This past Friday, the American Financial Services Association (AFSA) submitted a list of regulatory reforms to the Trump administration that the organization insisted would provide relief to its members operating in the consumer credit industry and ultimately benefit customers and communities across the United States.
At the behest of Mark Calabria, chief economist for Vice President Mike Pence, AFSA made the proposals following a White House meeting of AFSA member company executives, representatives of the administration’s Domestic Policy Council and Calabria in March. AFSA’s proposals include:
—A halt to Consumer Financial Protection Bureau examinations
—Placing moratoriums on the use of disparate impact theory and the CFPB’s complaint database
—Withdrawing compliance bulletin 2015-07 on in-person collection of consumer debt
—Terminating the arbitration and small-dollar rulemakings
—Withdrawing compliance bulletins 2012-03 and 2016-02 on service providers
—Re-designating payments from the civil penalty fund
—Ensuring the accuracy of press releases as they relate to the enforcement actions to which they pertain, and;
—A general review of CFPB procedures
Additionally, the trade association submitted letters to Defense Secretary James Mattis regarding reforms to the Military Lending Act that would help U.S. military service members access beneficial forms of credit, and to Ajit Pai, chairman of the Federal Communications Commission regarding reforms to modernize the Telephone Consumer Protection Act (TCPA).
In a public appearance last Thursday, CFPB director Richard Cordray described what he contends is the bureau’s approach to regulatory implementation, “which we believe is key to helping industry avoid unnecessary burdens while achieving compliance.” Cordray delivered remarks during the U.S. Chamber of Commerce’s 11th annual Capital Markets Summit.
“As we approach our work, we have made it very clear that we see ourselves as a 21st century agency. What does this really mean? Among other things, it means an agency built on developing our own independent sources of data and ensuring a strong democratic foundation of public engagement,” Cordray said.
“Despite our best efforts, we recognize that the outcome of any human process will be imperfect. We learn from the comments we receive and our final rules are helpfully informed by that input on a consistent basis,” he continued. “But even after we issue a final rule, if the data shows over time that any of our substantive calls need to be reconsidered, we can and will face the issue frankly and address it. We will not let pride of authorship interfere with the serious task of policymaking in the interests of consumers and the American public.
“We believe our rulemaking process does not end with finalizing a set of rules,” Cordray went on to say. “It is not good enough for us to take the view that once new rules are published, our work is done and we can say to financial institutions that ‘it is your problem now.’ If the point of our regulations is to protect consumers and to promote fair, transparent, and competitive markets, then we should care a great deal about how well the rules are implemented. We feel that way especially because we fully appreciate the difficulty of the task and the constant perils of unintended consequences, changes in circumstances, and the difficulty of predicting the future.”
GWC Warranty recently published four recommendations to help dealerships secure a high-quality compliance trainer.
The used-vehicle service contract and related finance and insurance products provider attempted to go beyond just someone who might have a deep knowledge of both federal and state regulations. Here are what GWC Warranty suggested:
1. The right training for the right people
The company highlighted a topnotch compliance training provider will be able to supply comprehensive content at a level appropriate for its audience. You’ll also want to look for a service that has training for several different types of employees to address all areas of a dealership.
2. Reporting capabilities
Without the ability to track and report results, GWC Warranty acknowledged you have no way of holding your staff accountable for the training they complete. The company recommended that managers look for compliance training that boasts an intuitive, easy-to-use reporting structure so you can stay on top of compliance training with minimal effort.
3. Extensive industry knowledge
Regulatory familiarity remains important as GWC Warranty noted that dealerships should look into who develops the content for the providers you investigate. Are they attorneys? Do they have automotive industry experience? Are they members of organizations like the National Association of Dealer Counsel? Checking off these boxes will ensure your training content puts you in the safest possible position.
4. Verification processes
GWC Warranty closed by noting that inserting important documents into your training platform that your employees must read and sign ensures buy-in across the dealership. Having a technology platform that can handle this and get confirmation from employees that they are on board with compliance is vital to your training program’s success.
