Counselor’s Corner JULIE CARDOSI, Law Office of Julie A. Cardosi, P.C. Federal Government’s Regulatory Impact on Auto Dealerships Review Your Existing Business Practices and Policies The Consumer Financial Protection Bureau (CFPB), a federal government agency, enforces federal consumer financial laws against unfair and deceptive acts or practices to protect consumers in the financial marketplace.1 Some of the areas of focus by the CFPB include: enforcing laws prohibiting discrimination in consumer finance; fielding consumer complaints; and monitoring the use by consumers of certain financial products. Earlier this year, the CFPB issued orders to nine large auto lenders requesting information about their auto lending portfolios; filed suit against a Michigan-based subprime indirect auto lender; filed suit against Credit Acceptance Corporation, a large subprime auto lender alleging deceptive practices in the financing of low-income consumers in high-interest auto loans; and ordered U.S. Bank and Dealers’ Financial Services to cease deceptive advertising and lending practices targeting active-duty military personnel.2 Among CFPB initiatives impacting the auto industry is its action “against sloppy servicing practices that cause harm” involving optional, add-on products that dealers sell and consumers can purchase when they buy a vehicle. This includes GAP and other add-on products. CFPB has observed: “auto dealers and finance companies often charge consumers all payments for any addon products as a lump sum at the origination of the auto loan, and they generally include the lump sum cost as part of the total vehicle financing agreement.”3 Additionally, CFPB investigative findings were published in a report, concluding: “Our examiners have focused on the way servicers handle these add-on product charges when the loan ends before the add-on product’s potential benefits end. Such early termination may happen because the consumer pays the loan off early, often through refinancing, or because the consumer was delinquent in making payments and the servicer repossessed the consumer’s car … [CFPB] examiners found that servicers engaged in unfair practices by failing to request refunds from the third-party administrators for “unearned” fees related to one such add-on product, GAP, and failing to apply the applicable refunds to the accounts after repossession and cancellation of the contracts. At that point, the consumers did not have the cars that had been subject to the GAP product, and the product no longer offered any possible benefit to consumers.”4 And the Federal Trade Commission (FTC), another federal agency which also enforces consumer protection laws targeting unfair and deceptive practices, has introduced the proposed Motor Vehicle Dealers Trade Regulation Rule5 proposing stricter regulation of dealer advertising and F&I practices and seeking to ban what the FTC described as “many of the junk add-on fees and bait-and-switch tactics plaguing car buyers,” and by regulating “the sale of ‘add-on’ products and services in a deceptive or unfair manner” to include add-ons such as extended warranties, service and maintenance 14 Illinois Automobile Dealer News
RkJQdWJsaXNoZXIy MTg3NDExNQ==