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.