Tag Archive | "compliance"

UDS Wins Two Dealers’ Choice Awards

CLEARWATER, Fla – United Development Systems, Inc. (UDS) has been named the Diamond Award Winner for F&I Training and Gold Award Winner for Compliance Training in the 2016 Dealers’ Choice Awards by Auto Dealer Today.

For the twelfth consecutive year UDS has been ranked tops in the F&I Training category, while placing 1st in eleven out of twelve years surveyed. “UDS is proud to have won this award each and every year the survey has been conducted. We believe that solid F&I Training and Coaching is the foundation of our value proposition to Dealers and to have today’s Dealers validate our efforts is rewarding,” says Randy Crisorio, President and CEO of UDS. “As we launch growth initiatives throughout the Southeastern U.S., our training will continue to evolve with the changing car-buying experience giving our Dealer Partners a step up,” adds Crisorio.

This is the twelfth year Auto Dealer Today has held the Dealer’s Choice Awards, which recognizes the highest rated vendors, suppliers and finance companies in the automotive industry. The awards are based solely on the votes of those who use the products and services every day, namely dealers and dealership management. Respondents rated providers in four areas: 1) the quality of the product or service, 2) customer support and service, 3) the overall value, and 4) whether the dealer would recommend the provider.

UDS is a full service F&I Performance Company based in Clearwater, Florida – recognized over the past twelve years as the best F&I Training and Development Partner, and a top Compliance Trainer, in the industry. For nearly 35 years, UDS has been providing automotive retailers with F&I training and development solutions to complement its full line of quality F&I products. Also available is critical technology solutions in AutoMenu®, the only true F&I selling system, and AutoTracking®, an easy to use online reporting system.

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CFPB Issues Proposal to End Forced Arbitration

ALBUQUERQUE, N.M. — As expected, the Consumer Financial Protection Bureau used its 34th field hearing to issue its proposed rule prohibiting mandatory arbitration clauses in finance contracts. Companies will still be able to include such clauses in their contracts under the bureau’s proposal; they just won’t be able to use such agreements to stop consumers from being part of a class action in court.

Issued on May 5, the proposal comes more than a year after the bureau issued its 728-page report on the use of pre-dispute arbitration clauses in consumer finance markets. The study, which reviewed more than 1,800 consumer finance arbitration disputes filed over a three-year period beginning in 2010 and more than 3,400 individual federal lawsuits, found that consumers were awarded less than $175,000 in damages and less than $190,000 in debt forbearance in arbitration suits vs. just less than $1 million in federal lawsuits.

“Today, we are proposing a new regulation for public comment and further consideration. If finalized in its current form, the proposal would ban consumer financial companies from using mandatory pre-dispute arbitration clauses to deny their consumers the right to band together to seek justice and meaningful relief from wrongdoing,” said CFPB Director Richard Cordray at the hearing, held at the Albuquerque Convention Center. “This practice has evolved to the point where it effectively functions as a kind of legal lockout. Companies simply insert these clauses into their contracts for consumer financial products or services and literally, with the stroke of a pen, are able to block any group of consumer from filing joint lawsuits known as class actions.”

Through the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress asked the CFPB to study the use of mandatory arbitration clauses in consumer financial markets. Congress also gave the bureau the power to issue regulations that are “in the public interest, for the protection of consumers, and consistent with the study.”

Released in March 2015, the CFPB’s study concluded that very few consumers bring individual actions against their financial service provider, either in court or in arbitration. It also showed that at least 160 million class members were eligible for relief over the five-year period studied. Those settlements totaled $2.7 billion in cash, in-kind relief, and attorney’s fees and expenses. In its press release announcing the proposed rule, the bureau said the study’s findings do not account for the “the potential value to consumers of class action settlements requiring companies to change their behavior.”

But not all findings in the study supported the elimination of mandatory arbitration clauses. For instance, the study showed that in many class action cases where the principal purpose of seeking class relief was to pressure a settlement, members of the class action got nothing or next to nothing. It also found that class action cases almost never make it to trial, while a significant percentage of arbitration proceedings actually resolve the disputes. The study also showed that arbitration is both faster and more economical than litigation.

