Tag Archive | "CFPB"

House Passes Legislation that Would Nullify CFPB Bulletin Regulating Car Dealers

WASHINGTON – The U.S. House of Representatives recently approved a piece of legislation that would nullify a 2013 bulletin issued by the Consumer Financial Protection Bureau, but would likely need the Senate to do the same by a veto-proof margin.

The Reforming CFPB Indirect Auto Financing Guidance Act targets a bulletin that gave guidance on Equal Credit Opportunity Act indirect auto lending requirements, reports legalnewsline.com.

“The bill passed with a veto-proof margin in the House, but it will have to pass the Senate with the two-thirds majority needed to withstand the possibility of a presidential veto,” said Elizabeth M. Bohn, shareholder at Carlton Fields Jorden Burt.

Bohn, who co-chairs the firm’s Consumer Finance Industry Group, added that those who opposed the bill argue that it would prevent the CFPB from effectively carrying out its duty to protect minority borrowers, and promised an administration veto.

“In my personal opinion, the bill does not appear to impair the CFPB’s authority to protect minority borrowers,” Bohn said.

“Rather, it is aimed at ensuring that (1) the Bureau does not regulate car dealers, who are exempt from (the Dodd-Frank Wall Street Reform and Consumer Protection Act); (2) that the methodology used by the Bureau to support its regulatory guidance based on findings of disparate impact is transparent and yields reliable information about disparate impact; and (3) that industry has fair notice of CPFB regulatory action vs. ‘guidance’ that appears to be de facto regulation,” Bohn said.

In 2013, the CFPB issued guidance that challenged a dealer’s ability to discount the annual percentage rate (APR) offered to consumers to finance vehicle purchases.

According to the bulletin, the CFPB confirmed that some indirect auto lenders use “markup and compensation policies” — policies that allow auto dealers to “mark up lender-established buy rates” and then compensate the dealers for those markups.

And since the compensation policies are created at the discretion of the dealers, the bulletin asserted that there is a “significant risk” of creating pricing disparities based on race, national origin or other prohibited bases. The ECOA makes discrimination by a creditor “in any aspect of a credit transaction” illegal.

CFPB’s bulletin proposed a strong influence over common auto industry practices, and some have wondered if the CFPB’s ability to change the auto industry world sets a difficult precedent in the industry. Bohn believes it does.

“The CFPB’s regulatory and enforcement activities against indirect auto lenders affect the auto finance industry and dealers alike,” Bohn said.

“For lenders to implement the policies and procedures needed to comply with Bureau expectations is costly and burdensome. Those added costs and burdens imposed on lenders, along with the reduction in profitability to dealers for originating contracts, could reduce the number of deals financed and lead to fewer financing options for consumers.”

Since the CFPB is supposed to deal with financial institutions, some question whether the CFPB is overstepping its boundaries by attempting to regulate the auto industry.

“The CFPB is authorized to regulate financial institutions and larger market participants providing consumer financial services, including consumer auto lenders. It isn’t authorized to regulate auto dealers,” Bohn said.

“The bill’s sponsors claim that the Bulletin represents a Bureau effort at an end-run around Dodd-Frank’s exclusion of auto dealers by attempting to regulate compensation paid to auto dealers.

“Specifically, by using enforcement actions against large indirect auto lenders to pressure finance companies to lower caps they set on dealer reserve or eliminate this discretion altogether. While indirect lenders who purchase consumer auto loans may be creditors subject to the Equal Credit Opportunity Act, and subject to CFPB enforcement, I would agree that the Bulletin’s expectation that lenders impose significant control on dealer compensation and mark up policies to avoid violations of ECOA swerves into regulation of auto dealers.”

Posted in Auto Industry NewsComments Off on House Passes Legislation that Would Nullify CFPB Bulletin Regulating Car Dealers

Texas Compliance Summit Sets New Standard

AUSTIN — Organizers of Texas Compliance Summit have announced that the conference, held last week at the Hilton Austin Airport, drew nearly 100 attendees and raised the bar for future events.

“All the events to date have been excellent, but I have to say that Texas Compliance Summit was the best yet,” said David Gesualdo, show chair and publisher of Auto Dealer Today and F&I and Showroom. “The agenda was incredibly comprehensive, all the speakers delivered memorable and informative presentations, and the crowd could not have been more engaged.”

The event began Monday, Nov. 16, with an evening reception and welcome address, followed by a full day of featured speakers and panel discussions. Highlights included sessions dedicated to actions taken by the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC) and state attorneys general, as well as compliance in sales, F&I and digital communications. The panels, which included four speakers who work in dealerships in Texas, Kansas and Colorado, tackled issues relating to the design, implementation and enforcement of compliant front-end processes. Karen Phillips, general counsel and executive vice president of the Texas Automobile Dealers Association (TADA), discussed truth in advertising, data sharing and factory relations.

Texas Compliance Summit also featured the debut of Auto Dealer Compliance, a new magazine dedicated to helping U.S. auto dealers keep up with the latest news, training tips and commentary from leading experts.

