We’re Keeping a Close Eye on Compliance

This time of year in our part of New England, everyone spends a fair amount of time watching the weather, talking about how much snow we’re going to get, whether it’s more or less than predicted, and whether this winter is worse or better than last year’s. Our local meteorologists have access to a fair amount of information to share. And we keep a watchful eye out to see if those projections come true.

The auto industry is in a similar situation. We are keeping a watchful eye on the Consumer Financial Protection Bureau (CFPB) and the new rules on compliance. Unfortunately, we don’t have the same level of information as our local meteorologists. We’re not flying blind – but visibility is definitely limited.

The industry won a small victory in November when the House passed the Reforming CFPB Indirect Auto Financing Guidance Act. In its current form, this piece of legislation directs the CFPB to amend how it issues guidance to indirect auto lenders by first nullifying the CFPB’s Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act Bulletin. This bulletin instructed lenders to either eliminate dealer pricing discretion or constrain dealer pricing discretion by monitoring dealership practices and using “controls” to force dealerships to adjust their practices. In addition, the bill directs the CFPB to:

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

While this bill does put restrictions on the CFPB, it does not curtail their authority over auto lending. We can expect the bill to undergo more revisions in order for it to pass the Senate and be signed by the President. So…just like the weather, we’ll keep a watchful eye on this bill as it tracks through the legislative process.

While the bill won’t mean much for the industry until we see it in its final form, we have the time now to ensure that your compliance procedures are in good shape.

Use this checklist perform your due diligence:

  • Are compliance policies written with clearly defined consequences?
  • Do pay plans support compliance initiatives?
  • How are payments being quoted in your dealership?
  • How are you working with lenders to ensure compliance?
  • How is private information being handled in the dealership to ensure its security?

Remember, compliance doesn’t have to be a bad thing. It doesn’t have to mean less profit. In fact, compliance can mean higher customer satisfaction resulting in repeat business and referrals, and higher CSI scores.

Now is the time to cultivate a balance between compliance and profitability by focusing on the value proposition. Today’s consumers are looking for more than just a car, they want value and they have a better understanding of the cost it takes to maintain it. Enhance your profit margin by offering compliant consumer protection products that consumers actually want. At Empire Dealer Services, we are keeping a watchful eye on compliance for you. We’ll keep you up-to-date as the situation evolves.

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