“Late last year, the CFPB released a study on arbitration, which the bureau says shows that consumers are harmed by arbitration agreements as opposed to class action lawsuits. However, a careful review of the CFPB’s study demonstrates that the opposite is true …,” the American Financial Services Association wrote in a news brief issued last Thursday. “In 60% of class actions studied by the CFPB, consumers received no remuneration at all.

“In the 15% of cases where consumers received monetary compensation in class actions, they received an average of just $32.25, after waiting an average of 23 months,” the associated added. “In contrast, consumers who prevailed in arbitration agreements, on average, received $5,389. The real winners in class action lawsuits are plaintiff’s attorneys, who divided approximately $424 million in fees.”

The CFPB said its proposal, which will be open for public comment for the next three months, would open up the legal system to consumers so they can file or join a class action someone else files. And while companies will still be able to include arbitration clauses in their contracts under the proposal, the clauses would have to say explicitly that they cannot be used to stop consumers from being part of a class action in court. The proposal would also provide the specific language companies must use.

Additionally, the bureau’s proposal would require companies with arbitration clauses to submit to the CFPB claims, awards, and certain related materials that are filed in arbitration cases. This would allow the bureau to monitor consumer finance arbitrations to ensure that the arbitration process is fair for consumers. The bureau is also considering publishing information it would collect in some form so the public can monitor the arbitration process as well.

“If arbitration truly offers the benefits that its proponents claim, such as providing a less costly and more efficient means of dispute resolution, then it stands to reason that companies will continue to make it available,” Cordray said at the bureau’s hearing. “So the essence of the proposal issued today is that it would prevent mandatory arbitration clauses from imposing legal lockouts to deny groups of consumers the right to pursue justice and secure meaningful relief from wrongdoing.”

That’s not how the AFSA views the bureau’s proposal. “Despite a wealth of evidence suggesting that the bureau’s interpretation of its own study is flawed, today’s rule, in its present form, would have a negative impact on customers by taking away a valuable tool to resolve disputes,” the associated stated. “AFSA will comment on the proposed rule and will continuing its ongoing dialogue with the CFPB.”

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Privacy: None of Your Business?

Are privacy concerns part of your business? If not, they should be. Ignoring them can unnecessarily expose your agency, your reputation and your dealer clients to great harm. To begin with, it is necessary to understand NPI.

NPI is a common abbreviation for nonpublic personally identifiable financial information. Personally identifiable financial information, in turn, means any information a consumer provides in order to obtain a financial product or service from you, typically a loan application. Car dealers who extend credit or arrange financing or leasing have certain responsibilities with regard to safeguarding NPI.

NPI is commonly found in dealerships in credit applications, driver’s licenses, credit card numbers and credit reports, to name a few, and can be on paper or in computer files. Let’s take a closer look at the process and benefits of securing this information.

Leave No Stone Unturned

Let’s start at the top. Does your dealership have policies and procedures in place to address safeguarding NPI? What happens to the customer’s driver’s license while they are taking a test drive? Do they sit on your salesman’s desk or in his or her drawer? What about credit card numbers? Do they sit in an unsecured area when a customer wants to get a rental car?

Do all employees have “all access” to the dealership computer network where customers’ NPI is stored? Are secure passwords and authentication required to access NPI, and is there a suspension protocol after a certain number of unsuccessful attempts? What are your polices regarding paper records? Where are they stored and who has access to the storage area? Where do you store “dead deal” files? How about “closed deal” files? These files are filled with NPI. Where are they stored, how are they secured and who has access to them? What happens when you need to move these files within the dealership or to a different building? What are your policies and procedures to keep them secure? How many sets of keys are there to the secure room and who has those keys? What happens when your salesmen or managers get up to leave their desks? What is displayed on their screen and is the network secured before they leave their desks? What are your remote access policies?

