Advocates for more regulation by federal agencies over the auto finance industry and other financial services providers might describe the latest executive order by President Trump as “one step forward and two steps back.”
The White House released the latest order involving regulations on Monday, saying that whenever an executive department or agency publicly proposes a new regulation, that department also must identify at least two existing regulations to be repealed.
“It is the policy of the executive branch to be prudent and financially responsible in the expenditure of funds, from both public and private sources,” the executive order said beneath the purpose heading. “In addition to the management of the direct expenditure of taxpayer dollars through the budgeting process, it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with federal regulations.
“Toward that end, it is important that for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process,” the order continued.
The order, which is available here, also said that for fiscal year 2017 that’s currently ongoing that the heads of all agencies are directed that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year should be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the director of the Office of Management and Budget.
Regulatory moves like this one by Trump were predicted at least to a degree during last week’s Vehicle Finance Conference hosted by the American Financial Services Association. During a nearly hour-long panel discussion, two experts faced the difficult challenge of trying to project what this administration might do in terms of how finance companies to navigate regulatory oversight and potential changes.
“Watch the media because we know this administration is all about the media,” said Frank Salinger, who now operates his own firm, Public Policy Law Practice, but also served with AFSA during the 1980s.
Moments later, Mark Calabria, who is director of financial regulation studies at the Cato Institute, added his thoughts. Before joining Cato in 2009, he spent six years as a member of the senior professional staff of the U.S. Senate Committee on Banking, Housing and Urban Affairs.
“We just don’t know yet with this administration whether it’s going to be populist, open market and pro-business. How it’s going to balance out is not clear,” Calabria said. “He’s a Republican, some might say not much of one, but he’s a Republican. What you see is not necessarily what you’re going to get out of the White House.
“Just as Trump has gone on Twitter and beat up on companies, I would see no reason to think any industry or agency would be exempt from that,” Calabria added.
The regulatory moves coming out of the White House on Monday arrived a little more than a week after Trump took his first action soon after being inaugurated. Reince Priebus, who is assistant to Trump and his chief of staff, released a memorandum that contained the subject line “Regulatory Freeze Pending Review” to outline six specific steps the heads of executive departments and agencies are to follow, including the halt of new regulatory actions for at least 60 days.
Two members of the legal team at Mayer Brown took a deeper look at what Priebus outlined and partner Laurence Platt associate Joy Tsai explained their findings through this blog post.
Platt and Tsai said the Consumer Financial Protection Bureau. the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission are classified as “independent regulatory agencies” and may be excluded from that moratorium.
“Financial services companies that hoped for immediate regulatory relief when the Trump administration assumed control may have to wait a bit longer, because the newly announced freeze on federal regulations does not appear to apply across the board,” Platt and Tsai said.
“Although the memorandum appears sweeping in scope, banks and other financial service providers are not necessarily relieved from new regulations, as the regulatory freeze does not appear to apply to independent agencies,” they continued.
“However, the CFPB and other independent agencies remain subject to the Paperwork Reduction Act of 1980, which provides that an agency must not conduct information collection activities without the prior approval of the Office of Management and Budget director. This means that while the Office of Management and Budget may not be able to prevent an independent agency from issuing a new rule, it can stop the agency from requiring the public to submit filings to comply with the rule,” they went on to say.
“It is too soon to tell if any particular ‘independent regulatory agency’ believes that it is exempt from the freeze or, even if it is, it nevertheless will honor the memorandum’s spirit,” Platt and Tsai added.
Meanwhile back at the Vehicle Finance Conference, AFSA executive vice president Bill Himpler recapped a published report by The Wall Street Journal that quoted CFPB director Richard Cordray. Himpler noted the Cordray reportedly said when discussing the order associated with the 60-day moratorium that, “We believe the congressional mandate to protect consumers outweighs the executive order by president.”
Himpler asked the gathering in New Orleans, “How many of you think that got the attention of the president? I think it will be very interesting to see how that plays out.”
Editor’s note: More of the dialogue from the regulatory panel discussion during the Vehicle Finance Conference will be included in future reports from SubPrime Auto Finance News.
