We’re all aware of the incessant government encroachment into how we run our F&I departments. First it was disparate impact pricing, then biweekly payments and now compliance management systems. What’s next? More importantly, who’s to blame for all these rules and regulations?
The reality is consumer regulations aren’t hatched in a vacuum. They’re a common sense attempt by state and federal legislatures — and their implementing agencies — to either define a desired end result or establish a methodology for effecting one. Think of Regulation Z as a manifestation of both objectives. Within this context, common sense means “for the common good.” And while it may be difficult to believe, the common good encompasses the industries the agencies are duty bound to regulate.
No offense is intended with the following analogy, but the first rule of being a parasite is to not kill the host. Well, the same holds true for state and federal regulatory agencies. Common sense dictates that the last thing they want to do is kill the industry they’re supposed to regulate. And in most cases, it’s the actions of the industries that determine the depth and breadth of the rules the agencies implement and enforce. The severity of that oversight usually says more about the industry than the government agencies charged with its regulation.
As the denizens of the F&I industry, how can we apply this common good standard to help curb the never-ending regulation cycle?
First, take a look at the common good aspects from an F&I practitioner’s perspective. Remember, the acid test is “for the common good,” but for the common good of whom? Well, there’s a direct correlation between the number of parties factored into the common good considerations of an F&I-related decision and its likelihood of satisfying the customer: the dealer’s policies, the terms and restrictions imposed by the lenders and vendors, the public (served by the governing state and federal regulations), and a test of acceptable ethical conduct.
The point is, if a specific act fully satisfies the common good standard for every entity or individual impacted by it, there isn’t, in most cases, any reason to create a rule governing the activity. The rules that become burdensome are the ones promulgated to rectify situations in which the common good of one or more parties isn’t being met. That is not to say a little regulation isn’t a good and necessary thing. To function properly, every endeavor requires a codified set of procedures and standards.
The second thing you can do is to just do it. Incredibly, for something so intuitively simple and highly beneficial, doing it right is outside some practitioners’ bandwidths.
Sadly, the Association of Finance and Insurance Professionals was recently forced to invoke the eighth canon of the AFIP Code of Ethics. It states, in part, that “(AFIP) will take action if the Code of Ethics is violated, including revocation of membership or certification status.” The standard for doing so is limited to situations in which an individual has admitted in writing to have committed the breach of ethical conduct. In these instances, there is no question as to who is responsible for the loss of certification status.
As I said, sadly, we’re in the process of revoking the certification of five people whose standard for the common good was limited to themselves. However, given the nature of their malfeasance, losing their certification status will be the least of their worries.
These nefarious acts not only irreparably damaged the perpetrators’ careers and dinged their employers, they negatively impacted all of us. The regulators involved took note of the specific transgressions, which means the bad acts will be catalogued by state and federal regulatory agencies for further discussion by regulation-drafting subcommittees. And it’s likely a more stringent rule will emerge.
The actionable areas have been circulated via the Internet by the plaintiffs’ lawyers to their colleagues as new sources of income. The incident also provided fresh grist for those who despise dealers. To them, it’s another example of those wily car dealers fleecing poor and unsuspecting car buyers.
Who’s to blame for the relentless ratcheting up of regulatory requirements? We all are. Those of us who honor the common good help keep the introduction of new laws in check. Those of us who don’t honor the standard keep the regulation-generating machine humming in high gear.
David Robertson is executive director of the Association Finance and Insurance Professionals. Email him at [email protected]