2021 Membership Directory Final

RENEWED FOCUS ON CONSUMER FINANCE ENFORCEMENT

The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are under new leadership. That most likely means a return to the increased regulatory and enforcement efforts over auto sales and financing last seen during the Obama administration. Fair lending guidance issued by CFPB in 2013 claimed that lender policies that compensate dealers for originating credit contracts in the form of dealer participation create a “significant risk” of fair lending violations. The risk they were concerned about then, and will be going forward, is lenders/dealers offering financing options to disparate customers based on socio-economic factors while earning variable rates of participation.

2021 MEMBERSHIP DIRECTORY & SERVICES GUIDE HOT TOPICS

Dealers can minimize the possibility of an adverse finding by the FTC or the CFPB based on disparate impact discrimination if the dealer has established a policy such as NADA’s, “Fair Credit Compliance Policy & Program.” This program recommends that dealers who want the flexibility to offer competitive financing should “establish a pre-set amount of compensation but allow for downward adjustments to that amount in the event that one or more pre-determined conditions occur.” Justification for reducing the amount of dealer compensation can include, customer inability to make the monthly payment at the offered rate, customer’s access to more competitive financing, promotional offers, employee incentive programs and inventory reduction incentives related to a specific vehicle. No matter the compensation model you adopt, the choice must be consistent with federal and state law as well as any contractual restrictions imposed on the dealer by its finance sources. It is essential that dealers consult their legal counsel when making decisions related to this topic. The benefits of a dealership Fair Credit Compliance Programwere discussed during a“Bagels with Bieber”webinar featuring attorneys Paul Metrey, Chief Regulatory Counsel, NADA, and Christopher Koenig, Esq., Arent Fox. That webinar is available at: www.gnyada-covid19.com/webinars-1/fair-credit-compliance-webinar- protect-your-dealer-assisted-financing-program .

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