ARTICLE | April 22, 2022
Authored by RSM US LLP
Auto finance lenders come in many shapes and sizes, giving rise to a complex, dynamic regulatory framework. While indirect auto lending has long been a priority among regulators concerned about fair lending practices, recent CFPB data and enforcement priorities suggest a broader push for enhanced scrutiny. Indicators include:
- New CFPB concerns related to affordable credit for auto loans given the increasing cost of vehicles
- Possible incentives for auto lenders to seize and illegally repossess certain vehicles due to the competitive used-car market
- The CFPB’s recent push for public commentary regarding general junk fees, including fees associated with auto loans
Given the impact of the pandemic, the increased costs of vehicles and the CFPB’s general push to limit junk fees, the auto lending space is ripe for significant regulatory change and increased enforcement action.
Factors to consider
Your auto lending compliance program should include robust monitoring to ensure your risk management efforts are operating effectively and are nimble enough to respond to regulatory change. Factors to consider include:
- Complaint trending analysis:
- Is your consumer complaint data complete and accurate?
- Do you have a centralized mechanism for reviewing complaints in the aggregate so that management can adopt and implement appropriate procedural changes?
- Regulatory change management:
- Have you assessed the impact of recent state-level enforcement actions?
- Are you actively monitoring ongoing CFPB efforts, including those related to any of your fees that could be deemed junk fees?
- How does your organization assess and escalate its response to regulatory changes?
- Effective risk assessment:
- Your auto finance and compliance risk assessment should be uniquely tailored to your auto lending model. If you are using a blanket approach without regard for the complexity of your model, you may be missing the mark.
- Auto lending risks and priorities are constantly changing. How often do you refresh your method of risk assessment?
- Third-party/vendor risk management:
- How robust is your review of key vendors and third parties involved in auto loan origination and servicing?
- Are you confident your debt collectors are complying with recent changes to the Fair Debt Collection Practices Act?
- Have you considered whether you or your debt collectors may have illegally repossessed vehicles while trying to remain competitive in the current used-car market?
Next steps for auto lenders
Auto lenders should look to enhance compliance monitoring to account for ongoing regulatory changes. Additionally, it’s important to rightsize your compliance program to fit the unique needs of your business. Working with a partner that can improve your compliance risk assessment, review your relationships with third-party vendors, and provide data and analyses around your auto lending operations can help tremendously in navigating the auto lending compliance landscape.
This article was written by Pete Hoglund, Courtney Nowlan and originally appeared on Apr 22, 2022.
2022 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Firley, Moran, Freer & Eassa is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Firley, Moran, Freer & Eassa can assist you, please call us at (315) 472-7045.