Hudson Cook’s legal team spotted an announcement from Reince Priebus, who is assistant to President Trump and his chief of staff, that appears to have been released within moments after this past Friday’s inauguration.
Priebus used the memorandum that contained the subject line “Regulatory Freeze Pending Review” to outline six specific steps the heads of executive departments and agencies are to follow.
“The president has asked me to communicate to each of you his plan for managing the federal regulatory process at the outset of his administration,” Priebus wrote in the memorandum that Hudson Cook posted online here. “In order to ensure that the president’s appointees or designees have the opportunity to review any new or pending regulations, I ask on behalf of the president that you immediately take the following steps.
Among the steps Priebus mentioned are:
— Subject to any exceptions the director or acting director of the Office of Management and Budget allows for emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise, send no regulation to the Office of the Federal Register until a department or agency head appointed or designated by the president after noon on Jan. 20, reviews and approves the regulation.
— With respect to regulations that have been published in the Office of the Federal Register but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum.
— Continue in all circumstances to comply with any applicable executive orders concerning regulatory management.
As a group of Senate Banking Committee Democrats praised Richard Cordray’s work as of the Consumer Financial Protection Bureau, Republican members of the House Financial Services Committee think the CFPB director may have violated federal law that governs agency rulemaking procedures.
Lawmakers highlighted the report, based on internal CFPB documents obtained by the House committee, uncovers several potential legal problems with the bureau’s 2015 rule authorizing it to regulate the auto finance market.
One problem the House group says it found is Cordray’s “failure to heed” CFPB attorneys who advised him to publish a list of institutions the bureau believed would be subject to the proposed rule and to re-open the public comment period after it had closed.
Despite the recommendations of CFPB attorneys who warned him of the legal implications of failing to re-open the comment period, the report said Cordray approved issuing the final rule without disclosure and public comment on the data underlying the rulemaking.
Lawmakers added the report also demonstrates that under recent Supreme Court precedent, the CFPB’s use of the “disparate impact” legal theory in enforcement actions against auto financers would not survive judicial scrutiny.
“Fuzzy logic and false comparisons are unfortunately prevalent in the CFPB’s auto-lending actions,” according to the report that’s available here. “In every aspect of the CFPB’s auto-lending actions, the CFPB’s lack of rigor leads to unsupported and unreliable conclusions.”
This is the third investigative report released by committee Republicans during the last 14 months about the CFPB’s troubled efforts to regulate auto finance companies. All three reports relied on internal CFPB documents.
According to the first report, issued in November 2015, lawmakers said Cordray was aware the statistical method it used to allege racial discrimination in auto lending is “prone to significant error” and that bureau lawyers had warned him of the “weakness” of the disparate impact theory it relied upon to build discrimination cases against auto finance companies.
The second report, issued in January last year, disclosed that Cordray approved the distribution of $80 million in settlement proceeds from a discrimination case without verifying that the recipients were eligible to receive the money. Committee members insisted the result was that some white borrowers received settlement checks over alleged racial discrimination against African-Americans, Hispanics and Asians.
“Once again we see the CFPB is a dangerously out-of-control, unconstitutional and unaccountable bureaucracy. It is a case study in the overreach and pathologies of the regulatory state run amok. The bureau routinely abuses and exceeds its authority, robs consumers of their economic freedoms, increases consumer costs and often attempts to hide information from the public,” said Committee Chairman Jeb Hensarling, a Texas Republican.
Meanwhile, the Senate Democratic contingent emphasized the need for his leadership at the CFPB in President-elect Donald Trump’s administration.
In a letter to Cordray, whose term expires in July 2018, the senators highlighted his accomplishments at the bureau in protecting servicemembers, seniors, students, and Americans from what they described as “abusive financial products.”
Since opening its doors in 2011, the CFPB has returned nearly $12 billion to 29 million Americans “who have been cheated by shadowy debt collectors, for-profit schools, and payday lenders,” according to the agency.
“Under your leadership, the CFPB has worked to protect servicemembers, seniors, students, and working families of all backgrounds from predatory financial schemes and illegal discrimination,” the Senators wrote in the letter available here. “We hope you continue to lead the charge against companies that take advantage of hardworking Americans.”