This material originally appeared on GWC Warranty’s website here. More recommendations from the company can be found at gwcwarranty.com/dealers/accelerate-blog.
Equifax auto finance leader Lou Loquasto insisted every credit provider and buyer of vehicle installment contracts has a story about how deliveries might have been completed because of some kind of fraud. Loquasto pointed out that sometimes it’s a “rogue” F&I manager or another unscrupulous member of a dealership’s staff.
“I’ve got my story. My guy is in jail currently,” said Loquasto, who spent a major portion of his professional career at Wells Fargo.
While malfeasance at the dealership level might not be as prevalent, consumers trying to deceive their way to approvals certainly is a growing problem. Loquasto shared, “You could Google the term ‘fake pay stubs’ and you get 370,000 results. For $5 and you invest five minutes, you can make $800,000 a year on paper. Some of these fakes are really good.”
In fact, PointPredictive, a provider of fraud solutions to banks and finance companies, generated a white paper at the beginning of the year detailing new analysis confirming that auto financing fraud risk has been rising for several years, but remains hidden in credit losses. PointPredictive estimates the annual value of auto finance originations that contain some element of misrepresentation may be as high as $6 billion in 2017, which is twice as much as 2016 estimates.
“I think the biggest problem when I was a lender and now talking to people in the business is there’s never been a good way to understand which portion of your loss comes from fraud,” Loquasto said. “You may forecast a 2 percent loss on your portfolio, but you’re not sure exactly what portion of that might have come from fraud.
“You know when that one situation comes up that it’s verified fraud, everyone gets really angry,” he continued. “The thing about fraud is a lot of times you just lose the whole deal. It’s not like a regular repossession where a customer goes bad and you lose half of it. In these situations, you’re losing the whole loan.”
The issue of fraud arrived again this week. Santander Consumer USA announced that it reached settlements totaling $25.9 million with the attorneys general of Delaware and Massachusetts in part because law enforcement said that SCUSA allegedly knew that the reported incomes, which were used to support the applications submitted to the company by dealers, were incorrect and often inflated.
Officials went on to state the investigation by Delaware and Massachusetts also revealed that SCUSA was allegedly aware that certain dealerships had high default rates due in part to the regular submission of inaccurate data on financing applications — most often involving inflated income. A company spokesperson said Santander neither admitted nor denied the allegations made by the attorneys general about contracts facilitated through certain dealers between 2009 and 2014.
Before this SCUSA settlement became public, Loquasto described what sometimes happens when a finance company learns that a dealership in its origination network fudges the numbers, so to speak, in order for the contract to be purchased and delivery completed.
“As a lender, this is crushing to your relationship with the dealer,” Loquasto said. “You’ve got a dealer you’re working with for a long time and maybe they’ve got a rogue employee. Maybe it’s just rogue people going to the dealership. If you’re asking the dealer to buy back $50,000 in losses from you or if you found out they had an employee that is doing bad things, that’s really bad for the relationship with the dealer.
“As a lender, it’s something on the radar, but I just don’t think there has ever been a real good mechanism to figure out that fraud has occurred and figure out how to share that information with others in the industry so lenders can help each other,” he continued.
In an effort to enhance possible collaboration, Equifax shared a trio of suggestions that could help finance company’s fraud prevention efforts. The recommendations included:
—A shared environment: Rather than relying on their own data, finance companies should be leveraging intelligence from data consortiums that span multiple businesses across multiple industries to stay ahead of the curve.
—Customizable platforms: Systems such as Equifax’s FraudIQ Manager can leverage customizable rules and models, providing lenders the ability to adapt to their unique needs, industry changes or new types of fraud.
—Real-time Intelligence: Fraudsters work fast, so finance companies need to act faster. The best fraud review processes can provide finance companies real-time intelligence for more efficient and confident identification of potential fraud.
Mike Urban, who is vice president of fraud consulting at Equifax, described how these recommendations are even more crucial in light of how online paths to auto financing are become more widespread.
