Compliance

CFPB Consumer Complaint Volume Jumps 80 Percent

WASHINGTON, D.C. - 

The Consumer Financial Protection Bureau said in its annual report that consumer complaint volume increased 80 percent in 2013, but vehicle loan issues still constitute only a small amount of the overall total.

The CFPB indicated this week that overall complaint volume nearly doubled from 91,000 complaints received in 2012 to 163,700 complaints received in 2013. However, only about 3,500 complaints from last year’s total were associated with either a vehicle loan or lease.

From July 21, 2011 through June 30 of last year, the CFPB received approximately 176,700 consumer complaints, but during that stretch vehicle contracts comprised only a small amount of that total figure — about 2,700 complaints.

The bureau carved out percentages of complaint categories that comprised vehicle contract issues in 2013. That breakdown went as follows:

—44 percent: Managing the loan or lease (billing, late fees, damage or loss, insurance GAP, credit, etc.), credit reporting, privacy.

—23 percent: Taking out the loan or lease or account terms and changes (changes after closing, rates, fees, etc.), required add-on products, trade-in payoff, fraud.

—22 percent: Problems when consumers are unable to pay (debt collection, repossession, deficiency, bankruptcy, default).

—11 percent: Shopping for a loan or lease (Sales tactics or pressure, credit denial, confusing advertising or marketing).

To date, including this year, the CFPB said it has received more than 310,000 complaints overall. According to the latest report, the top three complaints in 2013 by consumers were:

—Mortgages: The No. 1 most-complained about consumer product was mortgages, accounting for 37 percent of overall complaints. For these approximately 60,000 complaints, consumers were most concerned with problems when they were unable to pay, such as issues relating to loan modifications, collections, or foreclosures.

—Debt collection: Debt collection was the second most complained about category, accounting for 19 percent of overall complaints even though the bureau did not begin accepting debt collection complaints until July of last year. For the approximately 31,000 debt collection complaints, consumers were most concerned with collectors attempting to collect debt not owed, communication tactics by the collectors, and collectors taking or threatening illegal action.

—Credit reporting: The No. 3 most complained about category was credit reporting, accounting for about 15 percent of overall complaints. For the approximately 24,000 complaints about credit reporting, nearly three out of four consumers were concerned with incorrect information on their credit report.

The bureau explained that it expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take.

CFPB director Richard Cordray went on to mention that the agency expects companies to close all but the most complicated complaints within 60 days.

Cordray noted companies have responded to more than 93 percent of the complaints sent to them for response, and consumers have disputed only 21 percent of those company responses.

“Consumer complaints have become central to the work of this agency,” Cordray said. “They enable us to listen to, and amplify, the concerns of any American who wants to be heard.

“They are also our compass. They make a difference by informing our work and helping us identify and prioritize problems for potential action,” he went on to say.

Compli to Host Free Webinar Covering Workplace Challenges

PORTLAND, Ore. - 

Compliance obligation management software provider Compli is hosting a free webinar to help companies navigate workplace challenges coming this year.

The session titled, “Positioning Your Business for the 2014 Workplace,” is set to include Jean Roque, president and owner of Trupp HR. Roque plans to discuss what firms will need to know to protect the business from compliance and risk oversights while positioning the company to attract and retain top talent.

Other parts of the webinar agenda include:

• Learn about trending talent management and HR strategies

• Discover outlooks and influencers impacting compensation strategies

• Identify trends and requirements affecting workforce obligations such as benefit design and administration

• Gain awareness of recent changes in the compliance and regulatory environment and learn how your business can easily implement solutions

“With change on the horizon for workplaces in 2014, bringing together complex business obligations and initiatives that span your various departments, including compliance, human resources, operations and IT, can be a challenging task,” Compli officials said.

“Add to that additional business factors to consider such as the economic outlook, regulatory environment, political agendas, health care policies and workforce demographics, and you have a complex stew on your hands,” they continued. “How will all of these changes impact your company values and business decisions? Are you positioned to successfully navigate these changes?”

The webinar will begin at 2 p.m. ET on April 2. To complete the registration, click here.

NADA, Capital One Counsels Reiterate CFPB Questions

WASHINGTON, D.C. - 

Andy Koblenz, executive vice president and general counsel for the National Automobile Dealers Association, heard leaders from the Consumer Financial Protection Bureau speak last week and again left with questions about how the new regulatory agency intends to oversee vehicle financing.

Koblenz indicated during a panel session of an event hosted by the U.S. Chamber of Commerce that two points struck him during earlier remarks from CFPB deputy director Steve Antonakes.

