What does a Biden / Harris administration mean for auto sales and finance? | Hudson Cook, LLP
This article was originally published on December 7, 2020 in Out of prime time, official publication of NAF Association.
So the general consensus is that a Biden / Harris administration will mean a lot of changes for auto finance. But, what types of change exactly and how quickly will that change happen? And, how bad will it be for the industry? I’ve touched on my assumptions below about what a Biden / Harris administration can mean for the auto finance industry. Cliff Notes Version: if you were nostalgic for an aggressive watchdog and that “regulation by application” that we experienced under former CFPB Director Cordray during the Obama administration, where the success of the Office was measured in terms of dollars recovered for the consumer and penalty amounts, you’re in luck!
Let’s start with the change at CFPB first. Thanks to the decision of Seila Law case, Biden can fire Director Kraninger on day one, appoint a new acting director in his place, and then appoint a new director. However, the outcome of the Senate second round in January for Georgia will have a huge impact on who can be confirmed by the Senate and ultimately become director. If the Democrats take control of the Senate, could we see Richard Cordray take over the head of the CFPB? Or, maybe a disciple or sidekick of Elizabeth Warren? Regardless of Senate oversight, we should see a new CFPB director and a gradual move by the Bureau to take a more aggressive stance towards consumer protection; especially given the economic and other effects of Covid-19.
I also suspect that we will see a movement from the CFPB to promote racial equity and justice through financial policies and programs. You can expect renewed interest in fair lending practices in the industry, especially when it comes to race. We should expect to see more cooperation with state attorneys general and state regulators on these issues.
If you’re looking for a potential playbook for a new CFPB director, look no further than former Director Cordray’s April letter to Director Kraninger. et al. titled “Immediate actions for the CFPB to deal with the Covid-19 crisis” as a guide. In his letter, he offers to help avoid vehicle seizures by working with Congress to impose a moratorium on vehicle seizures “for the duration of the crisis and its economic consequences.” In addition, it recommends taking “measures to ensure that consumers faced with the trade-in of their vehicles are informed, treated fairly and that the equity balance of their car or truck is fully applied to their loan balance. “.
He also instructed supervisory staff to require brief summary reports to monitor industry performance on a basis biweekly basis – on issues such as call volume, waiting times, accounts placed on hold, accounts missing a payment and other items that may be useful in assessing the state of the economic crisis affecting consumers. And, he demanded that this anonymized data be made public, saying that “This will help identify best practices the industry is developing to deal with the growing economic crisis. CFPB’s market monitoring teams have been designed precisely to this end. ” Expect a ton more scrutiny from the CFPB on your maintenance and collection activities.
What about changes to the Federal Trade Commission? You may be aware that the Commission is headed by five Commissioners, appointed by the President and confirmed by the Senate, each for a term of seven years. No more than three commissioners may belong to the same political party. The president chooses a commissioner to act as president. The composition of the Commission is currently three republics to two Democrats, with a Republican president. The term of Commissioner Rohit Chopra (D) expired in September 2019, but he can wait until a new Commissioner is installed. The term of Commissioner Rebecca Kelly Slaughter (D) expires in September 2022. The terms of Republicans expire in 2023, 2024 and 2025.
All the commissioners were appointed at roughly the same time and there will be a period of at least 2 years (except resignation) with a Republican majority. And, commissioners can only be removed for just cause. President Biden can appoint a new Commission president; probably appointing a Democrat as president.
I doubt we’re seeing a lot of changes at the FTC when it comes to consumer protection. At least not at the beginning anyway. The FTC has certainly taken a more aggressive enforcement stance in recent years and I expect that stance to continue. You may recall that two of the commissioners issued concurring statements in the Bronx Honda rulebook, calling on the FTC to use its regulatory authority to tackle auto dealership abuse. They concluded that an enforcement strategy, by itself, is insufficient. We can very well see some regulatory authority to combat these perceived abuses by dealers.
What about the FTC’s Consumer Protection Office and its current director? You may remember that this is the office responsible for protecting consumers from unfair, deceptive or fraudulent practices. The current manager has been very efficient, but under a Biden / Harris administration he and other FTC staff may decide to move on to greener pastures. If that happens, you can bet with your bottom dollar that you will see more liberal management and staff in this office. I expect we will see a lawsuit, and possibly increased focus, by the FTC on dealer protection policies, privacy policies, and theft prevention policies. ‘identity.
Finally, there is the Department of Justice. As I noted above, I would expect the Department of Justice, along with a more liberal U.S. Attorney General, to put more emphasis on fair lending, racial equity, and justice. We could see more investigations from the DOJ, leading to more enforcement action and settlements with dealers and their principals for suspected criminal activity.
If you’ve spent the past four years being lax in your compliance efforts, it’s not too late to take action. What can you do? If you don’t have one, set up a compliance management system. If you have a CMS, make sure it’s updated, taking into account the Bureau’s findings on the CMS for other companies they’ve applied or reviewed against, and make sure it follows your policies and practices. real. Review and update, if necessary, your Identity Theft Protection and Prevention Policy (red flags policy). Finally, if you are a reseller and have not adopted NADA’s Fair Credit Compliance Program and Voluntary Protection Product Policy, you should consider doing so. A call to your friendly compliance advisor would be a good start!