F&I and Showroom, March 2018

www fi magazine com 6 F I and Showroom March 2018 LETTER FROM THE EDITOR S So what does BB Ts decision to ditch its flat fee compensation plan mean in terms of compliance Thats the question on everyones mind it seems especially since BB T was one of the first to make the switch to flats three years ago about two years after the Consumer Financial Protection Bureau CFPB issued its March 2013 guidance on dealer participation What drew attention to the move was the bank made the switch back to rate markups a week after acting CFPB Director Mick Mulvaney stripped the division that led the bureaus dealer participation examinations of its enforcement powers and about a week before Mulvaney released the bureaus five year strategic plan The 16 page plan confirms the regulators shift away from enforcement It also talks about efforts to improve the supervision examination and enforcement activities of the bureaus Supervision Examination and Fair Lending Division the one Mulvaney defanged last month One of those efforts includes piloting a project to supplement the traditional examination process I took that to mean the bureau wont be overly focused on rate markups Yeah Mulvaney is definitely making his mark Since his appointment in November the acting director has called for a review of the payday lending rules the bureau finalized last year called off a four year investigation into a South Carolina based subprime lender dropped a lawsuit against a group of four online payday lenders and initiated an examination of the bureaus policies and practices Then there was his appearance last month at the National Association of Attorneys General NAAG s 2018 Winter Meeting in Washington D C Theres no more regulation by enforcement Mulvaney said Were going to try to let the industry especially know what the rules are before we accuse them of breaking those rules Lastly and I just met with a lot of your state banking regulators a couple of weeks ago were going to be relying on you folks a lot more he continued Were going to be looking to the state regulators and state attorneys general for leadership when it comes to enforcement And you can bet theyre ready for that role In fact I wrote on this page back in November that Pennsylvania Attorney General Josh Shapiro is creating a mini CFPB that will be headed by former bureau enforcement attorney Nick Smyth Shapiro was in the room during Mulvaneys NAAG address He asked the acting director for his view on the Dodd Frank Act authorizing attorneys general to pursue civil actions in federal court for violations of the laws prohibition on unfair deceptive or abusive acts or practices Were not there to get in the way Mulvaney responded Maryland by the way has also formed a new Financial Consumer Protection Commission to assess the potential impact of changes to Dodd Frank and other federal laws Republican lawmakers are pushing Maryland Attorney General Brian Frosh and Shapiro joined 19 other attorneys general in issuing a letter last July urging U S Senate leaders to support the bureaus rule banning mandatory pre dispute arbitration when the Republican controlled Congress challenged and eventually repealed the rule under the Congressional Review Act Im betting those 21 state regulators are ready to take up the CFPBs torch And when they do theyll have plenty of auto related data to sift through Theres the 2016 Consumer Complaint Survey Report issued by the Consumer Federation of America and the North American Consumer Protection Investigators Not only was auto No 1 in the reports Top 10 Consumer Complaints Received list for the second year in a row the automotive section opens with three paragraphs on consumer complaints about canceling costly add ons And dont forget the National Consumer Law Centers Auto Add Ons Adds Up report which called on lawmakers and state and federal regulators to investigate how dealers price F I products By the way the CFPB isnt the only federal regulator that can make life tough on the auto finance industry and the F I office Theres the Office of the Comptroller of the Currency the Federal Deposit Insurance Corp the Federal Reserve Bank the National Credit Union Administration the Department of Justice and the Federal Trade Commission Still it is interesting to see how things are playing out at the CFPB under Mulvaney In fact September should be really telling Thats when the 2015 consent order the CFPB entered into with Fifth Third Bank is set to expire The question is will the bank eliminate the 125 and 1 markup caps it agreed to Bank representatives didnt respond to a request for comment Neither did representatives for Toyota Motor Credit Corp and American Honda Finance Corp whose consent orders with the CFPB are set to expire in February 2019 and July 2020 respectively They also agreed to cap markups at 125 and 1 For whatever reason that famed John Wooden quote comes to mind whenever Im asked about my compliance outlook The truest test of a mans character is what he does when no one is watching I know the character of this industry but maybe we need to use this climate of deregulation to reaffirm it with regulators Whos Watching The CFPBs acting director tells state regulators there will no longer be regulation by enforcement but the editor believes theres a long list of regulators waiting to take up the torch BY GREG ARROYO