First Ally Financial, then American Honda Finance Corp., and on Monday, the Consumer Financial Protection Bureau added Fifth Third Bank to its list of recipients of multi-million-dollar actions for what the regulators determined to be discrimination in vehicle financing.
As part of its $18 million penalty in the auto space, the CFPB and Department of Justice ordered Fifth Third Bank to substantially reduce or eliminate entirely dealer discretion. Officials told the bank to pay that $18 million to “harmed” African-American and Hispanic borrowers. Meanwhile the dealer participation stipulations included in the agreement are similar to what Honda Finance is being forced to do.
According to second quarter data from Experian Automotive, Fifth Third Bank tied for No. 15 in overall market share, holding 0.99 percent with fellow Midwestern commercial bank Huntington and USAA.
“We are committed to promoting fair and equal access to credit in the auto finance marketplace,” CFPB director Richard Cordray said. “Fifth Third’s move to a new pricing and compensation system represents a significant step toward protecting consumers from discrimination.”
Monday’s enforcement action is the result of a CFPB examination that began in January 2013. Over the time period under review, bureau officials indicated that Fifth Third permitted dealers to mark up consumers’ interest rates as much as 2.5 percent “while giving them the discretion to charge consumers different rates regardless of consumer creditworthiness.”
The examination evaluated Fifth Third’s indirect auto lending program for compliance with the Equal Credit Opportunity Act, which prohibits creditors from discriminating against loan applicants in credit transactions on the basis of characteristics such as race and national origin. The CFPB and DOJ’s joint investigation concluded that Fifth Third’s policies a pair of infractions, including:
• Resulted in minority borrowers paying higher dealer markups: Fifth Third violated the Equal Credit Opportunity Act by charging African-American and Hispanic borrowers higher dealer markups for their auto loans than non-Hispanic white borrowers. These markups were without regard to the creditworthiness of the borrowers.
• Injured thousands of minority borrowers: Fifth Third’s illegal discriminatory pricing and compensation structure meant thousands of minority borrowers from January 2010 through September of this year were charged, on average, more than $200 more for their vehicle installment contract.
The Dodd-Frank Wall Street Reform and Consumer Protection Act and federal fair lending laws authorize the CFPB and DOJ to take action against creditors engaging in illegal discrimination. The CFPB’s order was filed on Monday as an administrative action, and DOJ’s proposed order was filed in the U.S. District Court for the Southern District of Ohio.
“The measures provided in the orders will help ensure that illegal discrimination does not increase the cost of auto loans for consumers on the basis of race and national origin,” officials said.
Monday's announcement arrived about two months after a report surfaced that Fifth Third Bank was about to be penalized
The Wall Street Journal cited what the report described as people familiar with the matter who indicated the CFPB was asking Fifth Third Bank to reduce the amount of dealer mark-up it allows in exchange for a reduced monetary settlement with the regulator.
Agreement details
Under the CFPB order, Fifth Third must:
• Substantially reduce or eliminate entirely dealer discretion: Fifth Third will reduce dealer discretion to mark up the interest rate to only 1.25 percent above the buy rate for auto loans with terms of 5 years or less, and 1 percent for auto loans with longer terms. Fifth Third also has the option under the order to move to non-discretionary dealer compensation.
The bureau said it did not assess penalties against Fifth Third because of the “proactive steps” the company is taking that directly address the fair lending risk of discretionary pricing and compensation systems by substantially reducing or eliminating that discretion altogether.
• Pay $18 million in damages for consumer harm: Fifth Third will pay $12 million into a settlement fund that will go to harmed African-American and Hispanic borrowers whose auto loans were financed by Fifth Third between January 2010 and September of this year.
Based on a determination by the DOJ and the CFPB, officials calculated Fifth Third will receive credit of between $5 million and $6 million for remediation it has already provided to harmed consumers whose auto loans were financed by Fifth Third from January 2010 through June of this year. Fifth Third will then pay any additional funds necessary into the settlement fund to bring its total payment to harmed consumers to $18 million.
• Pay to hire a settlement administrator to distribute funds to victims: A settlement administrator will contact consumers, distribute the funds, and ensure that borrowers who were harmed receive compensation.
