Spotlight on Auto Finance (Part 3 of 3): Expanded Coverage for Vehicle and Consumer Loans

Auto Finance Attorney John ReddingConsumers have a larger platform to submit complaints against vehicle and consumer finance companies directly to regulators. The CFPB has set up an online database that allows the CFPB to receive consumers’ complaints against their lenders and take action or transfer those complaints to another, appropriate regulator.

“We are advising our clients to be aware of this increased focus on individual complaints,” says John Redding, Counsel in BuckleySandler‘s Southern California office. “Because of this new database, companies need to be aware of their customer service response times and make each customer complaint a top priority.”

He suggests:

  1. Provide prompt responses to consumer complaints
  2. Work with consumers to resolve issues before they become complaints to the CFPB or other regulatory agencies
  3. Monitor social media outlets, but don’t overreact to comments or complaints and use care when considering any type of response

“Companies need to recognize that consumers have been given a new outlet that they have not had before,” says Redding. “Consumers now have a greater voice with the regulatory agencies and, as a result, lenders have to be aware of all issues raised by their customers.”

Regulators have made it clear that  they are closely reviewing  consumer complaints and that they are likely to have a  strong impact on regulatory actions.

“The CFPB is likely to focus on standards, like fairness and risk to consumers, as well as specific rules” says Redding. “The regulators are looking to address practices that may cause harm to consumers.”

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Spotlight on Auto Finance (Part 2 of 3): New Database to Combat Fraud Against Military and Veterans

Auto Finance Attorney John ReddingThe federal government is increasing scrutiny of financial services companies’ practices affecting active military members, veterans and their families. Earlier this year, the CFPB along with the FTC, the Department of Defense and the New York Attorney General announced the launch of the Repeat Offenders Against Military (ROAM) database, which will track enforcement actions against companies and individuals who repeatedly scam military personnel, veterans and their families.

According to John Redding, Counsel in BuckleySandler’s Southern California office, this new effort is an important development that the financial services industry needs to be aware of. He says the firm has been advising clients on how to refine their policies and procedures for doing business with servicemembers and their families.

“We are suggesting they be aware of the increased focus on SCRA [Servicemembers Civil Relief Act] issues and, in part because of the new database and other efforts surrounding increased protections, need to review their practices to ensure continued compliance.”

According to the CFPB, law enforcement officials across the country, including state attorneys general, US attorneys, and judge advocates from all five branches of the armed forces, will be able to search the ROAM database for information about completed civil and criminal actions against businesses that have scammed military personnel, veterans, and their families.

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Spotlight on Auto Finance (Part One of Three): A New Road for Auto Finance Companies

Auto Finance Attorney John Redding

Traditionally, non-bank lenders looked to the states and the FTC for industry regulations. But, this has changed with the introduction of the CFPB. Recent reports show that the federal government is stepping up efforts to regulate and review auto finance companies, many of whom have never been subject to bank-style examinations.

“The CFPB has created a new layer of regulation,” according to John Redding, Counsel in the Southern California office of BuckleySandler. “Auto lenders have to be alert and aware of their fair and responsible lending risks.”

Redding says one of the ways to minimize these risks is to be proactive when reviewing a company’s policies, procedures, discretionary underwriting and pricing practices.  The CFPB is likely to conduct statistical reviews for loans that the company has made or purchased to ensure there is no unexplained or improper disparity between protected and non-protected classes , so companies should consider performing such analyses in advance of the regulator conducting such an analysis.

“This will help mitigate risks for the companies by identifying areas that may present risk and allowing them to proactively take steps to modify policies and practices. When the regulators are conducting an exam, companies will have to explain why the business is conducted as it is, including steps taken to ensure fair and responsible lending to all consumers, regardless of status, and address any issues that may arise,” says Redding.

The bottom line: Recognize that there are new regulators and more scrutiny on the industry and begin taking steps to perform these important reviews now.

Redding suggests the following steps auto finance companies can take to prepare for the CFPB:

  • Evaluate the institution’s risk profile and prepare an operations and compliance strategy
  • Update policies and procedures (review CFPB exam guidelines)
  • Monitor, address, and retain records regarding consumer complaints
  • Monitor third-party sources of complaints
  • Appoint an ombudsman
  • Conduct internal audits
  • Consider patterns and practices that emerge regarding operations
  • Focus on areas that may lead to consumer harm, as well as technical violations
  • Include the compliance team to monitor, analyze and advise on specific proposals
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