“He talked about their commitment to providing clear rules of the road. And yet when you look at the indirect auto lending area, every indirect auto lender that I’ve spoken to when I asked them if they understand what the methodology that the CFPB is using for their disparate impact analysis, whether it’s the proxy methodology of the statistical controls methodology, they all say no and they’re still guessing at it,” Koblenz told attendees at the eighth annual Capital Markets Summit orchestrated by the chamber’s Center of Capital Markets Competitiveness.

Koblenz acknowledged that Antonakes stated the bureau intends to be more forthcoming on how it plans to exercise its methodology. Koblenz offered an analogy to show the quandary finance companies face nowadays.

“It’s almost like the cop standing by the side of the road and pulling people over for speeding. Someone says I want to comply and the cop says I’m not going to tell you. I’ll look back after the fact and tell you if you were speeding or not. That’s not fair and it’s ultimately going to drive credit out of the market,” Koblenz said.

With last Friday marking the one-year anniversary since the CFPB issued its guidance into how indirect auto lending operations are supposed to operate, Koblenz noted that he perked up again when Antonakes insisted the CFPB is an evidence-based organization

“They’ve chosen to address issues in the indirect auto lending model through the issue of guidance. Yet they didn’t conduct any rulemaking. They didn’t take any public comment. They didn’t receive any input from the industry from any of the players in the industry and I think it’s led to some bad outcomes,” Koblenz said.

“Their solution to the indirect lending model and to address concerns if they exist in the fair lending world is to drive the industry to an indiscretionary, flat-fee model. But had they conducted rulemaking, they would have received comments saying that flat fee doesn’t eliminate discretion because the dealers don’t have the choice of which lender to work (with), so you would have interlender discretion not intra-lender discretion. You simply can’t eradicate discretion if that’s the cause of the problem by going to a flat fee,” he went on to say.

Koblenz’s fellow panelist raised issues not only with how the CFPB’s guidance arrived but also how the bureau is taking enforcement actions against only a small handful of institutions. Those points came from Andy Navarrete, senior vice president and chief counsel at Capital One.

“There are 5,000 auto lenders in this country. Tackling individual institutions via supervision enforcement may change behaviors at those individual companies but it’s not going to move markets in a way that produces consistent rules of the road for the industry, clear expectations of dealers and clear results and predictable outcomes for consumers,” Navarrete said.

Koblenz closed by reiterating NADA and other associations contend there are solutions available “that both address fair lending risk and retain competitive and flexibility in the marketplace but the bureau’s guidance approach seems to be turning down the opportunity.”

The NADA legal expert added, “There are reasonably reliable studies that show in the auto lending arena the ability to get an auto loan is clearly a step up the ladder of economic progression. The difference between having a car and not having a car means the jobs that are available to you are the ones on the public transportation grid. With a car, the universe of jobs expands dramatically. During the financial crisis we heard stories from people who gave their mortgage back to the bank but paid on their car loans because ultimately they could sleep in their car but couldn’t drive their house.

“The access to credit in our industry is really a step up the economic ladder. It’s a point we need to remind people to overcome this demonanization that has happened over the last few years,” Koblenz went on to say.

Wolters Kluwer Survey Shows Depth of Regulatory Burden Growth

MINNEAPOLIS - 

Results of the latest Regulatory & Risk Management Indicator for the U.S. banking industry issued this week by Wolters Kluwer Financial Services indicated U.S. banks and credit unions are carrying a much heavier regulatory and risk management burden than they were a year ago.

Officials explained the indicator began with a baseline score of 100 in January of last year when Wolters Kluwer Financial Services surveyed nearly 400 U.S. banks and credit unions. The reading rose to a score of 121 in January of this year when the company surveyed approximately the same number of financial institutions.

Driving the increased score were mounting pressures expressed by banks and credit unions in all seven of the indicator’s compliance and risk management factor categories as well as more than $8 billion in new regulatory fines and settlements at the federal level in the last three months of last year.

To calculate its Regulatory & Risk Management Indicator, Wolters Kluwer Financial Services uses 10 main factors, seven of which revolve around direct input from banks and credit unions on their top compliance and risk management concerns and three of which are based on regulatory data the company compiles.

In particular, financial institutions participating in the indicator demonstrated a significantly heightened concern over the Consumer Financial Protection Bureau’s recently finalized Qualified Mortgage, Qualified Residential Mortgage and mortgage servicing requirements and guidelines.

