Remaining compliant under new leadership
Published Jan. 2017
Welcome to 2017!
With the turn of the calendar, the U.S. now has a new Congress and, as of January 20, a new President. Many are speculating what these developments mean for the automobile finance industry. More specifically:
- What changes will be made to the leadership, structure or focus of the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC)?
- How will state and local regulators respond to what happens in Washington D.C.?
- What does this mean for dealers and GM Financial?
What impacts will this have on the CFPB and FTC?
The CFPB and FTC hold regulatory power over most of the federal consumer financial laws. These regulatory powers can be delineated into three areas: rulemaking, enforcement and supervision.
Rulemaking is very visible, public and as a result is potentially subject to political pressures. With a potential different agenda on hot-button issues like small-dollar lending, arbitration and debt collection, the new administration may have the greatest impact on the content of rules not yet finalized.
Enforcement is less subject to politics. Since substantive laws are not likely to change early in the new administration and wholesale changes to agency enforcement staff are not likely early on, we should continue to expect relatively aggressive investigative and enforcement activity by federal regulators.
Supervision is a CFPB activity. Because supervision and examinations are private and conducted by staff not directly affected by Presidential appointments, it is the least subject to politics. As a result we should expect little to no short-term supervisory affect from the new congress or administration.
How will state and local regulators respond?
Differing agendas and priorities may not match federal priorities. Depending on the political persuasion of a state and its regulators, local and state officials may feel the need to fill any gaps they perceive as being created by different regulatory or policy focus at the federal level.
What does this all mean for dealers and GM Financial?
In the short term, there is no change in the importance or scope of our regulatory compliance. We will continue to work hard to comply with all laws, with special focus on:
- credit bureau use and reporting and dispute management;
- fair lending compliance - continued monitoring of dealer participation, buy rates and underwriting;
- debt collection - with a watchful eye on UDAAP developments;
- ancillary products – accurate disclosure of financed products; and
- consumer privacy and personal information protection.
More specifically, this means dealers will likely experience continued regulatory focus on areas targeted in 2015-16 by FTC enforcement actions like the following:
- Accuracy of Advertisements:
- vehicle pre-sale inspections and certifications – e.g., failure to disclose open recalls;
- clear disclosure in advertised terms relating to lease vs financing;
- disclosure of up-front costs required to obtain an advertised payment;
- advertising teaser rates that few, if any, customers can attain;
- disclosing certain “trigger terms” without disclosing the additional required information;
- disclosing low payment without clearly disclosing the period to which it applies;
- Issues relating to so called “yo-yo” financing – e.g., requiring a consumer to sign a new financing agreement (rather than cancelling the initial contract) when the initial agreement cannot be placed with a financing company, threatening loss of down payment or reporting vehicle as stolen if new contract not signed;
- Ancillary products – e.g., selling product through claims that product is required or would improve the chance of finance approval;
- Other deceptive actions – e.g., creating false/fictitious positive customer reviews on dealer or other websites.
The bottom line is that our customers expect us all to comply with the laws of the land. We will continue our focus in this area to ensure we remaining compliant for both our consumers and dealers.
Happy New Year!
Chief Compliance Officer