“By moving to more digital access to funds and applications, it’s easier to take that paystub I downloaded off of the Internet, take a picture of it, copy it or scan it, and all of that information is going into the approval process so these criminals can launch broader attacks to see which one is going to come back with an approval. Then once they get that approval, they can walk into the dealer say ‘I’m preapproved. I’ve got my ID, and I’m driving off with the car,’” Urban said.
“Criminals will routinely take advantage of a lenders’ lack of sharing of information to execute large frauds. The more intelligence, the more experience that one lender has with verifying identity, that can be shared so when it hits again they’ll know right away and be able to sidetrack that application and manage it without allowing the credit to go out. Criminals have been sharing data over the Internet for years, and legally, the good guys should be doing it as well,” he continued.
Both Loquasto and Urban mentioned that Equifax has been part of consortiums in both the United Kingdom and Canada for quite some time to combat fraud, and the company recently launched a similar effort in the United States.
“If you think about it, a fraudster or some consumer will fraud on a cell phone and then maybe on a pay TV account. And then maybe they’ll fraud a credit card. These aren’t guys who do it once and are done,” Loquasto said.
“If you can bring in other companies from other verticals to share fraud experience, that’s where our consortiums have found a lot of value,” he continued.
And possibly through that sharing of ideas and information, Urban contends that auto finance companies could arrive at a place where fraud can be mitigated perhaps more than it is now.
“Every lender has different needs and they require solutions that are customized or configured to meet their needs and dynamic business requirements,” Urban said.
“It’s not enough to say I’ve got this big data. They really need a system to implement fraud strategies, looking at different data elements that are coming in through applications, tying together additional data elements into those decisions using analytic models so they can score what their risk is,” he went on to say.
Loquasto closed by saying he has a long-term goal of leading an industry-wide charge of reducing fraud by at least $1 billion.
“Lenders are spending a ton of money on data, credit data, income and employment data, alternative data, but they’re just not spending very much money on fraud. I think people are becoming awakened to the problem and the tools,” Loquasto said.
“We’re a very collaborate industry,” he continued. “You go to conferences and our industry is one of the most collaborative out there. We’re perfect for this type of solution. I think if we work together as lenders and vendors, we can really cut deep into the profits of these fraudsters.”
For the second time in roughly a week, details became public involving Santander Consumer USA and regulatory enforcers.
On Wednesday, SCUSA reached settlements totaling $25.9 million with the attorneys general of Delaware and Massachusetts for what state officials said was the finance company’s role in “facilitating unfair, high-rate” vehicle installment contracts.
The developments with the two states come on the heels of Santander Consumer USA and its parent’s subsidiaries entering into a written agreement with the Federal Reserve Bank of Boston.
When SubPrime Auto Finance News reached out to SCUSA regarding the Wednesday’s settlement, a company spokesperson said Santander neither admitted nor denied the allegations made by the attorneys general about contracts facilitated through certain dealers between 2009 and 2014.
“We are pleased to put this matter behind us so we can move forward and continue to focus on serving our customers,” the spokesperson began.
“Santander Consumer is totally committed to treating customers fairly,” the spokesperson continued. “In the last 18 months, our new management team has taken significant steps to strengthen our business practices and controls. Today’s voluntary agreement with the attorneys general of Delaware and Massachusetts, which resolves an investigation dating back several years, is another important step forward in that process.
“We will continue to strengthen our business controls and dealer management program while ensuring that we are focusing on best-in-class consumer practices,” the spokesperson went on to say. “We negotiated in good faith with the attorneys general with respect to past underwriting and origination practices, but would note this settlement is not about securitizations and, in fact, our settlement releases us from any such claims.”
Here are the details that led to the settlement, according to news releases shared by Delaware and Massachusetts officials.
The investigation, conducted by the fraud division of Delaware attorney general Matt Denn’s office in partnership with the Massachusetts attorney general’s office, revealed that Santander allegedly bought auto financing contracts without having a reasonable basis to believe that the borrowers could afford them. In fact, investigators said Santander predicted that a large portion of the contracts would default, and allegedly knew that the reported incomes, which were used to support the applications submitted to the company by dealers, were incorrect and often inflated.