In fact, officials pointed out only a third of respondents said they planned to offer non-QM home loans following the implementation of the CFPB’s new rules.

On the risk management front, banks and credit unions remain most concerned with regulatory risk and fair lending risk more specifically. Other major risk management concerns included asset and liability management, IT risk and fraud.

“The latest Indicator results verify a growing number of U.S. banks and credit unions are more proactively addressing regulatory change and potential risks,” said Timothy Burniston, vice president and senior director of Wolters Kluwer Financial Services’ risk and compliance consulting practice.

“Not only are these institutions more concerned about compliance and risk management, but they’re also devoting additional time and resources to addressing these areas to head off potential issues, and facilitate growth and performance objectives,” Burniston continued.

For more information on Wolters Kluwer Financial Services Regulatory and Risk Management Indicator for the U.S. banking industry, visit www.WoltersKluwerFS.com.

CFPB Names New Regulator to Oversee Auto Finance

WASHINGTON, D.C. - 

More than eight months after Rick Hackett left the Consumer Financial Protection Bureau, the agency tapped a replacement regulator on Wednesday whose main jurisdiction is the auto finance market.

Joining the CFPB as the assistant director of installment and liquidity lending markets in the bureau’s research, markets, and regulations division is Jeffrey Langer, who most recently served as senior counsel at Macy’s in Mason, Ohio.

Langer also has served as a partner in several law firms, including Jones Day and Dreher Langer & Tomkies. He is a founding fellow and treasurer of the American College of Consumer Financial Services Lawyers and is a former chair of the Consumer Financial Services Committee of the American Bar Association Business Law Section.

Hackett spent two years at the CFPB before departing the bureau last summer. Hackett arrived at the CFPB in 2011 after being a founder of the banking and financial services group at Pierce Atwood in Maine.

“I have no hesitation in saying that my work with CFPB has been the most rewarding, most challenging and most physically tasking assignment I have had in 35 years,” Hackett said in his farewell message obtained by SubPrime Auto Finance News last year.

“Of particular importance to me are the relationships I have been privileged to develop with bureau stakeholders, who have taught me critical information about the relationship of government and its stakeholders, the complexity of policy formulation, and the importance of frank and transparent exchange of ideas,” he continued.

Hackett now is a partner at Hudson Cook, a role he started in earlier this month. Hackett is set to be one of the keynote speakers during the upcoming National Conference hosted by the National Alliance of Buy-Here, Pay-Here Dealers in May in Las Vegas.

Langer’s appointment to the CFPB post was one of three announcements the bureau made this week.

Christopher Carroll also joined the CFPB as the assistant director and chief economist for the office of research in the bureau’s research, markets, and regulations Division.

Carroll is a professor of economics at Johns Hopkins University, from which he has taken a leave of absence while serving at the bureau. He also is a member of the board of directors of the National Bureau of Economic Research, and the co-chair of the NBER Research Group on Consumption. Carroll has served as a senior economist for the Council of Economic Advisors on two separate occasions, and as an economist for the Board of Governors of the Federal Reserve System.

The bureau also announced Daniel Dodd-Ramirez joined the agency as the assistant director of financial empowerment in the bureau’s consumer education and engagement division.

Dodd-Ramirez previously served as the executive director of Step Up Savannah in Savannah, Ga., from 2005 to 2014. Prior to Step Up, Dodd-Ramirez served as education project director and community organizer for People Acting for Community Together (PACT) in Miami.

From 1998 to 2000, Dodd-Ramirez was the human resources director for Families First, a social services agency in southern Vermont.

“I’m pleased that these incredibly talented individuals have joined the bureau,” CFPB director Richard Cordray said. “All three offices play an essential role in making sure that consumers are being treated fairly. These experts will lead the teams that help us monitor the marketplace and provide tangible benefit to consumers.”

AFIP Announces Launch of Certification Boot Camps

COLLEYVILLE, Texas - 

In response to dealer demand, the Association of Finance & Insurance Professionals announced the introduction of AFIP Certification Boot Camps, which include two days of accelerated preparation for the federal and state regulation-based AFIP certification exam.

The first boot camps are being offered in Cleveland, Kansas City, Mo., Scottsdale, Ariz., and Trenton, N.J., in April.

The AFIP certification course are designed to address the laws that apply to in-dealership vehicle funding and leasing and aftermarket product sales.

“As a result of recent high-dollar penalties and enforcement actions, we’ve been inundated with calls from dealers who want their people AFIP certified, but don’t want to wait the six to eight weeks it typically takes to complete the course,” AFIP executive director David Robertson said.