The Senators noted that polling shows the vast majority of Americans agree that the CFPB is doing great work.
The lawmakers indicated 71 percent of Americans — reportedly both Republicans and Democrats — approve of the CFPB's mission, and 55 percent of Republicans who voted for President-Elect Trump believe that the CFPB should be left alone to continue its work or even be given expanded authority to do more.
Donald Trump will be inaugurated as the 45th president of the United States on Friday. But industry experts have warned dealerships and finance companies not to reduce their compliance efforts despite some deregulatory rhetoric that might have been shared during his campaign.
Compliance expert Randy Henrick recently said via Twitter: “Don’t count on the new president to let up on compliance enforcement. CFPB and FTC staff won't change pro-consumer bias.”
One way managers and other industry professionals can handle the regulatory challenges that might be coming from the Consumer Financial Protection Bureau, the Federal Trade Commission or other places is by completing the Consumer Credit Compliance Certification Program offered by the National Automotive Finance Association.
“Well, I hate to say it, but I still think they’ll need to still continue to focus on compliance,” Hudson Cook partner Eric Johnson said in the video available here and at the top of this page. “It’s still all about compliance in both the near and the far-term future.”
“Now that (dealerships and finance companies) hopefully have their compliance management systems in place, they’ll need to make sure they’re keeping those maintained and updated as new laws, regulations and bulletins and enforcement actions come down from the CFPB,” continued Johnson, who along with fellow Hudson Cook partner Patty Covington serve as instructors of the NAF Association’s program.
“It’s going to be about compliance for the foreseeable future,” he added.
The NAF Association’s certification program is designed to provide the compliance professional with a solid working knowledge of the federal laws and regulations that govern consumer credit, together with a representative overview of state consumer credit law.
The program consists of four modules — two presented in an in-person classroom setting and two in an online format at the student’s own pace. Each module includes multiple sessions; and each session provides a thorough outline and description of the applicable law or regulation. Each session is followed by an online test that must be passed to receive credit for the session.
Another industry professional who completed the program is Ron Keable, who is the Texas field manager for Automotive Compliance Consultants.
“Automotive Compliance Consultants believes it is imperative that its consultants in the field uphold the highest standards and stay abreast of the ever-changing regulatory landscape in retail automotive,” said David Missimer, the firm’s general counsel about Keable’s certification.
“Dealership personnel rely on our consultants daily to assist them with their compliance needs. As such, each professional working for Automotive Compliance Consultants is expected to continue their education, and not only rely on what they may have learned a decade ago,” Missimer continued.
Automotive Compliance Consultants is a member of the NAF Association and recognizes the importance of membership in national and state associations like it that are dedicated to the automotive and finance industry.
“As a company, we believe if you provide compliance to dealerships, but you take no part in associations like NAF you are doing your customers a disservice,” Missimer said.
The NAF Association is hosting another opening model session. The event is set for Feb. 2-3 in Plano, Texas. Complete registration details are available here.
Companies such as Automotive Compliance Consultants will continue to have its consultants certified as consumer credit professionals in the NAF Association program.
“Compliance at dealerships will remain a focal point of state and federal agencies despite the election results. Compliance is just plain good business, and we want our people in the field not only to be good at what they do but be certified professionals,” said Automotive Compliance Consultants president Terry Dortch.
“This company is committed to making continuing investments like NAF training to bring increasing value to our customers,” Dortch added.
When reading through an email message or some other kind of material, the voice of the person who compiled it will stream through my mind if I know the individual’s tone and delivery.
Not sure if this phenomena happens to other people or if it’s just the condition I have after more than 40 years of television, radio, movie and other media consumption.
This scenario unfolded as a read through Tom Hudson’s latest book. And for me, it made the great composition by the Hudson Cook chairman all the more enjoyable.
While Cherokee Media Group was on hiatus from publishing our daily e-newsletters during the closing days of 2016, I had the opportunity to read Tom’s latest work — CARLAW IV, The Federal Government’s War on Car Dealers. Tom was kind enough to share a copy for this review, and to say the least, he gave me a wonderful Christmas gift.