Officials went on to state the investigation by Delaware and Massachusetts also revealed that SCUSA was allegedly aware that certain dealerships had high default rates due in part to the regular submission of inaccurate data on financing applications — most often involving inflated income. But law enforcement said Santander continued to purchase contracts from those dealers anyway and, in some cases, sell them to third parties.
“Protecting consumers from unfair lending practices is extremely important and has been a priority for our office,” Denn said. “We are pleased that this settlement results in significant consumer relief and provisions that will prevent similar misconduct in the future. We will continue to pursue investigations in this area to ensure that Delaware consumers receive a fair deal when they are extended credit to finance a purchase. I am proud of the work of our fraud division and also thank the Massachusetts attorney general’s office for being a valued partner in this investigation.”
Massachusetts attorney general Maura Healey also interjected that many of contracts involved in the investigation fell into the subprime portion Santander’s outstanding portfolio, which were leveraged as part of the funding process with many investment banks and other financial entities to resell or securitize the paper. Healey asserted that SCUSA dropped the contracts into large asset pools and selling bonds or notes backed by the assets in the pools.
Money obtained from the securitization process was then used to fund more subprime contracts — like many other finance companies do — but it drew the ire of the Massachusetts attorney general.
“After years of combatting abuses from subprime mortgage lenders, these practices are unfortunately familiar,” Healey said. “We found that Santander, a leading player in the business of packaging and reselling subprime auto loans, funded unfair and unaffordable auto loans for more than 2,000 Massachusetts residents. This first-in-the-nation settlement relating to subprime auto loan funding will provide relief to thousands of car buyers in Massachusetts and prevent these practices from being used against our residents.”
The settlement in Massachusetts, filed in Suffolk Superior Court, includes $16 million in relief to more than 2,000 affected consumers and a $6 million payment to Massachusetts. Santander has also agreed to implement new oversight policies regarding subprime auto funding and securitization practices.
Santander also will provide significant consumer relief by paying $2.875 million into a trust for the benefit of impacted Delaware consumers. A trustee will be appointed to locate and pay restitution to hundreds of eligible harmed Delawareans who financed vehicle purchases through Santander. Eligible consumers will be contacted by the trustee and the AG’s office regarding the claims process for restitution.
Santander will also pay just over $1 million to the Delaware Consumer Protection Fund, which pays for work on consumer fraud and deceptive trade practice matters and other consumer-oriented investigations and legal actions.
In an effort to keep its commitment to treat customers fairly, Santander reiterated in its message to SubPrime Auto Finance News that management actions during the past 18 months include:
— Improving policies and procedures to identify and prevent dealer misconduct.
— Putting in place a stronger management team and board of directors and improved board and management oversight.
— Reinforcing a culture of compliance throughout the company and investing in highly experienced compliance professionals who have a track record of compliance excellence in financial services.
— Establishing an Office of Consumer Practices to serve as an internal voice of the consumer and to examine, track and improve the customer experience.
— Creating a dealer council to increase focus and formalize decision making on dealer oversight issues.
— Creating a dealer services group to enhance the efficiency of dealer monitoring and management processes.
— Increasing the number of requirements a consumer must meet before the company funds a loan (e.g., providing paystubs or tax returns, making higher down payments, etc.).
Santander Consumer USA chief operating officer Rich Morrin directly addressed how the finance company now is watching its relationships with dealers during its “Investor Day” back on Feb. 23.
“Regulatory expectations of lender oversight of dealerships has increased pretty dramatically. So while SC has always held dealers accountable, it’s not a change,” Morrin said. “What we have done is we take this seriously and so what we have done is we’ve evolved our approach accordingly.”
The COO went on to say, “ … holding dealers accountable ultimately is a positive thing for a number of reasons. One is because we get the right kind of relationships from which to try to grow our volume, but secondly, the application population we get is a lot more positive and high quality, which we view is very positive.”
As a part of Wednesday’s announcement, SCUSA also mentioned the company is fully reserved for this matter with Delaware and Massachusetts and no additional charge will be taken in connection with the settlement.
