Tag Archive | "CFPB"

Tom Hudson Joins Dealer Summit Roster

TAMPA, Fla. — Prominent consumer finance attorney Thomas B. Hudson has agreed to speak at the upcoming Dealer Summit, organizers said Wednesday. The event will take place May 3–5, 2016, at the Sheraton Riverwalk Tampa Hotel. Hudson’s session, “Subprime and BHPH Dealers: How Regulators Have Changed Your Business Model,” will begin at 2 p.m. on Wednesday, May 4.

“Tom Hudson is universally admired as a dealer advocate and unwavering voice of reason,” said Greg Goebel, president of DealerStrong. “We couldn’t have asked for a better speaker to tackle this important topic.”

Hudson is a partner in the Washington, D.C., office of Hudson Cook LLP and one of the automotive industry’s foremost legal minds. He a frequent speaker and prolific writer, authoring a number of legal guides and publications and serving as a regular contributor to Auto Dealer Today and F&I and Showroom magazines.

Hudson is expected to analyze recent enforcement actions by federal regulators and their effect on automotive finance, including special finance and the buy-here, pay-here (BHPH) segment. Dealers must be willing to adapt to a “new business landscape” and change their business models, he warned, or face legal action that could cost them their livelihoods.

“There are two kinds of dealers in the world — those who know that the regulatory ground has shifted beneath them and those who don’t,” Hudson said. “Dealers need to understand and conform to the new rules or get out of the business before the regulators force them out.”

Registration for Dealer Summit is open at the event’s website. Dealers who register by April 1 will enjoy a $100 early-bird discount. They will also have access to several pre-show activities, including F&I Think Tank and Jim Ziegler’s Profit Masters.

For information about exhibition and sponsorship opportunities, contact show chair David Gesualdo via email hidden; JavaScript is required or at 727-947-4027.

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AFIP Issues Guidance on Reg. Z and M Dollar Thresholds for 2016

COLLEYVILLE — The Association of Finance and Insurance Professionals issued guidance this week on the Federal Reserve Board and the Consumer Financial Protection Bureau’s Nov. 25 announcement that 2016 dollar thresholds for Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing Act) exemptions will remain unchanged in 2016.

Protections under the TILA and CLA will apply to consumer credit transactions and consumer leases of $54,600 or less in 2016, according to the agencies, the same thresholds that applied in 2015, reports F&I and Showroom.

“The $54,600 threshold will remain the same for 2016, as well the accepted practice for processing transactions in excess of that amount.”

The $54,600 maximum amount to qualify for installment sale and consumer lease protection under TILA and CLA, respectively, is not based on the selling price of the vehicle, but on the “amount financed” for a credit sale and the “total contractual obligation” for a lease, Robertson added. The total contractual obligation includes non-refundable amounts a lessee is contractually obligated to pay under the lease, but excludes the residual value, purchase option price and amounts such as taxes, license and registration fees collected by the lessor, but paid to third parties.

“However, most dealers treat all consumer transactions as if they fall under TILA and CLA, regardless of the dollar amount involved,” Robertson noted. “Under the two regulations, a consumer transaction is one in which the vehicle is used ‘primarily’ for household, family or personal use. Consumer transactions exceeding the $54,500 threshold may be recorded on a TILA compliant installment sale agreement or a Consumer Leasing Act compliant lease agreement.”

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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.”

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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.

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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 …”

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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.

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