{"id":472,"date":"2015-09-30T15:46:48","date_gmt":"2015-09-30T20:46:48","guid":{"rendered":"http:\/\/efgintelligence.com\/subprimepoint\/?p=472"},"modified":"2016-01-21T16:18:12","modified_gmt":"2016-01-21T22:18:12","slug":"taking-advantage-domino-effect","status":"publish","type":"post","link":"https:\/\/efgintelligence.com\/lendingcurve\/taking-advantage-domino-effect\/","title":{"rendered":"Are You Taking Advantage of the Domino Effect?"},"content":{"rendered":"

\"Karen<\/a><\/p>\n

 <\/p>\n

Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies<\/h3>\n

In December 2013, the Consumer Financial Protection Bureau (CFPB) ordered Ally Financial to pay $80 million<\/strong> in civil penalties over Ally\u2019s allowance of dealer markup, representing the federal government\u2019s largest auto loan discrimination settlement in U.S. history.<\/p>\n

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<\/strong> proactively took action and lowered their cap on dealer participation<\/strong> in October 2014.<\/p>\n

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<\/strong> as the CFPB announced the expansion of oversight to larger non-bank auto finance companies. <\/p>\n

Momentum built swiftly as more rumors abounded about the CFPB targeting captive finance companies. Then, a month later in July, the CFPB announced another discriminatory auto loan resolution, this time with American Honda Finance Corporation. In this settlement, Honda agreed to pay $24 million to borrowers and to \u201csubstantially reduce dealer discretion.\u201d<\/strong><\/p>\n

Now, Fifth Third Bank has entered into a consent form with the CFPB to pay $18 million to borrowers and to cap dealer markups.<\/strong> The momentum is building, and the dominoes continue to fall.<\/p>\n

While you work to ensure your compliance with the CFPB, your dealer partners are scrambling to recoup lost profit potential from reduced dealer markup. They are focusing on selling more F&I products, lining up the lenders that fund the most money on each deal, and using the increased lending competition in the subprime market to their advantage.<\/p>\n

And there\u2019s the rub. How can you focus on both compliance and differentiating your institution in a flooded market?<\/strong><\/p>\n

The best way to remain competitive is to first look at your engagement model with dealerships:<\/p>\n