“This settlement will not impose any new restrictions on SC’s ability to make capital distributions,” the company said.
According to documents filed on Thursday with the Federal Reserve and the Securities and Exchange Commission, Santander Consumer USA and its parent's subsidiaries entered into a written agreement on Tuesday with the Federal Reserve Bank of Boston.
Under the terms of the written agreement, SCUSA is required to enhance its compliance risk management program, board oversight of risk management and senior management oversight of risk management.
Within 60 days of this agreement, the Santander board of directors has been instructed to submit a written plan to strengthen board oversight of the management and operations acceptable to the Reserve Bank; a strategy that’s to include:
—Measures to oversee compliance by the board of directors and senior management with this agreement.
—Allocation of adequate resources to ensure the company’s compliance with this agreement and applicable consumer compliance laws and regulations.
—Actions that the board of directors will take to maintain effective control over, and supervision of, the company’s compliance risk management program.
—Structure of the board’s oversight of compliance risk management program, including a description of the committee and officer positions responsible for oversight of the compliance risk management program and a description of the duties and responsibilities of each committee and officer.
Furthermore, the agreement said that within 30 days of the end of each calendar quarter, the board or authorized committees are asked to submit to the Reserve Bank written progress reports detailing “the form and manner of all actions taken to secure compliance with the agreement, a timetable and schedule to implement specific remedial actions to be taken, and the results thereof.”
The agreement goes on to state, “Each provision of this agreement shall remain effective and enforceable until stayed, modified, terminated or suspended in writing by the Reserve Bank.
The agreement closed with, “The provisions of this agreement shall not bar, estop or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting Santander, their subsidiaries, or any of their current or former institution-affiliated parties and their successors and assigns.”
Santander Consumer USA president and chief executive officer Jason Kulas discussed compliance at length during the finance company’s “Investor Day” back on Feb. 23. Kulas first mentioned compliance near the beginning of his opening remarks to Wall Street observers.
“You’re going to hear us talk about (compliance) several times today and anytime you hear us speak, you'll hear that as a central component of our strategy,” Kulas said according to the event transcript posted by the company. “We believe strongly that focusing on this is one of the keys to success in consumer finance for many years in the future and regardless of how the political winds may shift every four years or so.
“We’re going to continue to focus on compliance and putting the customer at the center of everything we do and making that a central component of how we are successful going forward,” he continued.
When circling back to compliance again, Kulas compared abiding by regulatory mandates to the human body.
“They aren’t arms and legs or fingers and toes. You can survive without some of those. These are vital organs. So without any one of these things we’re not the company we’re capable of being best case and we don’t exist worst case. So that’s how critically important these things are and that’s why they're the central components of our strategy,” Kulas said.
“If we’re really good at driving the vehicle finance business … and we have all the funding that we would ever need for that but we ignore compliance, we don’t think we’re (in business),” he continued.
Kulus also highlighted that SCUSA already hosts what he called “regularly scheduled town hall meetings” that focus on compliance. The sessions already include all employees, who are also reached via video and written messages within the company.
“It’s filtering through the entire organization in exactly the way it should be if we’re going to ultimately be able to say that we’re really good at this,” Kulas said.
Kulas closed the discussion about compliance during the company’s event back last month by highlighting the compliance expertise SCUSA employees possess.
“If we had their resumes in this presentation, you’d agree they must be pretty good at compliance,” Kulas said. “They’ve got good backgrounds at big institutions.
“But our entire team is responsible for compliance,” he continued. “I think what’s really critical is every executive you'll hear from today has spent more of our career working for large, regulated financial institutions than not. So the way we talk about that internally is we’ve got a group of people running this company who know what good looks like from a compliance perspective, from a consumer practices perspective and we talk about making this a place that treats employees well and makes them feel valued.
“All these things, happy customers, happy employees, lead to better cash flows and long-term good performance. So it's all related. We think we’ve got the pieces in place to do that,” Kulas went on to say.
