CRYSTAL LAKE, Ill. — “Remain vigilant and attentive to consumer business practices” was a compliance firm’s message to dealers regarding last week’s federal appeals court ruling that the Consumer Financial Protection Bureau’s single-director structure is unconstitutional.
Automotive Compliance Consultants’ David R. Missimer said the outcome of next month’s election will determine whether the ruling has teeth. His main message was that other regulators with jurisdiction over auto dealers have taken note of the CFPB’s successes and tactics, and he believes disclosures dealer provide at the point of sale and F&I product sales is what they’re interested in most.
“For dealers, the message is that although the ruling is significant, it does nothing to change the agency’s determination to terminate, or severely limit dealer reserve,” said Missimer. “Sound consumer financing practices and use of documented processes and practices continue to be a must to protect the dealership.”
The U.S. Court of Appeals for the District of Columbia Circuit stopped short of calling for the CFPB to shut down in its 2-1 ruling. Instead, it ruled that the president will now have the authority to direct and remove the director of the CFPB at will, severing the for-cause provision in the CFPB-creating Dodd-Frank Consumer Financial Protection Act.
The case came about after the bureau fined mortgage lender PHH Corp. for allegedly accepting kickbacks from mortgage insurers. The lender appealed the fine, which led to the last week’s decision. As part of that ruling, the federal appeals court threw out the bureau’s $109 million fine against PHH Corp.
Missimer said the ruling also means the CFPB will have to abide by the statute of limitations in all enforcement actions, noting that that the bureau has insisted that the Dodd-Frank Act does not set forth any limitations for any of its administration actions.
“The CFPB has been the biggest regulatory bully in D.C. without shame, and with a total disregard for Congress and elected officials,” Missimer said. “In its wrangling with the auto industry, in particular, Ally Financial and other auto finance companies, the CFPB clarified that you either settle with them on their terms or suffer the consequences if you fight.
“Should the ruling stand, it will make a significant dent in the agency’s no-prisoners approach to reviewing corporate conduct well outside any relevant statute of limitations, and demanding redress for the same,” he added.