Compliance: Don’t Get Complacent
Compliance doesn’t have to be a bad thing. It doesn’t have to result in less profit, either.
The auto industry received some positive news when the U.S. 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 CFPB’s “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 bureau’s authority. It’s also important to note that this bill likely will undergo more revisions before moving through the Senate and reaching President Obama’s desk.
Until we see the bill in its final form, we can’t 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, don’t 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 doesn’t have to be a bad thing. It doesn’t 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.
It’s important to maintain the balance between ensuring complete compliance and retaining and building profit margins. That balance lies in the value proposition.
Today’s 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 at 972-445-8910 and [email protected].
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