On Thursday, the Consumer Financial Protection Bureau (CFPB) took action against Experian and its subsidiaries for what regulators said was “deceiving” consumers about the use of credit scores it sold to consumers.
The CFPB said Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions. The regulator found lenders did not use Experian’s scores to make those decisions.
The CFPB ordered Experian to “truthfully” represent how its credit scores are used. Experian must also pay a civil penalty of $3 million.
“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” CFPB director Richard Cordray said. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”
Experian, based in Costa Mesa, Calif., is one of the nation’s three largest credit reporting agencies. Experian markets, advertises, sells, offers and provides credit scores, credit reports, credit monitoring and other related products to consumers and third parties.
As finance companies know, credit scores are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users consider these scores when deciding whether to extend credit.
The CFPB emphasized no single credit score or credit scoring model is used by every lender.
In addition to the credit scores that are actually used by lenders, the regulator said several companies have developed so-called “educational credit scores,” which lenders rarely, if ever, use. These scores are intended to inform consumers.
The CFPB recapped Experian developed its own proprietary credit scoring model, referred to as the “PLUS Score,” which it applied to information in consumer credit files to generate a credit score it offered directly to consumers. The PLUS Score is an “educational” credit score and is not used by lenders for credit decisions.
From at least 2012 through 2014, the CFPB charged that Experian violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by “deceiving” consumers about the use of the credit scores it sold.
“In its advertising, Experian falsely represented that the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions,” the CFPB said. “In fact, lenders did not use the scores Experian sold to consumers.
“In some instances, there were significant differences between the PLUS Scores that Experian provided to consumers and the various credit scores lenders actually use. As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness,” the CFPB continued.
The regulator went on to state Experian also violated the Fair Credit Reporting Act, which requires a credit reporting company to provide a free credit report once every 12 months and to operate a central source — AnnualCreditReport.com — where consumers can obtain their report.
Until March 2014, the CFPB found that consumers getting their report through Experian had to view Experian advertisements before they got to the report. The regulator said this practice violates the Fair Credit Reporting Act prohibition of such advertising tactics.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB 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 order, Experian must:
—Pay a $3 million penalty: Experian must pay a civil money penalty of $3 million to the bureau’s civil penalty fund.
—Truthfully represent the usefulness of credit scores it sells: Experian must inform consumers about the nature of the scores it sells to consumers.
—Put in place an effective compliance management system: Experian must develop and implement a plan to make sure its advertising practices relating to credit scores and on Internet webpages that consumers access through AnnualCreditReport.com comply with federal consumer laws and the terms of the CFPB’s consent order.
The full text of the CFPB’s consent order against Experian is available here.
TrainAndCertify.org, a national provider of training and certification programs for sales and customer service reps in various consumer-centric industries, recently announced its Certified Vehicle Protection Professional (CVPP) certification program.
TrainAndCertify.org established the CVPP program via the Academy of Certified Vehicle Protection Professionals (ACVPP) to recognize individuals who demonstrate the requisite knowledge required to responsibly and effectively market vehicle service contracts (VSCs) to consumers.
TrainAndCertify.org has also produced and launched a branded version of the CVPP certification program for the vehicle service contract industry trade association Vehicle Protection Association (VPA) and its member companies.
TrainAndCertify.org president Laurence Larose emphasized training and certification constitute a standardized method for evaluating employee knowledge and providing measurable results that can be tied to development plans and business objectives.
TrainAndCertify.org currently serves the consumer debt relief industry (International Association of Professional Debt Arbitrators), the vehicle service contract industry (ACVPP and Vehicle Protection Association) and the student loan consolidation industry (Association for Student Loan Relief).
Larose contends impact on the success of an industry and its organizations is significant, bringing each industry's sales and customer service consultants to a minimum standard of excellence, customer protection and product knowledge.
“We’re excited to introduce the new CVPP certification that was created with VSC industry experts to accurately validate the very specialized industry knowledge and skills of sales and customer service employees of vehicle service contract marketers," Larose said.
