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Regulators Reach Out

The CFPB has offered its first invitation to the auto finance segment, and the editor has a few thoughts for the agency — if it would just return his calls.

January 18, 2013

Where does the time go? I’m entering my seventh year with F&I and Showroom, and the magazine is entering its 15th year in operation. That’s right, 15 years serving an industry that few car buyers understand but is critical to getting their vehicles over the curb.

As for me, this has been my longest stint with the same company. Reporters typically move around every two years or so — at least, at the beginning of their careers — to take on new beats and new challenges. We also like to leave our mistakes behind. Yeah, I sometimes cringe at the things I did as a young newspaper reporter.

But here I am and here we are, doing our best to drive the industry forward. See, the magazine was created to help bring about a certain standard of operation, marked by a code of ethics and regulatory compliance. At the same time, we support the sale of F&I protection products, providing insights and advice to drive higher penetration rates and profitability.

To consumer advocates, those two goals would seem to be fundamentally opposed. I disagree. You could argue that our products can do more for consumers than just about anything else they buy. But our products are attached to the second biggest purchase a consumer will make in his or her lifetime, hence the scrutiny.

What I’m trying to get at is I don’t believe the credit crisis was the direct result of bad people doing bad things to good people. To me, it was more about good people making bad decisions. Still, I think we’d be naïve to think that regulators wouldn’t try to find their place in the overall cure to what ailed and continues to ail our economy.

And that’s why I was hopeful when Sen. Elizabeth Warren (D-Mass.), credited as the chief architect of the Consumer Financial Protection Bureau (CFPB), said in 2007 that her brainchild would be just as critical of the rules already on the books as it would toward the industries under its watch. What she was referring to were the required disclosure forms customers review and sign. “Worse yet, there is so much required fine print that most people get lost in it,” she told F&I and Showroom magazine six years ago.

Hey, if the CFPB can cut down the 55 or so signatures required before a customer can take delivery of a vehicle, I’m all for it.

With that said, I’m not sure what to make of the proposal the CFPB put forth in mid-December. See, the bureau wants to enlist lenders in its efforts to right the credit ship. So it’s asking finance sources to voluntarily test new consumer disclosures. But it’s not opening up the offer to everyone: The proposal stated that the bureau will approve lenders for the initiative, called Project Catalyst, on a case-by-case basis.

I like the idea of the new regulator looking to the finance community to help come up with better rules and requirements. But its proposition made me wonder if regulators really understand how much lenders, and even dealers, invest in their compliance processes. And these safeguards are so interwoven into what finance sources do on a daily basis, I’m just not sure how any of them would be willing to forego their processes to participate.

Well, I made the mistake as a reporter of infusing my opinion into an interview request I sent to the bureau. I simply wrote that I didn’t believe this would work, which is the best way not to get a call back. And, well, I didn’t.

Now, some of the magazine’s F&I Forum members thought the initiative was a novel approach — maybe because the initiative was directed at lenders and not dealers. Whatever the case, my friends in the social realm thought being a part of the solution was better than having a solution dictated to them.

Well, there was one forum member who sided with me. He goes by the name of CU Defender, and happens to work with a credit union that conducts business in our industry. He’s not a fan of the CFPB, but he admits that he’s in favor of the bureau simplifying forms like it’s done in the home mortgage arena. But as for this initiative, he’s not sure how well it’ll do.

“To have to reprogram everything is not only a cost [issue], it’s a drain on resources,” he wrote. “As it is, we have to do it way too often, thanks to ever-changing regs. To do so for a temporary form seems like a waste of time and money.”

When we started this magazine, regulators were focused on what happens to consumers between the showroom and the F&I office. Today, they’re interested in what happens between the F&I office and the lender. It will be interesting to see how this plays out. The one thing you can count on is that, like we have for the last 15 years, we’ll be here to keep you updated.


  1. 1. Frank Martin [ January 24, 2013 @ 08:35PM ]

    There is no doubt that in the last 15 years, the F&I office has become bogged down and bottle necked with way too much paper. Every day we go through a forest of trees and stacks of meaningless paperwork solely created for the twisted perception of compliance and CYA. The introduction of printed menu software programs marketed under the deceptive guise as a compliance tool was and still is nothing more than a sales tool, though effective as it may be. I was drawing menus way before menus were cool. Since the 80’s I have utilized the method as a tool to present and explain the benefits of all products available in the F&I office. Menus offer a distinct level of transparency creating trust and credibility that give customers that warm fuzzy with every decision they make. I have yet however seen one case where it has held up in any court as an object of defense in any compliance hearing. Not to say it hasn’t, I just have never seen it.
    The point I’m trying to make is we have paperwork to explain paperwork like some places have meetings about meetings. I just have to believe that in this day and age there has got to be way to consolidate and simplify. Wouldn’t it be great if the signature pad could be utilized with a signature signed only once by the customer? The customer could click on all the boxes that apply. Not only the legal applications we have grown to implement driven by fear, but also products, mileage disclosures, credit score disclosures, truth in lending, etc. all integrated after a series of cursor clicks, press return and voila it all prints out. Well maybe that would be too easy, some of us still like to feel needed.

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