The bureau said will provide contact information for the settlement administrator once that person is chosen to address questions that consumers may have about potential payments.
Pattern of settlements
In March 2013, the CFPB issued a bulletin explaining that it would hold indirect auto lenders accountable for unlawful discriminatory pricing. The bulletin also made recommendations for how indirect auto finance companies could ensure that they were operating in compliance with fair lending laws.
Then in December of that year, the bureau handed out a penalty topping $80 million against Ally.
In September of last year, the bureau issued an edition of Supervisory Highlights that explained that the CFPB’s supervisory experience suggests that significantly limiting discretionary pricing adjustments may reduce or effectively eliminate pricing disparities.
“Substantial limits on discretionary pricing like those imposed by Monday order can address the type of fair lending risk identified in the CFPB’s bulletin and Supervisory Highlights,” officials said.
Officials recapped that Monday's auto lending action is part of a larger joint effort between the CFPB and DOJ to address discrimination in the indirect auto lending market.
Most recently, in July, the CFPB and DOJ took an action against Honda Finance requiring the captive to pay $24 million in consumer restitution and take the same steps to substantially reduce or eliminate entirely dealer discretion.
DOJ officials cheered Fifth Third Bank for accepting terms of the agreement outlined on Monday.
“We commend Fifth Third for its commitment to treating all of its customers fairly without regard to race or national origin and its leadership in agreeing to impose lower caps on discretionary markups,” said principal deputy assistant attorney general Vanita Gupta, head of the Civil Rights Division.
“This agreement shows that the indirect auto lending industry is moving toward a model of dealer compensation that fairly compensates dealers for their work related to loans, while limiting the dealer markup that leads to discriminatory pricing,” Gupta continued.
U.S. Attorney Carter Stewart of the Southern District of Ohio added, “Consumers deserve a level playing field when they enter the marketplace, especially when financing an automobile. This settlement prevents discrimination in setting the price for auto loans.”
FNI’s David Bafumo dissected a class action complaint involving Santander Consumer USA filed in the U.S. District Court for the Northern District of Illinois (Eastern Division) and uncovered three important questions that might impact other auto finance companies.
To recap, the matter that reached the court system on Aug. 31 is associated with allegations that a dealership’s failure to properly disclose the terms and conditions of a GAP debt-cancellation agreement resulted in federal Truth in Lending and Illinois State Retail Installment Sales Act violations, for which SCUSA — the holder of the retail installment contract — should be liable.
Before going into his trio of potential implications, Bafumo spelled out that the plaintiff's case is based on the following key factual allegations about the vehicle finance transaction that originated at Al Piemonte Super Car Outlet in Northlake, Ill. Those allegations included:
• Before consummation of the credit transaction, plaintiff was not delivered a copy of the required TILA disclosures "in a form she could keep."
• Plaintiff was not given any information regarding the GAP debt cancellation addendum, and specifically the amount charged ($895).
• Instead of being advised of required TILA disclosures, plaintiff, “was presented with a stack of documents (including the GAP addendum) containing signature lines marked by the letter ‘X.’”
• Plaintiff alleges she was told the entire stack of documents constituted her retail installment contract and were required to complete the vehicle purchase and finance transaction.
• The GAP addendum’s program limits include a maximum APR of 24 percent and the plaintiff's APR was 27 percent.
• The GAP addendum did not state the payment of the GAP charge was voluntary, but rather stated, “(a)lthough not required to do so, you elect to purchase this addendum.”
“The plaintiff’s core argument is that the plaintiff was sold a product that had no value in their particular situation — a GAP policy with program limits that are exceeded by the customer's actual loan APR,” said Bafumo, an expert in F&I products with more than 15 years of experience who now runs his own firm.
“Essentially, a TILA violation for inaccurately disclosing amount financed and finance charges because the GAP charge was not paid for coverage with any value, it must be excluded from the ‘amount financed and cannot be excluded from the calculation of the ‘finance charge,’” he continued.
“The complaint seems to also lift language from recent consumer rights lobbying efforts, alleging, almost as an aside, without any factual allegations in support, that GAP generally is a ‘deceptive product primarily used to pad loan transactions and improperly increase the amount financed with what is really profit, and part of the finance charge,” Bafumo went on to say.