The policies and procedures should be overseen by a compliance coordinator with authority to carry out the duties of the position and who reports to the general manager or dealer. Can your dealer clients say, in good faith — as required by the Safeguards Rule — that they maintain “physical, electronic and procedural safeguards to protect the confidentiality and security of the information we collect”? Is there a training program in place so that existing employees and new hires are trained on the compliance issues, including the importance of securing NPI and protecting the business’ reputation?

When Disaster Strikes

One increasing risk of failing to secure NPI is a data breach or other security incident. In 2015 alone, there were almost 800 reported data breaches; many more go unreported. Each time a data breach happens, a business’ reputation suffers, money is lost and that business may come under strict regulatory scrutiny.

Have your dealers performed a risk assessment or security audit? Do you know if there are vulnerabilities in the process to taking, processing, storing and disposing of NPI? As previously mentioned, I would bet that your dealers’ sales desks and storage areas could be areas of concern as far as securing NPI goes. Is there a process for addressing any reports or discoveries of security vulnerabilities? Do you use industry standard methods to secure and monitor your network? Do you test your information security program regularly?

Does your business use outside service providers who have access to your customer’s NPI? For instance, do you use a contact management/business development system such as BDC or CRM which interfaces with your DMS? Can those other applications access NPI which you have stored in your DMS? Do you have a segmented network? Do you have contracts with written security expectations from the service provider? Do you oversee your service provider to verify they are compliant with your security expectations?

While it may be tempting to consider these ideas as something that will never happen to you or your clients, you should be aware of the consequences. Aside from the incalculable value of the loss of their customer’s goodwill, the FTC can seek civil penalties of $100,000 per violation against the business and $10,000 per violation against liable officers and directors. In addition to these civil sanctions, there can also be criminal penalties and claims of unfair trade practices. You may have heard of LifeLock, a company that specializes in identity theft prevention. LifeLock was recently penalized $100 million, in part because it failed to establish and maintain a comprehensive information security program. This is a company that is supposed to specialize in security! And that is a lot of zeros and a lot of reasons why compliance and privacy should have your undivided attention.

If you are reading this article, then you must know the importance of privacy rights and nonpublic personal information. Protecting privacy and customers’ NPI must be part of your business plan, now and for the future. As the old adage goes, no one plans to fail, but many fail to plan. While perhaps no system can be “bulletproof,” it makes good business sense to make reasonable efforts to protect yourself from the dangers of not securing customer privacy and NPI. Go out there and do all you can to protect yourself, your business and your dealer clients’ hard-earned goodwill and implement your security program!

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What Is a CMS and Why Do I Need One?

You may have heard of the term “CMS” and wondered what it meant. In the context of regulatory compliance, it stands for “compliance management system.”

A CMS provides dealership management with a systematic framework for compliance, from cradle to grave, in the lifecycle of products and services subject to supervision by the Consumer Financial Protection Bureau (CFPB).

A properly designed CMS will establish responsibilities and lines of communication and ensure compliance is “baked into” business processes. It will also provide a mechanism to review proper execution and to correct problems. A CMS represents “best practices” for dealers, and should help lower the risk of violating the law and harming consumers.

Agents can do their clients a great service by introducing this concept and taking an active role in building each dealer’s CMS. Let’s take a closer look at why these systems are so important and how they are designed.

F&I Under Fire

The CFPB does not have direct oversight over new- and used-vehicle dealers under certain circumstances. More particularly, dealers are exempted if they meet two requirements: first, they are predominantly engaged in the sale, lease and servicing of motor vehicles; and second, they routinely assign retail installment sales contracts to third-party finance entities.

On the other hand, “buy here, pay here” (BHPH) dealers, who own their own finance companies and do not routinely assign retail installment sales contracts (or retail leases) to unrelated finance entities may be subject to CFPB authority. The same is true for dealerships that do not have a service department.

Keep in mind that the CFPB has jurisdiction over auto financing at large banks, credit unions and affiliates with assets of more than $10 billion dollars. The CFPB has also revised the definition of “larger participants” to include any nonbank auto finance companies (e.g. captive finance companies) that make, acquire or finance 10,000 loans or leases in a year. The CFPB estimates that these nonbank auto finance companies originate 90% of all nonbank auto loans and leases.

