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Zurich Helping Dealers Navigate CFPB's Fair Lending Review

Zurich North America worked with Hudson Cook on guidance to help auto dealers protect their dealerships from allegations of unfair lending practices.

by Staff
January 27, 2014
3 min to read


SCHAUMBURG, Ill. — Amid stepped up federal regulatory enforcement against alleged discriminatory and deceptive lending practices, Zurich North America, an insurer of franchised auto dealers, has prepared a package of initiatives to assist auto dealers in managing their entire credit origination processes. These initiatives are designed to assist dealerships in limiting their risk associated with potential allegations involving noncompliance with fair lending laws.

“Zurich is aware of the regulatory demands surrounding lending practices that face auto dealers today,” said Glenn Roberts, national training and business development manager at Zurich. “We’ve developed these measures to help our customers comply with fair lending laws. Armed with this information, dealers can evaluate their business practices and assess whether adjustments are needed to reduce their risk of regulatory or legal challenges.”

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Differences in prices paid for dealer financed products, how products are sold and what products are sold can lead to regulatory inquiry and possible allegations of discriminatory violations of fair lending laws.

During the National Automobile Dealers Association (NADA) conference in New Orleans,  Zurich —advised by Hudson Cook, a law firm in the auto dealer industry — has identified five key elements that auto dealers across the industry can consider to assist them in a fair lending compliance program.

• Use of a credit score driven rate matrix

• Standardization of dealer participation

• Use of a vehicle-only base payment quote

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• Standardization of product gross margins and locking down menus

• Use of a model compliant menu that shows all prices, payments, rates and terms

To help its F&I auto dealer customers implement these recommendations, Zurich has worked with Hudson Cook to develop a set of compliance tools. These tools track performance and help ensure that the same procedure and policy for setting dealer participation is applied to all customers. The tools allow dealers to take subjectivity and employee discretion out of setting APRs, the amount of dealer profit and offering add-ons and ancillary products, which results in a more uniform and likely more compliant process.

In addition, Zurich representatives serve as an ongoing resource on compliance issues helping dealers stay up on the latest trends, changes in regulations and direction in clarifying issues or procedures that may arise.

“It gives me great peace of mind to know that we have worked to reduce our risk with the assistance of a company that understands how important it is for us to stay current with federal regulations.” said Tom Thompson, president, Thompson Automotive in Baltimore, Md. “We hold monthly meetings between Zurich and our staff so we can discuss the latest information available to help us stay compliant.”

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The creation of the Consumer Finance Protection Bureau (CFPB), as well as increased oversight by the Federal Trade Commission (FTC), and in collaboration with state attorneys general has led to greater scrutiny of the nation’s auto dealers in the way they conduct their auto financing operations. In the past, regulatory oversight of F&I practices was focused almost exclusively on the F&I office. Now however, regulatory agencies have expanded their interest into the origination stage of the financing.

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