If you ever have heard Tom speak, you know he mixes his witty humor with whatever relevant facts and precedents are germane to the specific top he might be discussing. After delving through the book, the anecdotes and analysis he shares about federal and state regulatory activities going back nearly 10 years offered keen insight into where the industry currently stands.
Tom explained how the Consumer Financial Protection Bureau germinated into the regulatory behemoth it now is while other agencies have taken notice and intensified their overseeing activities regarding the financing and delivery of vehicles by dealerships and credit providers.
Tom acknowledged he compiled this work because he’s been practicing law “since the invention of dirt.”
Industry participants both experienced and “green peas” can benefit through the more than 300 pages of material Tom assembled.
The work is broken up nicely so that if you don’t have the opportunity to read it straight through, you can pause and pick it up later and continue nicely. The book contains other elements such as an industry lexicon that make it a resource on par with anything else available.
If you’ve read this far, please do not consider this commentary simply a free advertisement for Tom’s book. His knowledge and reputation certainly are at a level where he doesn’t need someone like me to shill for him.
Rather, I wanted this review to serve as a recommendation to an industry who has some players who believe agencies such as the CFPB will simply disappear once President-Elect Trump assumes control of the White House in a little more than a week.
I assure you, a host of skilled and well-informed experts have conveyed to me that situation is unlikely to unfold no matter how many times Trump tweets.
The investment needed to acquire and navigate through Tom’s latest work are well worth it. Even if you think you know the auto finance world inside and out, I assure that Tom has at least a few nuggets of information in this book you might not already know.
I would even go so far as to recommend the newest employees at your dealership or finance company delve into the material. Perhaps they are assigned reading time of 30 minutes a day during their first month on the job to read a few segments at a time. For individuals new to the industry, they would have a knowledge foundation that could make them an even better asset to your operation.
For individuals traveling to New Orleans later this month for the annual events hosted by the American Financial Services Association and the National Automobile Dealers Association, I have no doubt Tom can tell you more about how to secure your copy. For those not making it to the Big Easy, go to this website.
Happy reading and all the best to you for 2017 and beyond.
Nick Zulovich is senior editor of SubPrime Auto Finance News and can be reached at nzulovich@cherokeemediagroup.com.
You might automatically assume if student loans — and difficulty in maintaining payments — are the hurdles to keeping the financing from being finalized for vehicle delivery, the customer surely is a recent college graduate.
A new report from the Consumer Financial Protection Bureau indicated that situation might not necessarily be the case.
The CFPB released a report that examined complaints from older student loan borrowers about servicing practices that can jeopardize their long-term financial security.
In the last decade, bureau officials found the number of older student loan borrowers has quadrupled and the amount of debt per older borrower has roughly doubled, as many take out loans for children or grandchildren.
According to the report, older borrowers struggling to make payments complain about obstacles to enrolling in income-driven payment plans and accessing their protections as cosigners. In 2015, nearly 40 percent of federal student loan borrowers age 65 and older were in default.
“It is alarming that older Americans are the fastest growing segment of student loan borrowers,” CFPB director Richard Cordray said. “Many of these older Americans are helping to finance their children’s or grandchildren’s education while living on a fixed income.
“We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress,” Cordray continued.
The CFPB calculated student loans make up the nation’s second-largest consumer debt market, and seniors are the fastest growing segment of this market.
From 2005 to 2015, the number of Americans age 60 or older with one or more student loans quadrupled from about 700,000 to 2.8 million, and average debt load owed by an older borrower roughly doubled from $12,000 to $23,500.
The CFPB’s analysis of survey data showed that about three-in-four older borrowers with student loans used them to finance their children’s or grandchildren’s college education.
The complete CFPB report about student loans can be found here.
In an action one of the credit bureaus acknowledged through a filing with the Securities and Exchange Commission, the Consumer Financial Protection Bureau confirmed on Tuesday that it took action against Equifax, TransUnion and their subsidiaries for what they regulator deemed to be “deceiving consumers” about the usefulness and actual cost of credit scores they sold to consumers.
The CFPB asserted the companies also lured consumers into costly recurring payments for credit-related products with “false promises.”