“Compliance is here to stay, and that’s not a bad thing,” Gesualdo said. “If we learned anything from the attorneys, trainers and dealers at Texas Compliance Summit, it’s that transparency and strict adherence to the law offers the clearest path to production in F&I and peace of mind for dealers and car buyers.”

For information about the next Compliance Summit, stay tuned to the event’s website.

Posted in Summit UpdatesComments (0)

House to Vote on CFPB-Altering Bill This Week

WASHINGTON, D.C. — The U.S. House of Representatives is expected to vote this week on a bill that would rescind the Consumers Financial Protection Bureau’s guidance on dealer participation and add a few more steps in to its guidance-writing activities.

The House is expected to vote on H.R. 1737, which the House Financial Services Committee passed this past July by a 47-10 vote, either on Wednesday or Thursday. It was introduced this past April by Rep. Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.).

Aside from repealing the bureau’s March 2013 guidance on dealer participation, the legislation would require that the bureau provide a public comment period, consult with other agencies that share jurisdiction over the indirect auto finance market and disclose its testing methodologies before issuing any further guidance. The bill has received strong support from the National Automobile Dealers Association, which called on members this week to contact their local Congressperson to urge them to vote “Yes” on the bill.

“H.R. 1737 is a good-government bill that says to the CFPB, stay in your lane, make sure you understand the market, listen to the public, listen to the stakeholders — all of them — understand the implications of what you’re doing, understand what your actions do to consumers, and understand what they do to minority-owned businesses, women-owned businesses, and, in fact, all small business,” Andrew Koblenz, the NADA’s executive vice president of legal and regulatory affairs and general counsel, told F&I and Showroom this past September.

“And be transparent,” added Koblenz, who served as a keynote speaker at the magazine’s annual conference in September. “Tell us what you’re basing your analysis on, your conclusions on, and, to the extent you can, what your data shows. And coordinate with other agencies that have share responsibilities in this marketplace …”

Posted in Auto Industry NewsComments Off on House to Vote on CFPB-Altering Bill This Week

Reynolds Expands Into Mortgage Banking With IDS Acquisition

DAYTON, Ohio — Reynolds and Reynolds, a dealership software, documents, and compliance services company, has acquired IDS, a provider of mortgage documents and compliance services.

The Salt Lake City-based IDS, or International Document Services, will operate as a standalone division of Reynolds and Reynolds and retain its name and brand in the market.

“We look forward to continuing to serve our IDS customers with the expertise and service they’ve come to expect from us,” Mark Mackey, vice president and general manager of IDS. “Now we can do so with the strengths and advantages of a much larger company behind our brand.”

New regulatory requirements from the Consumer Financial Protection Bureau impacting  the mortgage industry went into effect earlier this month. Mackey indicated that IDS is ready to implement services for its customers in response to the new regulations.

“The mortgage industry — much like automotive — is facing the dual challenge of increased pressure from regulators and the changed expectations from consumers who are looking for a more rewarding and engaging experience when handling the documents necessary to purchase a vehicle or home,” said Robert Burnett, senior vice president of business development at Reynolds and Reynolds. “IDS has developed a strong reputation and product line in serving the mortgage banking industry and their expertise is well recognized.”

Reynolds and Reynolds provides software, documents and services to dealerships. One of its offerings is the docuPAD, a solution designed to help dealerships meet regulatory and compliance requirements, a well as and streamline F&I document processing and improve customer experience.

Reynolds officials said the company recently completed a two-year pilot program of the docuPAD in the mortage industry, a trial period that resulted in the software being rebuilt for use by mortage lenders.

The docuPAD is a large, flat, touchscreen dealership use to complete a vehicle sale or lease. It can be used to present content and documents like personalized product menus and video presentations. The docuPAD can also be used for e-signature capture for contracts, disclosure documents and compliance verification.

Posted in Auto Industry NewsComments (0)

NADA Files Second Request for Internal CFPB Documents

MCLEAN, Va. — The National Automobile Dealers Association (NADA) filed a Freedom of Information Act (FOIA) request today, asking the Consumer Financial Protection Bureau (CFPB) to release internal documents acknowledging that the agency intended to regulate the auto finance market through enforcement action, and eschewed evidence that its methods for estimating disparate impact were deeply flawed.

This is the second time in less than three months that the NADA has requested internal CFPB documents leaked to American Banker. A request filed in July asked that the bureau turn over documents that allegedly stated the CFPB’s “goal” in the auto lending arena was to significantly limit dealer discretion, despite the fact that the regulator is specifically prohibited from regulating auto dealers under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB denied the NADA’s request three days later.

On Sept. 17 and Sept. 24, American Banker published articles that made numerous references to internal CFPB documents. Those documents supposedly show that the CFPB based its understanding of vehicle financing on a now-discredited study conducted by the Center for Responsible Lending. The bureau also allegedly acknowledged in the documents that the proxy methodology it uses to determine the presence of discrimination in auto lending is flawed, yet it continues to use the results to reach large settlements with finance companies like Honda Finance Corporation and Fifth Third Bank.

