F&I and Showroom, Industry Summit 2015

Regulatory Update 12 F I and Showroom Industry Summit 2015 details is frequently true here And our job is to help the regulatory agencies implement those congressional directives and in some cases to stay within those directives So our task is to help regulators understand how the world outside of government operates so when they do their job write rules to implement the policies that Congress has directed them to implement they do so in a way that allows markets to operate while providing the best consumer outcomes possible F I How is working with the CFPB different from working with other regulators Koblenz Theres one major difference As you know under Section 1029 of the Dodd Frank Act the CFPB has no supervisory regulatory enforcement or any other authority over our members who are engaged in originating indirect auto financing This is in contrast to the FTC Federal Trade Commission or the Federal Reserve Board or the IRS agencies that do have regulatory and or enforcement authority over our members But despite this difference the education process is the same F I Whats the relationship like between the association and the CFPB Koblenz We have sought out and obtained the ear of the CFPB They have talked to us and listened to us Were educating them about the market and explaining what their proposals guidance and actions would do or not do as the case may be F I Are we winning or losing the battle with the CFPB Koblenz We have had a lot of concerns with the auto financing guidance the CFPB put out in March 2013 and with the pressure the bureau has been exerting on finance sources Our concerns emanate from the fact that the CFPBs attempt to address the fair credit concerns it has identified has utilized an approach that we think doesnt really address those fair credit concerns and that additionally has adverse effects on consumers So in our view adoption of the CFPBs approach would fail to advance the ball from a fair credit perspective and at the same time would move the ball back from a consumer perspective by reducing the amount of discounts that are available to consumers What the NADA has tried to do is to explain that there is an approach to the vehicle finance market that both addresses the CFPBs concerns regarding fair credit and preserves the availability of discounts for consumers which is the hallmark of this highly competitive marketplace And that approach of course is the Fair Credit Compliance Policy Program we issued in early 2014 along with the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association We think that program is the solution to the problem the CFPB says it is attempting to address F I How is dealer adoption of that program Koblenz I think its important to note that the program is optional so its not mandatory and each dealer has to decide whether its right for his or her operation With that said some of the internal surveys weve seen suggest a fairly high level of use within dealerships From the perspective of the regulators we believe this approach which is based on a 2007 consent order developed by the Justice Department remains the single best way of addressing fair credit risk and ensuring the preservation of the ability of consumers to get discounts And we are heartened by the full throated endorsements the program has received from some of the most respected compliance attorneys in the dealer and lender communities I also want to give credit to some of the vendors including Dealertrack RouteOne and CU Direct They have actually gone ahead and automated the program for their customers which has made it easier for dealers who adopt the program to implement it F I Lets talk about Honda Finances 24 million Equal Credit Opportunity Act ECOA settlement with the CFPB and Department of Justice Did agreeing to lower its markup cap hurt the industrys efforts to protect dealer participation Koblenz Well any analysis of the consent order should recognize up front that it affects only non subvented contracts on vehicles that are financed through America Honda and doesnt apply to leases That means its really applicable only to a very very small part of the auto finance market Thats important because it The NADAs Andrew Koblenz returns to Industry Summit after participating in a compliance panel at the 2013 event