“Professionals are looking for a way to demonstrate and promote their skills by earning a certification that is a distinct indicator of their deep industry knowledge and VSC marketing companies also benefit from the rigor and integrity of the CVPP training and exam process,” he continued.
Vehicle service contract sales and customer service professionals who would like to be CVPP certified must complete the online CVPP training module and certification exam. Organizations that work with CVPP certified professionals will be assured that these individuals are well-versed in industry knowledge and best practices for the vehicle service contract industry.
All participating companies are granted CVPP Accredited Service Center status with no monthly or annual fees or dues. The CVPP Accredited Service Center credential validates an organization's level of commitment to staff CVPP training and certification, resulting in competitive differentiation and consumer confidence. It can identify organizations that employ CVPP certified customer service and sales staff members.
To learn more about the program, go to TrainAndCertify.org.
The parade of legal developments leading toward the U.S. Court of Appeals for the District of Columbia Circuit rehearing an important case involving the Consumer Financial Protection Bureau has started in earnest.
First, the American Financial Services Association, along with a dozen other organizations, delivered an amicus brief — a legal document filed in appellate court cases by non-litigants with a strong interest in the subject matter. AFSA joined other organizations that have involvement in auto finance such as the American Bankers Association (ABA), the Consumer Bankers Association (CBA) and the Credit Union National Association (CUNA), as well as the Financial Services Roundtable (FSR).
The entire matter stems from a case in which the initial decision reached last October called the CFPB “unconstitutionally structured.” The case pit the regulator against PHH Corp., a Mount Laurel, N.J.-based finance company that operates in the mortgage space.
It involved a three-judge panel of the court, which ruled the CFPB’s structure was constitutionally flawed and that its director, who currently is Richard Cordray, should be removable at the will of the president.
As AFSA shared through its weekly Newsbriefs, the case deals with Corday’s order from June 2015 asserting that PHH violated the Real Estate Settlement Procedures Act (RESPA). The CFPB asked for the rehearing after a panel of judges ruled that the CFPB’s structure of a single director who can only be removed by cause is unconstitutional.
The rehearing will intensify further when oral arguments before the en banc court will be heard on May 24. AFSA and its fellow industry organization looked to make clear their issues with the CFPB’s actions and what the court should do next.
“In abruptly departing from the plain language of the statute, the bureau’s own regulations and longstanding guidance for industry, the order exceeded the bureau’s authority and violated fundamental tenets of administrative law and fair notice. The order also raises the troubling specter of further changes without notice, deeply unsettling a market built on predicable legal rules,” the organizations said in their amicus brief, which is available here.
Meanwhile, last Friday, the U.S. Department of Justice filed its own amicus brief, referencing a 1935 case that determined the president has “Article II authority to supervise, direct and remove at will subordinate (principal) officers in the executive branch in order to exercise his vested power and duty to faithfully execute the laws.” The specific matter — Humphrey’s Executor vs. United States — involved how Congress could forbid removing members of the Federal Trade Commission except for cause.
Then, the Justice Department made its connection to this matter involving the CFPB.
“The principal constitutional question in this case is whether the exception to the president’s removal authority recognized in Humphrey’s Executor should be extended by this court beyond multi-member regulatory commissions to an agency headed by a single director,” DOJ officials said in its amicus brief obtained and posted online by Hudson Cook.
“While we do not agree with all of the reasoning in the panel’s opinion, the United States agrees with the panel’s conclusion that single-headed agencies are meaningfully different from the type of multi-member regulatory commission addressed in Humphrey’s Executor,” they continued. “The Supreme Court’s analysis in Humphrey’s Executor was premised on the nature of the FTC as a continuing deliberative body, composed of several members with staggered terms to maintain institutional expertise and promote a measure of stability that would not be immediately undermined by political vicissitudes. A single-headed agency, of course, lacks those critical structural attributes that have been thought to justify ‘independent’ status for multi-member regulatory commissions.
