At my request, Tom Hudson, a partner at the law firm of Hudson Cook LLP, arranged a meeting with Jeffrey Langer, assistant director of the Consumer Financial Protection Bureau (CFPB), in Washington, D.C. Langer replaced Richard Hackett, who left the Bureau to return to private practice in Hudson Cook’s Portland, Maine, office. As a result of an earlier informal meeting with Hackett, I sent the AFIP’s Certified F&I Professional training material to the CFPB.
Very much to his credit, Langer is educating himself on automobile sales in general and F&I processes in particular. This is a laudable and necessary undertaking, given the expansive and deeply penetrating powers granted the CFPB. This undertaking is exacerbated by the fact that two polar extremes are attempting to define the same universe by looking into different ends of the telescope.
I have asked Langer to provide a list of questions to ensure that areas of interest to the CFPB are addressed. I will submit a written response prior to the meeting and use the face-to-face session to clarify areas that warrant further discussion. I have also asked Hudson, the AFIP’s official legal resource, to critique my written responses and to participate in the meeting.
By their nature, discussions within this forum are as much philosophical as they are empirical. The breadth and severity of the regulations governing an industry are largely influenced by how the regulator views it. It’s unfortunate that, due to the inordinate amount of press accorded unscrupulous operators, far too many industry overseers and rule-makers succumb to the notion that a varying percentage of car dealers are dishonest.
Much can be done to paint a more accurate picture of the automobile industry. The caveat? To quote an axiom attributed to Leon Trotsky: “For those who believe, no explanation is necessary; for those who don’t believe, no explanation is enough.”
Buying a vehicle is the second most expensive consumer purchase most Americans will make. And owning two or more vehicles is a necessity for many of us. The private ownership demographic ranges from the Silent Generation duffer going 10 miles per hour under the speed limit to the “I’m still living at home” Gen Y driver cutting in front in his dad’s Corvette. The car-buying experience — and the recounting of the experience, for better or worse — is an integral component of the American way of life.
A vehicle may be leased, paid for in cash or funded on installments by a captive or institutional lender or credit union. And the vehicle may be purchased from a franchised, independent or buy- or lease-here-pay-here dealer, or a private party. With few exceptions, nearly every aspect of the process is subject to negotiation, with consumers accorded free access to a market full of similar products and services.
In its real-world execution, a vehicle purchase or lease is a matrix of an infinite number of permutations. With this as my palette, what picture can I hope to paint for the CFPB?
First, the vehicle purchase, funding and owner-protection processes result in millions upon millions of transactions. If fundamentally flawed, the current systems would have long ceased to exist. However, for these core processes to prevail, they must implement, as they have in the past, more highly defined and consumer-friendly procedures. And they must be subjected to heightened levels of scrutiny. The objective is to make what already works, work better, and to only fix what’s actually broken.
Second, given the number of variables, no two car deals and no two problems — or their solutions — are alike. Most issues don’t lend themselves to one-size-fits-all (i.e., everyone pays the same price) regulatory fixes. The levels of diversity inherent in the processes are too great, and the latitude to manipulate the variables in play also works to the consumer’s advantage.
Third, the array of actors on the retail automobile industry stage aren’t markedly different from the cast of characters found in any other highly competitive, for-profit business operating in a free enterprise economy. The shared consensus is that the imposition of, and compliance with, regulatory constraints is essential to the success of their business. It provides the mechanism to cull bad actors and the guidance to optimize marketing opportunities. This industry recognizes that a well-crafted rule is one that serves both ends of the spectrum.
David Robertson is executive director of the Association of Finance and Insurance Professionals. Email him at [email protected].