“The boot camp allows dealers to certify their people in a much shorter time period. We recommend that attendees spend about three weeks of independent study before the sessions,” Robertson continued.

The first day of boot camp is devoted to an intensive review of the key state and federal regulations. The second day begins with a final exam review and culminates in administration of the proctored exam.

The boot camp fee is $150, plus the cost of the AFIP certification course. Boot Camps are open to first-time, senior- and master-level candidates in AFIP’s three-tiered continuing education program.

Onsite boot camps are available to dealer groups. Managers can contact AFIP for pricing and availability.

Robertson noted the boot camp concept was originally developed to assist a national dealer group’s personnel who were having trouble completing the course.

“The methodologies implemented with this group turned out to be highly successful,” he said. “The scores and passing rates were higher than those typically achieved through the traditional course of study.

“When we started getting calls from dealers who wanted their people certified yesterday, we already had an accelerated program in place that we knew would ultimately benefit all candidates and expedite the certification process,” Robertson went on to say.

For more information about AFIP, visit www.afip.com.

AFIP Announces $1,000 Scholarship Winner

In other news, Christina Robertson, AFIP’s corporate counsel and director of education said the recipient of the $1,000 Jakob Murray Lange Memorial scholarship went to Luke Flannery, a Northwood University automotive marketing major from Bad Axe, Mich.

Robertson noted Flannery earned the scholarship for his exemplary achievement as a dealership intern last summer.

Flannery interned at Bill Marsh Automotive Group in Traverse City, Mich. The full service dealership operates on four campuses and sells new and used Buick, GMC, Chrysler, Dodge, Jeep, Ram, Hyundai and Ford vehicles.

According to general sales manager Dan O’Connor, “We first connected with Luke in a roundtable discussion on campus. I was very impressed with his professionalism and knowledge of the business. He later approached us about internship opportunities. We’d never had an intern, but decided to take Luke on last summer.

“Luke spent time in every department on all four campuses — sales, service and parts, the body shop, centralized reconditioning, marketing, accounting and J.D. Byrider — plus time on the job shadowing me,” O’Connor continued.

“Our experience with Luke went beyond our expectations,” O’Connor went on to say. “He was always prepared, conducted himself in a very professional manner and was a ‘sponge’ to all things Bill Marsh. He not only became a part of our team, by the end of the summer Luke was contributing in leadership meetings and truly had an understanding of our philosophy and culture.

“I’d like to thank Elgie Bright for his dedication to the young students coming out of Northwood. He’s a great role model and example to the next generation of automobile professionals,” O’Connor added.

This is the second year AFIP has awarded the scholarship, recently named to honor a gifted AFIP staff member, Jakob Murray Lange, who died in a car accident last year.

A plaque recognizing the scholarship recipients is on display in the NADA building on the Northwood University campus.

In addition to the scholarship funds, Flannery will receive a crystalline obelisk in recognition of his achievement.

Bright emphasized that internships have been an important component of Northwood’s automotive marketing and management program for many years.

“The experience students gain working at dealerships has proven invaluable to their success in moving from the classroom to the showroom,” Bright said. “Having AFIP support our efforts through their scholarship program raises the prestige of the experience and helps boost interest in internship opportunities.

“We are grateful to Dave Robertson and the AFIP staff for all they do to support our program here at Northwood,” Bright went on say.

And David Robertson added, “As I've learned firsthand working with dealers throughout the U.S., Northwood interns are highly prized for their ability to apply the lessons learned in the classroom to the real world challenges they encounter in the dealership."

Free NADA Webinar to Address Federal Advertising Requirements

McLEAN, Va. - 

With dealer advertising promoting attractive financing options in the crosshairs of the Federal Trade Commission, the National Automobile Dealers Association is hosting a free webinar aimed at helping stores keep their campaigns compliance.

NADA officials highlighted the upcoming “Comply with Federal Advertising Requirements” webinar will provide participants the opportunity to hear directly from a panel of FTC attorneys on key requirements and restrictions related to dealership advertising.

Set to be a part of the session from the FTC are Mark Glassman, Teresa Kosmidis, and Carole Reynolds

NADA chief regulatory counsel Paul Metrey will moderate the discussion, which will highlight recent FTC advertising enforcement actions from dealerships around the country as examples of what to avoid.

The 75-minute webinar is available to dealership employees, dealership compliance professionals, and persons who provide advertising services to dealerships.

