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Balancing Act

September 3, 2013

Welcome to Industry Summit 2013. We’re happy to have you and I look forward to seeing you on the show floor.

Clearly, the Consumer Financial Protection Bureau (CFPB) is the hot topic of the day. We could certainly dedicate our entire agenda to the bureau, but our surveys from past conferences say that’s not what you want. So how do we balance what you really want, which is training, with what you need to hear?

I’m not sure we accomplished that balance in 2008 and 2009, when the Red Flags Rule headlined our conference. Heck, I remember being excited about having the Federal Trade Commission’s Manas Mohapatra speak on the rule in 2009, but I’m not sure you were.

The credit crisis was in the spotlight in 2010, making lender relations a big topic of discussion. Deal structuring was another hot-button issue. We also began delving into front-end topics like inventory management and Internet sales. Much of that was driven by the fact that recession-weary consumers were turning toward the used market, and the thought was that F&I offices could roll more deals if their lots had the right inventory. We also started hearing industry leaders talk about the need for dealers to move toward a more Apple store approach, the main message being that we needed to make purchasing a vehicle easier and faster for consumers. But I’m not sure we were helping you sell more products.

After that show, my publisher, David Gesualdo, and I sat down and took a hard look at our agenda. It was during that meeting we decided to turn our show into a training summit of sorts. And the timing was right. The industry was climbing out of the Great Recession, and consumers were beginning to come off the sidelines and creep back into showrooms.

But it was also during that period that we began to see blueprints for a new federal regulator, the CFPB. We knew the industry was entering a new era of regulation, but, as F&I and Showroom’s Brittany-Marie Swanson noted in her July article on the CFPB, the bureau took two years to direct its attention toward auto finance. While that worked for us in 2011 and 2012, that meant we were going to have to make some hard decisions for this year’s show.

So how do we balance compliance with F&I training, especially since the only time we hear from the CFPB is through speeches, press releases, letters and posts on its website? The truth is, the CFPB has done little in terms of writing new regulations for the auto finance industry. Yes, it has issued guidance in regards to dealer participation, but it was more of a warning to finance sources that it’s monitoring policies that allow dealers to mark up interest rates on finance contracts.

The bureau did issue its first consent order against an auto finance source, U.S. Bank and its nonbanking partner, Dealers’ Financial Services. But that issue focused on disclosure. So nothing new there, right? 

Even my industry insiders aren’t clear on the CFPB’s agenda. What I do know is the bureau does have a dealer list. And if you’re on it, then you’re one of the operations the CFPB believes is causing minorities, or protected classes, to pay higher interest rates through your rate markup policies. And from what I hear, the CFPB is working with finance sources to identify and possibly correct the problem. I’m just not sure if this will result in enforcement actions, but just know that this is happening.

So, how do we design an agenda around this new regulator when it’s done more sabre rattling than taking action? Well, since the CFPB is so in love with dealer participation, we thought we’d do our part by helping you make product sales a bigger percentage of your per-deal income.

We asked our trainers to weigh in on the possible loss of rate markups. And as you’ll see on Page 78, they seem excited about weaning F&I offices off of reserve.

We are dedicating one session to the Dodd-Frank Act. It’s scheduled for Tuesday, Sept. 17, at 10:30 a.m. On the panel is Andrew D. Koblenz, the NADA’s executive vice president of regulatory affairs, and Hudson Cook LLC’s Nikki Munro. They will take us inside the discussions taking place between the CFPB and our industry. Also on the panel is Damon Wiener, legal expert with Safe-Guard Products International LLC. He’ll offer his thoughts from an F&I product provider’s perspective. We’ll also have David Robertson, executive director of the Association of Finance and Insurance Professionals, and compliance expert Robert Harkins to translate what it all means to dealers.

I’m excited about this year’s agenda, but feel free to drop me a note on how we did. Now let’s have a great show.

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