“Interestingly, that statement is also posed as a ‘question of law and fact’ in the complaint’s justification for class action status,” he added.
In light of that backdrop, Bafumo elaborated about the three questions auto finance companies should ask if they are offering or underwriting GAP products similar to what SCUSA does.
What specifically makes this GAP contract allegedly worthless to this customer?
Bafumo indicated the GAP “program limits” set out on the front page of the contract states a maximum loan APR of 24 percent, and in the contractual list of exclusions, part “K” states that the GAP addendum does not provide coverage if the finance contract APR exceeds that maximum APR. Court paperwork showed plaintiff Joyce Pettye’s loan included a 27-percent APR.
“From a GAP product perspective, the limitation found in the contract at issue is fairly unusual,” Bafumo said. “Most GAP contracts do not specify such a limitation on the face of the contract.
“More typically, GAP benefits are contractually limited by loan-to-value percentages and vehicle type, value, or use classifications,” he continued.
Is the GAP contract at issue Santander's own private labeled program?
Bafumo noted the GAP contract at issue does not appear to be Santander's private branded S-Guard GAP program. Instead he said it appears to be a dealer selected product administered by a California company, Partners Alliance.
“That may raise some problems for the plaintiff’s class certification,” Bafumo said. “Their argument for class certification contends that a large percentage of Santander’s loans include this particular APR-limited GAP policy, which seems unlikely if it is indeed a dealer selected program rather than Santander's preferred program.
How is Santander supposed to prevent these kinds of alleged errors or improper disclosures that occur at dealerships?
Bafumo emphasize an indirect auto finance provider cannot monitor product disclosures and F&I practices inside every dealership that originates loan transactions.
“But the instant case is avoidable,” he said. “With established product funding approval policies and processes that include minimum product contractual requirements and benefits (amongst other product and administrator due diligence) and internal funding verification and audit, the GAP contract in this case would have been rejected and the deal returned to the dealership.
“Santander presumably has such policies and processes in effect for their own S-Guard suite of products but apparently none — or perhaps a failed policy — for dealer-selected products,” Bafumo added.
Bafumo also mentioned that less than 20 years ago, setting basic approval guidelines for add-on products like GAP and vehicle service contracts was a common practice among indirect auto finance providers. If a product contract form number and/or product administrator was not on the “approved” list, he indicated the product simply would not be financed.
“Mysteriously, this smart business practice has diminished and largely disappeared at many financial institutions — over the same time period that consumer protection litigation and regulatory interest has substantially increased —and remains consistently implemented only by auto manufacturer’s captives and some experienced operations, mostly in the subprime market,” Bafumo said.
On the day CarMax Auto Finance completed the second quarter of its current fiscal year with a 6.2-percent increase in net income, the financing arm for the used-vehicle retailer came within the jurisdiction of the Consumer Financial Protection Bureau thanks to the larger participant rule.
When asked how this additional regulatory burden might burden CAF’s performance, CarMax chief financial officer and executive vice president Tom Reedy quickly tried to assuage any concern investment analysts might have held when the company held its quarterly conference call earlier this week.
“The larger participant ruling is out there, and frankly it was nothing of any surprise for us,” Reedy said. “There is no direct impact on our dealer operations, but as we expected all along, CarMax Auto Finance will be subject to the bureau’s supervisory authority, and what that means is we’ll be interacting with them in the future, as we were pretty certain.”
Previously, the bureau supervised auto financing at the largest banks and credit unions. Then as of Aug. 31, the CFPB’s rule extends that supervision to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year.
The CFPB announced this move back in June so Reedy reiterated that CAF had time to prepare.
“As far as what we’ve been doing, we’ve been paying careful attention to developments in the industry as we see new announcements and new actions by them,” Reedy said. “We’ve been assessing our practices as we see what we think are the expectations of the bureau, and we’ve been working hard to make sure that our compliance and program is up to snuff and will be ready for examination, if and when it comes.”
An examination would show what CarMax Auto Finance reported for Q2, which included $98.3 million in net income. The company also highlighted its average managed receivables grew 16.4 percent to $8.99 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and its funding costs, declined to 6.2 percent of average managed receivables from 6.6 percent in last year’s second quarter.