The CFPB ordered TransUnion and Equifax to “truthfully represent” the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Between them, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” CFPB director Richard Cordray said. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
The CFPB determined that TransUnion — since at least July 2011 — and Equifax (between July 2011 and March 2014) violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:
— Deceiving consumers about the value of the credit scores they sold: In their advertising, bureau officials insisted TransUnion and Equifax falsely represented that the credit scores they marketed and provided to consumers were the same scores finance companies typically use to make credit decisions. They stressed that, in fact, the scores sold by TransUnion and Equifax were not typically used by finance companies to make those decisions.
— Deceiving consumers into enrolling in subscription programs: In their advertising, the regulator said TransUnion and Equifax falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only “$1.” In reality, the CFPB determined consumers who signed up received a free trial of seven or 30 days, after which they were automatically enrolled in a subscription program. Unless they cancelled during the trial period, consumers were charged a recurring fee — usually $16 or more per month. This billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers.
The bureau added that Equifax also violated the Fair Credit Reporting Act, which requires a credit reporting agency to provide a free credit report once every 12 months and to operate a central source — AnnualCreditReport.com – where consumers can get their report.
Until January 2014, the bureau found consumers getting their report through Equifax first had to view Equifax advertisements. The CFPB said this practice violates the Fair Credit Reporting Act, which prohibits such advertising until after consumers receive their report.
More details of enforcement action
Under the Dodd-Frank Act, the CFPB reiterated that it is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent orders, TransUnion and Equifax must:
— Pay more than $17.6 million in total restitution to harmed consumers: TransUnion must provide more than $13.9 million in restitution to affected consumers. Equifax must provide almost $3.8 million in restitution to affected consumers. The companies must send notification letters about the restitution to affected consumers.
— Truthfully represent the usefulness of credit scores it sells: TransUnion and Equifax must clearly inform consumers about the nature of the scores they are selling to consumers.
— Obtain the express informed consent of consumers: Before enrolling a consumer in any credit-related product with a negative option feature, TransUnion and Equifax must obtain the consumer’s consent.
— Provide an easy way to cancel products and services: TransUnion and Equifax must give consumers a simple, easy-to-understand way to cancel the purchase of any credit-related product, and stop billing and collecting payments for any recurring charge when a consumer cancels.
— Pay $5.5 million in total penalties: TransUnion must pay $3 million to the Bureau’s civil penalty fund. Equifax must pay $2.5 million to the bureau’s civil penalty fund.
With the staff at SubPrime Auto Finance News fresh for 2017, we gathered up some noteworthy announcements that arrived while we celebrated the close of a great year with family and friends.
Among some of the highlights that came during the past few days included an update on defaults, an acquisition by RouteOne and TransUnion settling with the Consumer Financial Protection Bureau in an agreement set to cost the credit bureau nearly $20 million.
First, here is the latest default information stemming out of the S&P/Experian Consumer Credit Default Indices generated by S&P Dow Jones Indices and Experian.
Data through November indicated auto financing defaults recorded a 1.00 percent default rate in November, down 8 basis points from October.
The auto finance default rate hasn’t been that low since last July when S&P and Experian pegged it at 0.93 percent.
Analysts determined the latest composite rate — a comprehensive measure of changes in consumer credit defaults — remained unchanged on a sequential basis as both the October and November readings stood at 0.87 percent.
First mortgages also came in flat in November, holding at 0.70 percent. S&P and Experian added the bank card default rate rose 5 basis points in November compared with from the previous month to settle at 2.81 percent.
S&P and Experian noticed three of the five major cities saw their default rates decrease in the month of November.
Dallas posted the largest decrease, reporting in at 0.66 percent, which was down 10 basis points from October.
New York saw its default rate decrease by 2 basis points to 0.91 percent in November, and Chicago reported a decrease to 0.96 percent, down 1 basis point from the previous month.
Los Angeles watched its default rate increase, up 8 basis points to 0.70 percent.
Miami's default rate spiked to 1.44 percent, up 38 basis points in November and setting a 12 month high. The default rate increase of 38 basis points is unmatched in Miami since January 2013.
David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. explained a historical review of Miami's basis points movement in November shows increases since 2005, suggesting a seasonal up-trend in defaults for the month of November.
