS","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/1108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/comments?post=1108"}],"version-history":[{"count":1,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/1108\/revisions"}],"predecessor-version":[{"id":1110,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/1108\/revisions\/1110"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/media\/1109"}],"wp:attachment":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/media?parent=1108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/categories?post=1108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/tags?post=1108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}