Officials also mentioned their allowance for loan losses climbed to $87.8 million in Q2, up from $77.8 million a year earlier.
“I think from the perspective of CAF, it was a straightforward, a boring quarter, which is what we like to see,” Reedy said. “That means everything is going as expected.
“If you remember, last quarter and, I believe, the quarter before, we had some but changes in our loss expectations, which were favorable and actually boosted income growth in those quarters,” he continued. “This quarter, we’ve seen loss experience come in as expected, right where we booked it, which is how we like to see things.
“There’s nothing different going on. It’s just a matter of we’ve seen losses come in exactly as we’d been planning on,” Reedy went on to say.
The reported acknowledgement by the Consumer Financial Protection Bureau that its use of disparate impact could over-count potential discrimination by indirect auto finance companies continues to churn the industry’s frustration with how the regulator operates.
Paul Metrey, chief regulatory counsel at the National Automobile Dealers Association, reiterated his position after American Banker reviewed a series of private documents exchanged between CFPB officials. The report indicated bureau officials say they prefer using disparate impact to the alternative where bias is underestimated.
“In order to have an accurate measurement of potential consumer harm, you have to isolate out legitimate pricing factors that can cause a deviation in the results. There are business factors that the Justice Department has recognized as legitimate that the CFPB appears to be blatantly ignoring during investigations,” Metrey said.
“There’s also an added reputational harm to the actors when the CFPB is basing damages off overestimated figures. If you look at the press releases of these enforcement actions, they are not holding back,” he went on to say.
The American Banker report also touched on subject that triggered a scathing editorial Investor’s Business Daily. The internal documents American Banker obtained as well as its sources reflected back on the largest enforcement action to date the bureau has made in the auto finance space. Sources said the CFPB “chose to act aggressively because it wanted to send a message to the industry and do so quickly,” when it bureau used disparate impact to hand out an $80 million penalty against Ally Financial at the end of 2013.
In light of all the reports and CFPB activity not only against Ally, but also the $24 million action against American Honda Finance, editors of Investor’s Business Daily urgently questioned the bureau’s continued use of proxies to find discrimination since auto finance applications do not require race disclosure.
“Not only does CFPB guess about the qualifications of the applicants they're comparing, it also makes faulty assumptions about the actual race of those applicants,” the publication said in its editorial posted here.
The publication closed its opinion piece by stating, “That’s a lot of speculation for something as serious as racism. Lacking hard evidence to support their discrimination claims, they show no concern about charging people with something that they didn't necessarily do.”
The National Automotive Finance Association enjoyed another great turnout for the opening module of its Consumer Credit Compliance Certification program.
The most recent session last week in Irvine, Calif., drew 78 participants from 55 different companies. Hudson Cook partner Patty Covington, one of the instructors for the opening module of the four-part training endeavor, told SubPrime Auto Finance News in an email message that the topics drawing the most questions from attendees included:
— Adverse action notice requirements
— Furnishing to the credit bureaus
— Text messaging
— Collections
— Compliance management systems
After two days of classroom style learning in Irvine to complete Module 1, participants will move onto the 29 self-paced, Web-based sessions covering federal and state laws and regulations that govern the auto financing business.
Successful testing throughout the program is necessary before progressing in the program, which is available to the staff of NAF Association member companies at the price of $2,000 per person and non-member companies at $3,000 per person.
The certification of Compliance Professional is awarded upon completion of Module 4, a live classroom session covering the Consumer Financial Protection Bureau. The next time the NAF Association is offering Module 4 is ahead of the SubPrime Forum at Used Car Week, which begins on Nov. 16 in Scottsdale, Ariz.
Whether or not they’re participating in Module 4, NAF Association members can take advantage of $100 discount off of the registration fee for the SubPrime Forum, which includes a wide array of presentations as well as networking opportunities at the Phoenician, the site of Used Car Week.
When completing registration, NAF Association members can use the code NAF2015 when prompted.
Agenda and registration details all can be found at www.usedcarweek.biz.
For more information about the Consumer Credit Compliance Certification program, visit nafassociation.com or contact executive director Jack Tracey at (410) 865-5431 or jtracey@nafassociation.com.
A West Virginia franchised dealer group again found itself involved in a regulatory matter with the Federal Trade Commission.