“Recent data paint a picture of a strong economy, and lower consumer credit defaults reflect this,” Blitzer said. “Default rates are modestly lower than a year ago, even as continued strength in home sales, auto sales and retail sales are supporting expanded use of consumer credit.
“Money market rates rose after Election Day, the Fed raised the target range for the Fed funds rate (in December) and has indicated that further increases lie ahead. The favorable default trends are likely to be tested in 2017 as interest rates rise,” he continued.
Among the five cities regularly tracked in this report, Blitzer reiterated Miami has consistently shown the highest default rate.
“One factor may be that home prices rising in Miami and mortgages are the largest portion of the city composite rate,” he said. “While Dallas home prices are rising faster than Miami, Dallas prices fell far less in the housing bust and have rebounded to new all-time highs.
“Miami home prices remain more than 20 percent below the highs set in 2006,” Blitzer went on to say.
Jointly developed by S&P Indices and Experian, analysts noted the S&P/Experian Consumer Credit Default Indices are published monthly with the intent to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien.
The indices are calculated based on data extracted from Experian’s consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month.
Experian’s base of data contributors includes leading banks and mortgage companies and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.
TransUnion’s CFPB settlement tops $15M
TransUnion said in a filing with the Securities and Exchange Commission that the credit bureau agreed to settle with the CFPB stemming from a civil investigative demand (CID) the regulator delivered back on Sept. 14, 2015.
TransUnion explained in the filing posted on Dec. 29 that that the CID was focused on common industry practices relating to the advertising, marketing and sale of consumer reports, credit scores or credit monitoring products to consumers by the company’s consumer interactive segment.
In connection with the agreed settlement, TransUnion indicated that it has executed and delivered a “stipulation and consent to the issuance of a consent order,” pursuant to which TransUnion will accept the issuance of a consent order by the CFPB requiring TransUnion to:
• Implement certain agreed practice changes in the way TransUnion advertises, markets and sells products and services offered directly to consumers, including more robust disclosures regarding the nature of the credit score being provided as well as confirming consumer consent if the product or service is being sold through the use of a negative option feature (such as a trial period becomes a recurring paid subscription unless the consumer affirmatively cancels their registration).
• Develop and submit to the CFPB for approval a comprehensive compliance plan detailing the steps for addressing each action required by the terms of the consent order and specific time frames and deadlines for implementation.
TransUnion acknowledged that it will incur a one-time charge of approximately $19.4 million in the fourth quarter of 2016, consisting of the following:
— Approximately $13.9 million for redress to eligible consumers.
— A civil money penalty to be paid to the CFPB in the amount of $3.0 million.
— Current estimate of $2.5 million for additional administrative, legal and compliance costs we will incur in connection with the settlement.
“The CFPB is expected to recommend the aforementioned settlement to the director for final approval,” TransUnion said in the filing signed by senior vice president Mick Forde about the agreement reached on Dec. 22.
RouteOne acquires MaximTrak
In a deal effective as of Dec. 20, RouteOne acquired the assets of MaximTrak and its related business in a move that means MaximTrak will operate through its wholly-owned subsidiary RouteOne Holdings.
The company insisted the acquisition will bring together two long-time partners to deliver a seamless vehicle F&I sales process.
Executives explained the vehicle purchase process has undergone fundamental changes in recent years, and will continue to do so with increasingly rapid speed. Consumers and dealers alike expect consistency and seamless transition across all physical and digital sales channels.
As a result, both RouteOne and MaximTrak have been pursuing aggressive strategies to innovate the sales process on behalf of their respective customers. RouteOne and MaximTrak’s complementary strategies have now come together to deliver on the vision of a complete sales and F&I solution that meets OEM, dealer and consumer needs — any time, any place, and on any device.
While reiterating MaximTrak will be operated by RouteOne Holdings, a wholly-owned subsidiary of RouteOne, officials mentioned MaximTrak leadership and team members remain in place and continue to operate from the MaximTrak offices in Pennsylvania.
RouteOne and MaximTrak employ approximately 400 people with offices in Michigan, Pennsylvania and Canada, as well as local staff in major markets. Directly and through partnerships, RouteOne and MaximTrak have customers in the U.S., Canada, Puerto Rico and Mexico.