The CFPB also has jurisdiction over indirect lenders under many laws such as the Equal Credit Opportunity Act (ECOA), unfair or deceptive acts or practices under Dodd-Frank, the Truth in Lending Act (TILA), the Consumer Leasing Act (CLA) the Fair Credit Reporting Act (FCRA) and the privacy of consumer financial information standards set by the Gramm-Leach-Bliley (GLB) Act, among others.

The ECOA generally makes it illegal for a lender to discriminate on any prohibited basis, including race, color, religion, national origin, sex, marital status and age. ECOA issues can arise in dealer-arranged financing when the dealer has the opportunity to increase the auto loan interest rate above the rate quoted by the indirect lender, typically referred to as “markup” or “dealer reserve.” The ECOA risk is that the markup is illegally based upon prohibited factors. So while there is a carveout for dealers as described above, the CFPB can and does still have the very real ability to supervise and affect dealers and their businesses.

CMS Essentials

Now that you have some idea about the extent to which the CFPB can affect business on the dealership floor, your dealers still may ask why they need a CMS. The short answer is that the CFPB says so and it makes good business sense. A CMS demonstrates a commitment to compliance with applicable consumer protection laws. If that doesn’t convince your dealers, remind them that a customer who feels they have been treated fairly makes for repeat business and referrals.

The CFPB Supervision and Examination Manual (Ver. 2, October 2012) states, in part, “The CFPB expects every regulated entity under its regulation and supervision authority to have an effective compliance management system (CMS).” When the CFPB starts an investigation, they typically start by asking for a copy of the written CMS. How would your dealers answer that question?

A CMS is expected to show policies and procedures showing how the business complies with federal consumer protection laws. Do you have this? A CMS should demonstrate operational and training procedures. Have you implemented such a program? A CMS should show auditing, testing and complaint management. What is your process for these functions?

Ultimately, a CMS improves customer satisfaction and customer retention which, in turn, increases profitability. A CMS just makes good business sense and helps to reinforce the good name and reputation of the dealership. The old saying that an ounce of prevention is worth a pound of cure applies doubly in the compliance space. So don’t delay. Go out there and help your dealers by implementing a CMS today!

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NCM Associates’ Kerr to Break Down BHPH at Dealer Summit

TAMPA, Fla. — Organizers of Dealer Summit have announced that NCM Associates’ Dustin Kerr will present a session dedicated to buy-here, pay-here (BHPH) operations at the event, which will take place May 3-5, 2016, at the Sheraton Tampa Riverwalk Hotel.

“As a trainer, operator and moderator, Dustin Kerr has a wealth of experience and wisdom,” said Greg Goebel, president of DealerStrong. “I advise any Dealer Summit attendee who has an interest in launching or improving a BHPH operation to take notice.”

Kerr managed BHPH dealerships in two different states and served as the general manager of a General Motors dealership before joining NCM Associates, where he serves as a trainer and 20 Group monitor.

His session, “Building BHPH Wealth in a Dangerous Compliance Landscape,” will begin at 11:30 a.m. on Wednesday, May 4. He is expected to explain how properly planned and managed BHPH operations can serve as a hedge against the vagaries of the economy and the subprime market.

“Many attributes that make us great car guys and gals on the retail side are the very things that lead to our demise in the BHPH business,” Kerr said. “To truly be successful, you have to understand and apply best practices for the BHPH model.”

Registration for Dealer Summit is open at the event’s website. Dealers who register by April 1 will enjoy a $100 early-bird discount. 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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Dealertrack Releases 2016 Dealertrack Compliance Guide

LAKE SUCCESS, N.Y. — Dealertrack has released the 2016 edition of its Dealertrack Compliance Guide in print and online formats. The guide, written for dealers and is free of charge, is designed to help dealers protect their dealerships from audits, fines and consumer fraud.

The new edition contains new Federal laws — including new regulations governing dealer advertising — that have taken effect in 2016.

The 2016 guide also offers recommended practices for data safeguards and identity theft protection. It also contains instructions on how dealers can implement a compliance management system.

To access the new guide, click here.

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