Ramey Motors recently agreed to pay an $80,000 civil penalty to settle a lawsuit the FTC brought last year.
The FTC recapped that it charged Ramey Motors with violating the terms of a 2012 consent order with the regulator that barred it from deceptively advertising the cost of buying or leasing vehicles
The civil penalty settlement resolves charges that Ramey Motors’ ads violated the consent order by concealing important terms of sale and lease offers, such as a required down payment, and failing to make credit disclosures clearly and conspicuously, as required by federal law.
The civil penalty order also prohibits Ramey Motors from violating the 2012 order. That matter included the FTC finding fault with claims such as “Ramey will pay off your trade no matter what you owe … even if you’re upside down, Ramey will pay off your trade.”
The commission vote authorizing the staff to file the stipulated civil penalty order was 5-0. The order was entered by the U.S. District Court for the Southern District of West Virginia, Bluefield Division, on Sept. 9.
On Thursday, Reynolds and Reynolds launched the Reynolds LAW Tennessee F&I Library, a comprehensive catalog of standardized, legally reviewed finance and insurance documents available to automobile retailers in Tennessee.
The F&I resource for dealerships in the Volunteer State extended Reynolds’ expansion since the beginning of the year as the provider now has added this availability in five other states, including Maryland, North Carolina, Louisiana, Alabama and Massachusetts.
“Automobile retailers continue to face increasing levels of regulatory scrutiny, as well as higher expectations from consumers around the entire car-buying experience," said Jerry Kirwan, senior vice president and general manager of Reynolds Document Services.
“Part of Reynolds' response for dealers is to develop document services that help them tackle those issues directly. The documents in the LAW Tennessee Library can help dealers minimize their compliance risk, streamline their F&I processes and improve their customers' experience in the F&I office."
Kirwan noted several benefits of the Reynolds LAW Tennessee F&I Library:
— Minimized compliance risk: LAW brand documents can help support a standardized, streamlined F&I process and can help reduce the retailer's litigation risk. The documents in the LAW Tennessee F&I Library are regularly reviewed for compliance with the latest regulations. Reynolds' industry-leading forms specialists lead the review alongside Reynolds' outside legal partners.
— Streamlined F&I processes: By using the standardized vehicle deal documents in the LAW Tennessee F&I Library, dealers can achieve a more consistent and effective F&I process in every transaction.
— Increased customer satisfaction” The LAW Tennessee F&I Library contains documents written in consumer-friendly language to help create a more transparent and understandable F&I process and improve the customer experience with the dealership.
— Smooth the transition to electronic transactions: The printed documents in the LAW Tennessee F&I Library are also available in digital format, which can help facilitate the conversion to laser-printed transactions or e-contracting. Reynolds Document Services maintains licensing agreements with all major providers of electronic F&I solutions.
The latest enforcement action against a dealership in New Jersey provided another reason why Dealertrack Technologies associate general counsel Randy Henrick recently acknowledged that when he brings up the topic of compliance, “many dealers feel a headache coming on.”
Before a Garden State superior court judge ordered an independent dealer to pay nearly $700,000 in penalties, Henrick began a recent company blog post by recognizing, “With so many laws, regulations and rules to contend with, it’s easy for dealers to feel frustrated and confused.
“The trouble is that non-compliance can lead to thousands of dollars in fines, class-action penalties and reputation damage,” he added.
RLMB, a dealership located in Ledgewood, N.J., sustained exactly what Henrick referenced since a judge ordered the store to pay $693,645.91 after finding that it violated the state’s consumer protection laws and regulations a total of 640 times, following legal action brought by the Attorney General’s Office and the State Division of Consumer Affairs.
The state’s 10-count complaint, filed this March in State Superior Court in Morris County, alleged that RLMB and its manager, Michael Bloom Sr., violated the Consumer Fraud Act, the Motor Vehicle Advertising Regulations, the Automotive Sales Regulations, the Used Car Lemon Law (UCLL) and UCLL regulations by, among other things, advertising used vehicles for sale without disclosing:
— To consumers the vehicle’s prior damage or prior use
— Selling vehicles “as is” when they qualified for a warranty
— Permitting third parties to advertise, offer for sale and/or sell used vehicles on Craigslist that were titled to RLMB.