“RouteOne has had a long and successful relationship with MaximTrak, and we share very similar cultures, values and DNA,” said RouteOne chief executive officer Justin Oesterle. “We are excited to have made this acquisition happen as we believe it creates significant value for all our customers at the OEM, finance source, provider, and dealer levels.
“It also creates strategic and economic value for RouteOne’s owners: Ally, Ford Credit, TD and Toyota Financial, all of whom supported the investment,” Oesterle continued.
“I, and the entire RouteOne team welcome MaximTrak to the family. We look forward to doing great things together for the industry,” he went on to say.
The companies added RouteOne and MaximTrak product integration began prior to the acquisition and will now be further developed and strengthened on an expedited basis.
MaximTrak was founded in 2003 by the Maxim family.
“The entire MaximTrak team is excited and energized by the growth opportunities that this transaction represents for our customers, employees and key stakeholders. Like RouteOne, MaximTrak is an established, innovative leader in the F&I space,” MaximTrak president Jim Maxim Jr. said.
“Where RouteOne excels in the finance elements of F&I, we excel in the “I” side of the equation and in developing technologies that optimize the dealership process and ultimately dealer profitability through F&I product sales,” Maxim continued. “Together, with our combined scale, talents and product line-ups, we will be able to provide a complete digital workflow from initial customer contact and first pencil to finance, aftermarket and eContracting across online, mobile and in-store channels.
“With that, our emphasis will be on helping our customers deliver a buying experience they control and one that consumers actually want,” he added.
As the Consumer Financial Protection Bureau reported that it handled approximately 27,000 complaints in October, four industry associations delivered a letter this week to the Senate’s top leaders, urging the bureau’s structure be modified to create a five-person, bipartisan board.
The letter addressed to Sen. Mitch McConnell, the majority leader, and Sen. Chuck Schumer, who has been elected to be the chamber’s minority leader, came from the Consumer Bankers Association, the Credit Union National Association, the Independent Community Bankers of America and the National Association of Federal Credit Unions
“The CFPB is an independent regulatory agency that provides the sole director unprecedented authority over financial institutions, with minimal oversight,” the quartet said. “As the sole decision maker, the director can promulgate regulations and levy enforcement actions that have sweeping and long-lasting effects on credit availability for consumers. The current single director structure leads to regulatory uncertainty for consumers, industry, and the economy.
“In contrast, a Senate confirmed, bipartisan board or commission will provide a balanced and deliberative approach to supervision, regulation, and enforcement over financial institutions that is more in keeping with other financial regulators,” the group continued.
For example, the Federal Trade Commission has this kind of organizational structure. The FTC is headed by five commissioners, nominated by the president and confirmed by the Senate with each one serving a seven-year term. No more than three commissioners can be of the same political party, and the president chooses one commissioner to act as chairman.
The letter also mentioned the ramifications if lawmakers do not take this recommended action.
“Moreover, the CFPB has recently finalized, or is in the process of finalizing, several rules, including arbitration, small dollar, third-party debt collection, and prepaid cards, that will have a dramatic and lasting impact on consumers, the economy, and financial institutions,” the groups said.
“Should the CFPB continue to promulgate these and other rules, Congress may utilize its authority under the Congressional Review Act (CRA) to repeal these actions. In the meantime, financial institutions must expend precious time and resources in complying with rules that may or may not materialize,” they continued.
“The 115th Session of Congress can bring certainty to consumers by passing legislation that would establish a commission and make needed changes to the many rules and regulations the bureau has or will consider,” the groups went on to say in the letter available here.
CFPB’s November complaint update
As of Nov. 1, the CFPB reported that it has handled approximately 1,035,200 complaints nationally across all products. Some of the findings from the statistics being published in this snapshot include:
—Complaint volume: For October, bureau officials indicated debt collection was the most-complained-about financial product or service. Of the approximately 27,000 complaints handled in October, there were 7,749 complaints about debt collection.
The second most-complained-about consumer product was credit reporting, which accounted for 5,369 complaints. The third most-complained-about financial product or service was mortgages, accounting for 4,357 complaints.
