How much F&I income dealerships can generate might have sustained another impediment stemming from a published report that surfaced this week.

SubPrime Auto Finance News connected with Ben Saul, who is a partner in Goodwin Procter’s consumer financial services litigation group in Washington, D.C., to discuss the implication of the captive finance companies for Honda, Nissan and Toyota potentially entering into consent decrees with the Consumer Financial Protection Bureau and the Department of Justice.

American Banker reported that it obtained confidential documents that indicated American Honda Finance Corp., Toyota Motor Credit Corp. and Nissan Motor Acceptance Corp. would accept as part of consent decrees involving unintentional discrimination that the captives would reduce dealer participation. The report said the markup would be cut from about 200 basis points per vehicle installment contract down to 100 basis points.

After seeing the online report, Saul emphasized, “It remains to be seen what the actual consent orders will say. I think it’s important to mindful of that; or even if there will be consent orders. It’s a process. Both parties have to agree. You file a consent order. The judge has to enter it. There’s a whole process that hasn’t played out. We’re way out in front of it.”

But presuming these documents preview what the captives and regulators finalize, Saul told SubPrime Auto Finance News during a phone interview on Wednesday that the development “would be a significant move for the industry. It may be a harbinger for other industry participants to move markup caps down, which is of course something that in dribs and drabs has been happening since the indirect auto fair lending examinations and investigations really kicked off with a fervor several years ago.

“I would expect that’s how the industry will react,” he added.

While none of the captives nor the regulators have yet to make official announcements, Saul leveraged his experiences to explain the current stage. He has represented clients in matters involving not only the CFPB and DOJ, but also situations associated with the Federal Trade Commission and the Securities and Exchange Commission.

“These investigations are fairly advanced. The article referenced internal memorandum provided internally at the CFPB seeking authorization for terms and conditions of the consent decree,” Saul said. “That tells you that negotiations surround the consent decree are at an advanced stage presumably.

“Although anything can happen in a negotiation, we’re likely to see a negotiated resolution soon in the near term,” he continued.

While the possible change in dealer participation at these three captives, the report doesn’t indicate a the finance arms for Honda, Nissan and Toyota are preparing to switch to a flat-fee structure, which BB&T Dealer Finance chose to do last month without a regulatory demand.

“If this was a move to flats, it would be tremendously significant. But it does appear that the agreement in the consent order will stop short of that more dramatic move,” Saul said.

“There’s no question that there is a current in the industry that has been moving for some time moving in the direction of either reduced markup caps or either going one step further, the imposition of a flat-fee or fixed structure,” he continued.

“I think that movement is picking up momentum but a movement to flats in particular would be such a seismic shift in the structure of these transactions that I suspect, given the breadth and scope of the industry players, that many will continue to be resistant to a movement to flat fees,” Saul went on to say.

“So as long as that is the case, the momentum will be limited. Certainly I think the momentum is picking up steam, but it probably has not yet reached a critical mass that you’re going to see a broad-based shift in how this compensation model works,” he concluded.