Officials indicated the defendants failed to file a response to the complaint, resulting in Judge Stephan Hansbury entering a final judgment by default.
The judgment requires the defendants to pay $640,000 in civil penalties, $31,200.91 in reimbursement to the state for its legal and investigative costs and $22,445 in restitution to seven consumers.
By the terms of the final judgment by default, the dealership must comply with all applicable state laws and regulations in its business practices.
“The penalty ordered in this matter is appropriate and should send a clear message to all motor vehicle dealerships that violating our consumer protection laws and regulations comes at a steep price,” New Jersey acting attorney general John Hoffman said.
“We are continuing to review the practices of new and used motor vehicle dealers to ensure consumers are not taken advantage of,” Hoffman continued.
The state in its filed complaint alleged that RLMB:
— Failed to provide consumers with title and registration to used vehicles prior to the expiration of temporary title and/or registration.
— Required that consumers sign blank sales documents.
— Offered used vehicles for sale at the dealership location that did not have prominently displayed the Federal Trade Commission Used Car Buyers Guide, a document which, among other things, indicates whether such vehicle comes with a warranty.
— Offered for sale used vehicles that did not have the total selling price conspicuously posted.
— Advertised and/or offered for sale used motor vehicles through the RLMB website, without the required statement that “price(s) include(s) all costs to be paid by a consumer, except for licensing costs, registration fees and taxes.”
— Failed to itemize documentary service fees
— Since at least 2007, failed to pay the $.50 administrative fee for each used vehicle sold, as required by the UCLL and UCLL regulations.
“The evidence presented to the court by the Division of Consumer Affairs, resulted in a favorable decision for consumers,” New Jersey acting state director of consumer affairs Steve Lee said. “Dealerships must not withhold information from consumers that the dealerships are required by law to provide.”
To avoid the same fate this New Jersey store sustain, Henrick said in the blog post, “While enlisting the help of qualified legal counsel is the best approach, there are a number of proactive steps dealers should take to help guard against the threat of non-compliance.”
Henrick elaborated about three steps dealers can take in the post available here.
The American Financial Services Association announced that nine executives have been elected to join its board of directors for three-year terms, which will begin following the association’s board meeting on Oct. 6.
The nine individuals include:
— Jody Anderson is responsible for managing Regional Management’s daily operations, implementing, managing and monitoring the execution of current strategies, policies, directives and plans as approved by the board and the chief executive officer. Prior to joining Regional Management in October 2014, he was director of North American Operations at OneMain Financial North America/Division of Citigroup and was also vice president of North America compliance for CitiFinancial Network/Division of Citigroup. Anderson has been active in AFSA, particularly in the Independent Auto Finance Executive Group.
— Robert Bloom has been in his present role with Southern Management since June 2012. Prior to joining the company, he worked for Rent-A-Center for 16 years in a variety of senior executive positions. Bloom has been very supportive of the association’s initiatives and participated in this year’s Installment Lenders Summit in Washington D.C.
— Daniel Chait is responsible for the strategic and operational management of World Omni and its divisions. He also serves as a member of JM Family’s Executive Management Team, which oversees the development and implementation of the company’s long-range planning and strategies for future growth. Chait joined World Omni in 2002 as vice president of asset management. In 2007, he was promoted to group vice president, and in 2012 he was promoted to his current position. Chait has more than 20 years of experience in the financial services industry. He has been very involved in AFSA, serving on CEO panels and participating in many of the AFSA/NADA Executive Forums. He has been a member of the Vehicle Finance Board since 2012.
— Ginger Herring is replacing Buddy Cheek, vice chairman, 1st Franklin Financial Corporation, on the AFSA board. Herring has been CEO and president of the company since 2001. She is also the owner of the Learning Tree Academy, a pre-school and after-school child care center. Herring previously served on AFSA’s Independents Section Advisory Board, which she chaired in 2013. She also serves on the board of the AFSA Education Foundation.
— Dale Jones is replacing Joy Falotico, executive vice president of marketing, sales, americas and strategic planning, Ford Motor Credit, on the AFSA board. Jones has responsibility for business operations in North America and South America. Previously he was vice president, business center operations. Jones joined Ford Credit in 1989 as a customer service representative.
