Why dealers must keep compliance ‘near top of to-do list’

Regulatory compliance for dealers and lenders won’t be going away.

Whatever limits have been imposed on the federal Consumer Financial Protection Bureau (CFPB), there are sound business reasons to maintain the discipline it brings to automotive sales.

Regulatory compliance still “should be near the top of every dealers’ to-do list,” suggested a report in Auto Remarketing after Congressional approval of legislation overturning the CFPB’s 2013 “guidance” on indirect auto financing that increased oversight of lenders and dealers.

052918 IL Why dealers must keep compliance ‘near top of to-do list’

“If you think changes at the Consumer Financial Protection Bureau will give dealers a little breathing room, take a deep breath,” the report said. “Then consider this: States are stepping up their scrutiny.”

Santander Consumer USA (SC), one of the nation’s largest non-prime lenders, has cited “a push at all levels of government to regulate auto lenders and dealers more closely.”

Beyond that, SC’s Enterprise Fraud and Dealer Management unit suggests that continued attention to regulatory compliance issues can result in important dealer benefits, including:

  • Improvement in overall customer experience and loyalty
  • Reduction in consumer harm and reputational risk
  • Reduction in credit stipulations
  • Reduction in funding delays to dealerships
  • Reduction in post-funding disputes and potential unwinds

Because “the number of identity theft, fraud and elder-abuse complaints reported to consumer agencies has increased significantly,” SC suggested, failure to remain vigilant can result in increased overhead costs, higher prices to consumers, lower sales volume and lower profits and growth.

“One area of increasing concern has been ancillary products,” reported Auto Finance News (AFN).

“There has been an incremental compression in rate participation margins … and dealers are trying to make up that income in other areas [such as] ancillary products,” Kenneth Rojc, managing partner of the automotive finance group at Nisen & Elliott, told AFN.

Rojc told AFN that “regulators will be more keen on pursuing deceptive practices during the financing process, especially disclosures of service contracts and guaranteed asset protection policies.”

While regulatory compliance presents challenges, “it should not be viewed as an obstacle, but rather an opportunity,” said Michael Sanders, vice president of Enterprise Fraud Management at SC.

“When practiced effectively, regulatory compliance assists in preventing fraud, stopping deceptive practices, and protecting customers,” Sanders observed.

“By embracing a standard of regulatory compliance, we demonstrate our commitment to doing the right thing for our customers,” Sanders said. “This commitment can be a differentiator that sets our company apart from the competition, and builds consumer confidence in the industry as a whole.”

If you have questions or are uncertain how to improve your compliance systems and processes, contact your SC Dealership Relationship Manager, who can guide you to the appropriate resource.

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