—Product trends: In a year-to-year comparison examining the three-month time period of August to October, the CFPB found that student loan complaints showed the greatest increase — 108 percent — of any product or service. The bureau received 1,272 student loan complaints between August and October of this year, while it received 612 complaints during the same time period in 2015.
—State information: The bureau noticed Alaska, New Mexico, and Missouri experienced the greatest year-to-year complaint volume increases from August to October period versus the same time period 12 months earlier; with Alaska up 53 percent, New Mexico up 33 percent and Missouri up 31 percent.
—Most-complained-about companies: The top three companies that received the most complaints from June through August were credit reporting companies Equifax, Experian, and TransUnion, according to the CFPB’s update.
The Republicans control both the legislative and executive branches of government for only the third time since 1929, the previous times being 2001 and 2003 with President George W. Bush.
It would seem to be an opportunity for an end to gridlock, assuming the Republicans can manage to unite themselves.While it may arguably also effectively eliminate checks and balances, a fair guess is that the Republicans will celebrate the next two years by getting as much done as they can possibly agree on. Expect a new, conservative Supreme Court Justice and an all-out assault on the Affordable Care Act.
Another fair expectation is an equal assault on the Consumer Financial Protection Bureau, if not the Dodd-Frank Act as a whole, and even, possibly, the Telephone Consumer Protection Act.
The CFPB, and the removal of Richard Cordray as director in particular would seem to be logical targets. The recent decision of the United States Court of Appeals for the D.C. Circuit in PHH Corp. vs. CFPB decided Oct. 11 held that the CFPB’s single directorship structure subject only to presidential removal “for cause” is unconstitutional. While the court’s solution was to neither shut down the CFPB nor invalidate any of its administrative rulings, the court simply severed the “for-cause” provision it considered unconstitutional from the remainder of the Dodd-Frank Act. “With the for-cause provision severed, the President now will have the power to remove the director at will, and to supervise and direct the director.”
Those believing a Clinton victory (or a Trump defeat depending on your perspective) was imminent, gave this holding short shrift in terms of immediate impact. While it was certainly a blow to the bureau, it was not generally viewed as a death sentence. Now it would seem monumentally dispositive. Given the Congressional beatings director Cordray has taken in recent hearings and even some Democratic willingness to stem the unilateral power of the director, it’s not unreasonable to think that director Cordray’s job is anything but safe.
Trump needs no reason to fire him. Indeed, he has made a living out of firing people so it is far from unreasonable to imagine director Cordray being called to the boardroom in relatively short order.
Indeed, director Cordray’s firing could be just the first domino.
If the CFPB suddenly has a Republican banker as director, all of the pending investigations could be thrown into a land unknown. The bureau’s current administrative proceedings, rulings, matters on administrative appeal and pending lawsuits in District Courts around the country could be similarly affected. With a change in directorship, a change in Bureau policy can’t be far behind. A new director could mean new staff, new policies, new investigators, new procedures, negotiations, settlements and remediation strategies. Stipulated Orders with pending payment terms should be reviewed to determine if they may be fair game for reevaluation by agreement between the parties. These circumstances may be subject to a fresh look by a new CFPB director or perhaps even an oversight board or commission.
If you are currently under CFPB investigation, either supervisory or enforcement, a new strategy may be in order, or at least considered. Should you procrastinate and attempt to outlast the current regime hoping there’s a changing of the guard and all investigations get a fresh look from a new director and his/her staff? Should your settlement documentation contain provisions allowing for future review by the Bureau? The CFPB could accelerate current investigations anticipating a shortened lifespan or even be motivated to negotiate more favorable deals.
Politics is a tough game to bet on. Just ask the pollsters. And the irony may be that the very people whose elected officials may upend the CFPB are in large measure the same people whom the CFPB was originally designed to protect.
David Silverman, attorney & counselor at law, is based in Colorado. His law practice is focused on business management and regulatory compliance in the financial services industry, including automotive finance. The information contained in this article is not intended as legal advice and should not be so considered by any reader as there is no attorney- client relationship established. It was originally posted here. Silverman can be reached at David@dsilvermanlaw.com, (303) 858-9850 or www.dsilvermanlaw.com.