“Moreover, because a single agency head is unchecked by the constraints of group decision making among members appointed by different presidents, there is a greater risk that an ‘independent’ agency headed by a single person will engage in extreme departures from the president’s executive policy,” the Justice Department went on to say. “And as the panel recognized, while multi-member regulatory commissions sharing the characteristics of the FTC discussed in Humphrey’s Executor have existed for over a century, limitations on the President’s authority to remove a single agency head are a recent development to which the executive branch has consistently objected."
The Justice Department closed its summary with a request for the U.S. Court of Appeals for the District of Columbia Circuit.
“We therefore urge the court to decline to extend the exception recognized in Humphrey’s Executor in this case. In addition, in our view, the panel correctly applied severability principles and therefore properly struck down only the for-cause removal restrictions,” DOJ officials said.
Warranty and vehicle service contract administrator AUL Corp. released its 2017 F&I training schedule on Thursday, marking the second year in a row the company is offering F&I training.
AUL highlighted its training is designed to provide a tailored education that includes a three-day live course, virtual training sessions and an online platform that includes a variety of videos and quizzes available for 12 months following the in-person course. The curriculum is designed for F&I professionals selling finance and insurance products in dealerships.
Each course will be conducted by Kirk Manzo, director of global training for Assurant's Vehicle Protection Services group. Since 1999, Manzo has consulted and trained retail dealerships to help them maximize profits in their sales and F&I departments. He is a certified member of the John Maxwell Team.
The live workshops will be held in Dallas; Napa, Calif.; Atlanta and Chicago. The three-day workshop will include training on compliance, objection handling, turnovers from sales to F&I and menu-selling. These highly interactive workshops will teach real-world strategies and tactics necessary to improve performance and increase satisfaction. Also included in the in-person training will be role-playing scenarios and valuable feedback following a video session.
When asked about the courses, Manzo said, “AUL’s training program integrates the use of virtual roundtables to provide a unique 'peer to peer' learning and accountability component unlike anything in the industry. It's like having your own private F&I 20 group to support and encourage your performance improvement."
AUL general sales manager Jason Garner elaborated about why the administrator is providing these resources
“Training must be a proactive and continuous process that becomes an essential element in a dealership's culture,” Garner said. “In addition to three days of classwork, AUL’s 12-month follow-up delivers the necessary components to ensure a successful continuous learning environment at the dealership.”
To learn more about AUL’s 2017 F&I Training, contact marketing@aulcorp.com or call (800) 826-3207.
Earlier this week, Reynolds and Reynolds announced the release of the Reynolds LAW Maine F&I Library, just a short while after the firm unveiled a similar product for a neighboring state with the rollout of the Reynolds LAW Vermont F&I Library.
In both of these instances, as well as for the more than 30 other states where Reynolds offers resources, the library is a comprehensive catalog of standardized, legally reviewed finance and insurance (F&I) documents for franchised dealers in the state of Maine and Vermont.
“The pressure of regulatory scrutiny is a constant for automotive dealers,” said Jerry Kirwan, senior vice president and general manager of Reynolds Document Services. “The documents in the LAW Maine F&I Library are regularly reviewed for legal sufficiency by Reynolds' industry-leading forms specialists alongside our outside legal partners. As a result, the library is a tool designed to help dealers better meet compliance obligations and manage risk.”
Kirwan went on to say, “We are pleased to announce the new LAW Vermont F&I Library. Regulatory scrutiny is an ongoing pressure on automotive retailers, and the LAW Vermont F&I Library is a tool designed to help dealers meet compliance obligations and manage risk.”
Kirwan also noted that because the documents in the library are written in consumer-friendly language, they can help dealers to establish a clearer, more efficient F&I process. A more efficient F&I process can help lead to a better overall customer experience with the dealership.
In addition, the printed documents in the Maine and Vermont F&I Libraries are available in digital format, which can help facilitate the conversion to laser-printed forms and e-contracting transactions. Reynolds Document Services maintains licensing agreements with all major providers of electronic F&I (e-F&I) solutions.
Now with Maine and Vermont in the offering portfolio, other states where Reynolds resources are available include: Alabama, Arizona, Arkansas, California, Colorado, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wyoming.
