Compliance: Don't Get Complacent

Category: Auto Financing Published: Saturday, 30 January 2016 Written by Super User

The auto industry received some positive news when the US House passed the Reforming CFPB Indirect Auto Financing Guidance Act in November.

While the legislation still must pass the Senate and be signed into law, it directs the Consumer Financial Protection Bureau to amend how it issues guidance to indirect auto lenders.

Under the pending legislation, the CFPB would have to:

  • Provide a public notice and comment period before issuing the guidance in final form.
  • Make public all information relied on by the CFPB, while also redacting any information exempt from disclosure under the Freedom of Information Act.
  • Consult with the board of governors of the Federal Reserve System, Federal Trade Commission and Department of Justice.
  • Study the costs and impacts of the guidance to consumers, as well as women-owned and minority-owned small businesses.

The bill also nullifies the CFPBs Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act bulletin, which instructed lenders to eliminate dealer pricing discretion or constrain dealer pricing discretion by monitoring dealership practices and using controls to force dealerships to adjust their practices.

These developments are small wins for the auto industry. However, while this bill puts restrictions on the CFPB, it does not curtail the bureaus authority. Its also important to note that this bill likely will undergo more revisions before moving through the Senate and reaching President Obamas desk.

Until we see the bill in its final form, we cant determine how it will impact auto lending compliance. In the meantime, dealers must stay vigilant with their compliance initiatives. In no way will the industry return to business as usual. Dealers simply have more time to ensure compliance procedures are buttoned up.

Toward that end, dont take a wait-and-see approach. Take time now to complete your due diligence and ask yourself:

  • Do I know how payments are being quoted in my dealership?
  • Are my compliance policies written, with clearly defined consequences?
  • Do my pay plans support my compliance initiatives?
  • How is private information being handled in my dealership to ensure its security?
  • How am I working with lenders to ensure compliance?

Compliance doesnt have to be a bad thing. It doesnt have to result in less profit, either. Compliance can bring higher customer satisfaction, which will lead to repeat business and referrals and higher CSI scores.

Its important to maintain the balance between ensuring complete compliance and retaining and building profit margins. That balance lies in the value proposition.

Todays consumers are looking for more than just a car. They want value and they better understand the cost it takes to maintain it. You will enhance your profit margin if you focus on offering compliant consumer protection products that consumers actually want.

John Stephens is senior vice president of Dealer Services at EFG Companies. He can be reached at972-445-8910 and This email address is being protected from spambots. You need JavaScript enabled to view it..

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