The webinar will be held at 1 p.m. ET on March 19.

Click here to register.

AutoNation, Asbury Bosses Consider NADA Fair Credit Guidance

FORT LAUDERDALE, Fla., and DULUTH, Ga. - 

Less than two weeks after the National Automobile Dealers Association released its fair credit guidance to member franchised stores, top executives at two of the largest publicly traded dealer groups are still assessing the recommendations and determining what to do next.

AutoNation chairman and chief executive officer Mike Jackson said the company would be implementing NADA's guidance at certain stores during the next few months, "to see exactly how it works, how difficult it is to roll out, how disruptive it this and what kind of issues we would have to roll it out on the broader basis. That's the way we do everything.

"There's no way I'm subjecting the entire company to a roll out of something from one day to the next when we haven't figured out exactly how it would work and what the results would be," Jackson continued during AutoNation's conference call with investment analysts last Thursday.

"And because I don't know, you don't know for sure whether it really takes you down to the road of achieving the objectives and how disruptive it is so I think it's very prudent," Jackson went on to say. "I applaud NADA for putting it together. I think it's a step in the right direction. We're going to take it into stores and see how it works. We've seen the test results so I think we have time to do this in a prudent manner."

The crux of NADA's fair credit guidance is that stores would have set standards for any dealer participation that would be altered only because of certain circumstances such as matching a competitor's interest rate or as part of an incentive issued by an automaker or finance company.

If any changes are not consistent with the store standards, NADA suggested dealers document reasons for any changes to allow for reviews by regulators such as the Consumer Financial Protection Bureau.

Asbury Automotive Group president and chief executive officer Craig Monaghan was asked about the NADA guidance that can be found at www.NADA.org/faircredit on Tuesday during that company's quarterly conference call.

"We very much support the direction that they're going in trying to nail down something that's more concrete for all of us," Monaghan said. "I would also add that many of the elements they're proposing we already have in place. We're just going to continue to watch how this plays out.

"I think bottom line for us we feel very confident that no matter what comes we'll be able to manage through it," he continued.

All of the developments are coming in reaction to the CFPB first issuing its own guidance on indirect auto lending last March as well as the significant enforcement action the agency handed out against Ally Financial just before Christmas. Ally agreed to a consent decree that included a $98 million penalty among other demands.

During the American Financial Services Association's Vehicle Finance Conference that preceded NADA's annual gathering, the CFPB reiterated its apprehension about dealer participation because of what regulators believe to be the opportunity for discrimination. The CFPB maintained that dealers should be compensated for being a part of the origination process. The regulatory kept pointing to its guidance from last year, but Monaghan still is foggy about how indirect auto lending can be completed based on those compliance recommendations.

"I would say from the big picture, we'd love clarity. We don't feel like the CFPB has given us the clarity that we would very much like to have," Monaghan said.

Despite the perceived regulatory drive to element dealer participation and move to a flat-fee structure, Jackson remains confident the process for indirect auto financing unfolds will continue.

"I think the business model absolutely is a winner for all parties. All parties acknowledge that, and that includes CFPB, so I don't expect a structural change in the business model," Jackson said.

"Everybody's trying to find common ground where the amount of discretion at the store level can be restricted to the point that the CFPB feels much more comfortable that the possibility of discrimination has been restricted," he continued. "Whether that leads to more caps, I don't see flats or a solution like NADA proposed, which we're going to try at a few stores. I call it the Pacifico model where it's a markdown model where management has to sign off on it.

"I think there's a lot of discussions," Jackson went on to say. "I think at the end of the day, though, the business model serves the marketplace the lenders and us extremely well. It's very effective, very efficient for everyone. There is a reason that 80 percent of auto loans are originated through the dealers. It's because we're very good at it with a lot of added value. It saves the customers a lot of money, and do very effectively for the bank. So I don't know the end of the story yet. I think it will be on ongoing story, but there'll be common ground, and I do not expect the fundamental business model to change."

To reinforce his position, Jackson pointed to his observations of few industry-wide changes after the CFPB made its enforcement actions against Ally.

"If you look at the Ally agreement, there are no operational changes in that agreement whatsoever so you would think that something significant was coming," Jackson said. "Since the government has a lot of leverage with Ally, it would have happened then but it didn't.

"Our discussions with the lenders is that they're so satisfied with the current business model and how it works that they feel there will be some other solution to find common ground with CFPB," he continued. "So it's interesting, that nothing's changed yet. You have the first enforcement action, and from an operating point of view, nothing has changed."