“These documents demonstrate a lack of transparency and accountability that should be deeply troubling to anyone concerned about how significantly a regulator can influence a market that affects millions of consumers,” said NADA President Peter Welch in a statement on the NADA’s website. “Consumers benefit tremendously from the discounts they get from dealers, and they have every right to demand that their voices be included in — not willfully excluded from — the debate about how to regulate the auto finance market.”

Earlier this month, during the bureau’s semi-annual report to Congress, CFPB Director Richard Cordray was challenged by lawmakers over the methods the bureau is using to bring enforcement actions against auto lenders. The regulator noted that “‘Accurate’ is in the eye of the beholder,” and that the CFPB is working to find the most reliable method possible to determine the presence of discrimination in auto lending.

However, Cordray was not forthcoming about the internal documents cited by American Banker, telling members of Congress he was only “roughly familiar” with the memos.

Posted in Auto Industry NewsComments (0)

CFPB Considering Ban on Arbitration Clauses

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced it is considering proposing rules that would ban arbitration clauses in consumer financial services contracts, less than five months after 50 members of Congress urged the bureau to eliminate such clauses.

Describing arbitration clauses as a “free pass” to block consumers from suing in groups to obtain relief, the CFPB said the proposals under consideration would give consumers “their day in court and deter companies from wrongdoings.”

“Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” said CFPB Director Richard Cordray in a statement. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”

In its press release announcing its intentions, the bureau cited results of a three-year studyit conducted on pre-dispute arbitration clauses. Released this past March, results showed, among other things, that more than 75% of consumers surveyed did not know whether they were subject to an arbitration clause in their agreements with their financial services providers. The report also concluded that it is common for such clauses to be invoked to block class action lawsuits.

The study fueled more than 50 members of Congress, led by U.S. Sen. Al Franken (D-Minn.) and Rep. Hank Johnson (D-Ga.), to issue a letter to the bureau this past May. It urged the regulator to eliminate arbitration clauses in consumer financial contracts.

“In total, the study conducted by the CFPB at Congress’ request roundly confirms that individuals unknowingly sign away their rights through forced arbitration agreements, which do not reduce consumer costs for financial service,” the letter read, in part. “Moreover, forced arbitration shields corporations from liability for abusive, anti-consumer practices, encouraging even more unscrupulous business conduct at the expense of individuals and law-abiding businesses.

“Based on this substantial bedrock of evidence, we urge the CFPB to move forward quickly to use its authority under the Dodd-Frank Act to issue strong rules to prohibit the use of forced arbitration clauses in financial contracts and give consumers a meaningful choice after disputes arise.”

But not everyone took the study’s findings at face value. In April, Tom Hudson, F&I and Showroom’s legal columnist and Hudson Cook LLP partner, criticized the CFPB’s report for its “gaping holes” — such as failing to address the growing consumer-friendliness of arbitration clauses.

“In fact, it isn’t unusual to see clauses that provide for the payment by the creditor of some or all the costs of arbitration,” Hudson wrote. “Creditors also frequently call attention to the presence of an arbitration agreement by using large type, separately boxing the clause or having it separately signed or initiated. The study offers no insight on whether these best practices might change any of its conclusions.

“There is much to dislike about the CFPB’s work on arbitration,” Hudson added. “You’d think arbitration must have some things to recommend it, since Congress passed the Federal Arbitration Act and nearly all states have enacted laws permitting arbitration. But the bureau seems determined not to see any good in the process.”

The American Financial Services Association also took issue with the bureau’s study and proposals, saying in a statement issued to F&I and Showroom that the bureau has not provided any meaningful link beween arbitration and class action lawsuits. It also noted that academic studies have shown that arbitration cases actually produce more in the way of settlements than class action lawsuits.

“As the CFPB study indirectly points out, class action attorneys are the real winners, raking in excess of $424 million in fees awarded in settlements during the period studied,” the statement read. “The bureau that is entrusted to protect consumers is again making it policy to deprive them of that very protection. In essence, the rules that the bureau is proposing would deprive consumers of a low-cost, lawyer-free dispute resolution system and replace it with an expensive, lengthy, and complex judicial process.”

Included in the bureau’s announcement was an outline of the proposals under consideration. They will be reviewed by a panel of “small industry stakeholders” as the bureau’s first step in its potential rulemaking process. The proposals include a complete elimination of arbitration clauses that block class action lawsuits. The ban would apply to credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans.

Creditors would also have to say explicitly that arbitration clauses found in their agreements do not apply to cases filed as class actions unless and until the class certification is denied by the court or the class claims are dismissed in court. The bureau also wants to require companies that choose to use arbitration clauses for individual disputes to submit to the CFPB the arbitration claims filed and awards issued.

“This will allow the bureau to monitor consumer finance arbitrations to ensure that the process is fair for consumers,” read the CFPB’s press release, which noted that the bureau will seek input from the public, consumer groups, industry and other stakeholders before continuing with its rulemaking process. “The bureau is also considering publishing the claims and awards on its website so the public can monitor them.”

Posted in Auto Industry NewsComments Off on CFPB Considering Ban on Arbitration Clauses

Page 4 of 17« First...23456...10...Last »