— Shawn Krause leads the company’s government advocacy program and works alongside policymakers, educating them on mortgage banking and housing issues. Krause has more than 25 years of experience in the mortgage industry. She joined Quicken Loans in 1991 and has held positions with nearly every team in the company. Krause is actively involved with many industry-related organizations and currently serves on the National Community Reinvestment Coalition Development Corp. board and National Association of Hispanic Real Estate Professionals Corporate Board of Governors. She currently serves on the AFSA Law Committee, where has provided strategic and substantive input on mortgage policy issues.
— Dawn Martin Harp is the head of Wells Fargo Dealer Services after having been chief operating officer from 2006 to 2011. Previously, she served as chief information officer with WFS Financial. Wachovia acquired WFS Financial in 2006 and then merged with Wells Fargo in 2008. She currently serves on the board of AFSA’s Vehicle Finance Board.
— Horst Meima has more than 20 years of financial services experience, including the roles of president and CEO of the former Volkswagen Bank USA, vice president of sales and marketing for VCI, and president and CEO of VW Credit Canada.
— Ross Williams recently was appointed president and CEO to lead of Hyundai Capital America’s business growth and international expansion in the Americas region. Previously, he was president and CEO of Hyundai Capital Canada, where he was in charge of planning and leading the start of a captive auto finance business for Hyundai and Kia. He joined Hyundai Capital America in 2010. Prior to joining the Hyundai Motor Group, he served as business and operations leader of GE Capital.
The more the Consumer Financial Protection Bureau highlights details about its consumer complaint database, the more industry associations make their own grievances about how the regulator constructs its reports, which are often critical of how providers are performing.
The American Financial Services Association emphasized that the information in the CFPB’s consumer complaint database is “not always correct and so is not reliable.”
AFSA executive vice president Bill Himpler recapped in a letter delivered to the bureau earlier this week that the CFPB had asked for feedback on best practices for “normalizing” the raw complaint data that the bureau makes available via the complaint database. The regulator contends the process is geared to make it is easier for the public to use and understand.
Himpler explained that to normalize data is to transform “raw” data so that it may be compared in meaningful ways. As an example, the CFPB said that providing the total number of complaints against an issuer of credit cards may offer limited opportunities to analyze that company against other credit card issuers. Providing additional information on the size of the issuer’s credit card business as compared to others provides another an aspect from which consumers may make better informed decisions.
“AFSA opposes the CFPB’s effort to normalize the complaint data for this simple reason — data normalization is only worth the effort if the data is reliable,” Himpler said in his latest letter to the CFPB that’s available here.
“The data in the database is not always correct and so is not reliable. Therefore, normalizing the incorrect data will not help better inform consumers, but instead will further misinform consumers,” Himpler added.
Instead of normalizing the data, AFSA recommended that the CFPB should focus on collecting better data. Himpler told the bureau that AFSA members receive complaints without vital information, such as the borrower’s address, property address, loan number, phone number or email.
“In order to solve this problem, more of the fields in the complaint form should be mandatory for the complaintant to complete. It would also be helpful for the categories on the complaint form to be more granular,” Himpler said.
“In short, normalizing the complaint data would be a great amount of work with likely little consumer benefit,” he continued. “If the CFPB decides to proceed with the effort to normalize the data, the CFPB should give everyone an opportunity to comment on the specific approach that the bureau proposes using.
“We understand that the CFPB has said that this would be the last opportunity to comment, but we respectfully request that the CFPB reconsider that position given the amount of work that companies would be required to perform to normalize their data,” Himpler went on to say.
Meanwhile, AFSA wasn’t the only industry organization to send its own complaint about the CFPB database normalization. The Consumer Bankers Association (CBA) had its own regulatory counsel, Kate Larson, deliver a long proposal to the CFPB, too.
“The CFPB has a fundamental duty to publish accurate, reliable information,” CBA president and chief executive officer Richard Hunt said. “Publishing out of context, unverified data will only mislead consumers.
“As outlined in the letter CBA submitted, we urge the CFPB to shift their focus,” Hunt continued. “They must verify the data before they work to normalize it because only then will consumers truly benefit from the ‘complaints.’”
CBA’s complete recommendations can be seen here.
