My Compliance Lawyer is Crazy

Nicole Munro with Sound Advice on Dealership Compliance Practices

Deal­ers and finance com­pa­nies call our law firm won­der­ing how they can be pre­pared for the new fed­er­al Con­sumer Finan­cial Pro­tec­tion Bureau (CFPB). When we tell them they must have writ­ten poli­cies and pro­ce­dures evi­denc­ing com­pli­ance and they must review their cus­tomer accounts for fair lend­ing issues, and ensure their doc­u­ments are in order and com­pli­ant, they look at us like we are crazy.

This is part­ly because they don’t believe us and part­ly because they believe they are compliant—and if they aren’t, they think it’s pos­si­ble to fly under the radar. It is also part­ly because they don’t know what they don’t know.

Deal­er­ships need to update their philoso­phies:

  • Many of these deal­ers and finance com­pa­nies have oper­at­ed for years with loy­al employ­ees who know the laws and their busi­ness.
  • Many of these deal­ers and finance com­pa­nies care about their cus­tomers and want to work with them to estab­lish long-last­ing rela­tion­ships.
  • Many of these deal­ers and finance com­pa­nies are vis­i­bly shocked when faced with the daunt­ing task of writ­ing down the busi­ness’ prac­tices, which have tra­di­tion­al­ly been infor­mal and unso­phis­ti­cat­ed but gen­er­al­ly com­pli­ant.

They balk at the expense of fed­er­al law reviews of their adver­tis­ing and orig­i­na­tion process­es. And they look at us like we’ve com­plete­ly lost our col­lec­tive minds when we sug­gest they ded­i­cate one or more of their smartest employ­ees sole­ly to com­pli­ance rather than sell­ing cars or col­lec­tions.

They haven’t seen the CFPB civ­il inves­tiga­tive demands aimed at larg­er indus­try mem­bers and don’t rou­tine­ly read the CFPB blog and don’t fol­low the CFPB’s activ­i­ties.

There has been no recent law that has impact­ed the con­sumer finan­cial ser­vices indus­try as sub­stan­tial­ly as Title X of the Dodd-Frank Wall Street Reform and Con­sumer Pro­tec­tion Act. Title X of Dodd-Frank cre­at­ed the CFPB—a “super reg­u­la­tor” charged with pro­vid­ing pro­tec­tion to con­sumers of finan­cial ser­vices. Intend­ed to pro­tect con­sumers, the CFPB was tasked with super­vi­sion of select indus­try mem­bers like con­sumer report­ing agen­cies and “larg­er par­tic­i­pants” in oth­er indus­tries like BHPH deal­ers. The bureau was also charged with the enforce­ment of con­sumer finan­cial pro­tec­tion laws against many oth­ers.

What this means to the auto finance indus­try is that the CFPB intends to pro­tect con­sumers. It will do so by using all of the tools at its dis­pos­al, includ­ing super­vi­sion, reg­u­la­tion and enforce­ment.

So, your com­pli­ance lawyer is not crazy; we just want you to be com­pli­ant and pre­pared if the CFPB—or a state reg­u­la­tor, for that matter—comes knock­ing at your door.

Nicole Frush Munro is a part­ner in Hud­son Cook, LLP, and can be reached at Read the full arti­cle here.



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