{"id":41,"date":"2013-07-30T10:26:15","date_gmt":"2013-07-30T15:26:15","guid":{"rendered":"http:\/\/efgintelligence.com\/subprimepoint\/?p=41"},"modified":"2013-11-04T16:31:54","modified_gmt":"2013-11-04T22:31:54","slug":"make-cfpb-exposure-a-non-issue","status":"publish","type":"post","link":"https:\/\/efgintelligence.com\/lendingcurve\/make-cfpb-exposure-a-non-issue\/","title":{"rendered":"Make CFPB Exposure a Non-Issue"},"content":{"rendered":"

\"Contributing<\/a>With the Consumer Financial Protection Bureau (CFPB) threatening to crackdown on what they deem as predatory auto loan practices, dealers and financial institutions alike are scrambling to make sure they are compliant with the fair lending requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.<\/p>\n

The CFPB was created in July 2010 in an effort to consolidate most Federal consumer financial protection authority in one place.\u00a0 To-date, the thrust of the CFPB\u2019s oversight has been on rooting out deceptive advertising and sales practices, including misrepresentation of products or product costs, and enrolling customers in products or programs without their consent.\u00a0\u00a0 In general, the laws prohibiting these practices are not new; however, the CFPB has also stepped up efforts to eliminate discriminatory practices. \u00a0Take the following example:<\/p>\n

Sally, a subprime borrower, walks into a dealership to purchase a car. Her F&I manager submits the paperwork to several lending institutions, who then decide to extend a rate on the loan. The interest rate offered by the lender to Sally reflects the higher risk in a loan to an individual of Sally\u2019s credit worthiness.\u00a0 The F&I manager presents Bank ABC\u2019s rate to Sally, but what she doesn\u2019t know is that, after getting the bank\u2019s rate, her F&I manager increased it with the intention of the dealership participating in the lending profit.\u00a0 No problem so far.<\/em><\/p>\n

However, a discriminatory practice occurs if the F&I manager marks up Sally\u2019s interest rate by a greater amount than the dealership typically marks up the bank\u2019s \u201cbuy rate\u201d for other customers, even if Sally has few other options to finance her vehicle purchase and is willing to accept the interest rate presented by the dealership.\u00a0 The fact is that the bank\u2019s buy rate already appropriately reflects the risk in a loan to Sally and the cost to the dealership associated with financing Sally\u2019s purchase is no different than that associated with every other customer.\u00a0 \u00a0If the F&I manager increased the rate more for Sally than he would have for another customer because of her race, gender, ethnicity, or any other protected class, then his actions could be deemed discriminatory and both the dealership and Bank ABC could be held liable.<\/em><\/p><\/blockquote>\n

Some questions have arisen from lenders as to whether the sale of F&I products, such as extended vehicle service contracts, could increase their liability.\u00a0 Not surprisingly, subprime lenders have asked the question most frequently as they were the proverbial \u201cscapegoat\u201d held responsible by many for the latest recession. \u00a0As sub-prime lenders expect to be targeted first and monitored most closely by the CFPB, it makes sense for them to double check every process and procedure to ensure compliance.<\/p>\n

Lenders who partner with consumer protection product administrators that understand the depths of their business and the regulation that goes with it don\u2019t have to worry. \u00a0Organizations like EFG Companies<\/a> (EFG), that hold administrative licenses in every state for the sale of F&I products, have made compliance a core facet of their business, influencing everything from product development to claims and client support.<\/p>\n

The sale of vehicle service contracts and GAP policies are some of the most highly regulated products by the states.\u00a0 As long as the seller\u2019s advertising and sales practices are sound, the responsibility for compliance actually lies with the contract administrator.<\/p>\n

As noted previously, the majority of legal hot spots to-date concerning the sale of consumer protection products fall within marketing and advertising, where companies may inappropriately use deceptive language regarding actual product benefits, the cost of the product, or eligibility.\u00a0 Advertising and sales practices are deemed sound on multiple bases.\u00a0 The products available for discretionary purchase should be presented to all prospective buyers.\u00a0 The features, coverages and eligibility requirements as well as the cancellation and refund policies associated with the products should be fully disclosed.\u00a0 And the incremental cost associated with each product should be fully disclosed in an uncomplicated manner.<\/p>\n

With engagement from F&I product providers that embody dependability and integrity, lenders can rest assured that their loan buyers and their dealership partners are presenting their products accurately and fairly. \u00a0EFG<\/a> goes above and beyond to mitigate liability by developing customized go-to-market execution plans for each client.\u00a0 This effort begins with a comprehensive review of the client\u2019s existing processes and leads to joint agreement with the client with respect to a well-defined blueprint for compliant \u2013 and profitable \u2013 implementation.\u00a0 EFG then creates customized training curriculum and conducts interactive training with the client\u2019s field sales force and credit analysts, supported by ongoing monthly audits, to ensure that compliance pitfalls are avoided.<\/p>\n

Sub-prime lenders have a great opportunity to bundle their loans with F&I products to increase profit per transaction. \u00a0However, lenders should keep these considerations top of mind when selecting their product administrative partners: \u00a0their operating history and customer service brand recognition in the marketplace, their compliance focus and capabilities, and their liability structure. \u00a0Whomever they choose as their partner must be strong in all three areas to provide the level of service and compliance expected from a trusted partner.<\/p>\n","protected":false},"excerpt":{"rendered":"

With the Consumer Financial Protection Bureau (CFPB) threatening to crackdown on what they deem as predatory auto loan practices, dealers and financial institutions alike are scrambling to make sure they […]<\/p>\n","protected":false},"author":1,"featured_media":102,"comment_status":"open","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":[29,14],"tags":[8,2,7,159,160,10,12,13,3,11,6,5],"class_list":["post-41","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banner","category-government-regulations","tag-advertising-sales-practices","tag-cfpb","tag-dealerships","tag-efg-companies","tag-fi","tag-finance-insurance","tag-gap","tag-guaranteed-asset-protection","tag-john-pappanastos","tag-lenders","tag-sub-prime","tag-subprime"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/efgintelligence.com\/lendingcurve\/wp-content\/uploads\/sites\/4\/2013\/07\/EFG-Blog-Images.jpg?fit=760%2C250&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7ht2K-F","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/41","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=41"}],"version-history":[{"count":14,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/41\/revisions"}],"predecessor-version":[{"id":191,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/posts\/41\/revisions\/191"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/media\/102"}],"wp:attachment":[{"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/media?parent=41"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/categories?post=41"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/efgintelligence.com\/lendingcurve\/wp-json\/wp\/v2\/tags?post=41"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}