What the Auto Finance Industry Can Learn From the Lessons of History

For retail automotive dealers and lenders, regulatory requirements provide checks and balances that benefit the business—not just the consumer


In our daily 24/7 news cycle, perspective can be fleeting. We fail to consider the ebb and flow of events, especially anything with political overtones.

Although the world of finance prefers consistency, the one thing we can count on is change. Lately, the topic of compliance has been buffeted by change.

From regulation to deregulation, the various local, state, and federal agencies that enact laws seem to fluctuate between the two. This seesaw particularly applies to the Consumer Federal Protection Bureau (CFPB).

The agency has been in the news a lot lately. From Acting Director Mick Mulvaney’s decommissioning of the Advisory Committee to a federal district judge ruling its structure unconstitutional, some might think that the CFPB’s days are numbered.

History has a lesson to offer, however, compliments of the Federal Trade Commission (FTC). And it’s a lesson those in the auto finance industry should heed.

A brief history lesson

The FTC was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The regulatory agency opened its doors in 1915 with a mission to protect consumers and promote competition.

The FTC building was finished in 1938, with President Franklin D. Roosevelt stating, “May this permanent home of the Federal Trade Commission stand for all time as a symbol of the purpose of the government to insist on a greater application of the golden rule to conduct the corporation and business enterprises in their relationship to the body politic.”

Currently, the FTC houses three bureaus: the Bureau of Consumer Protection, the Bureau of Competition, and the Bureau of Economics. Each bureau has a set of mandates to guide its work.

In the early 1970s, the agency became more aggressive in prosecutions and sanctions. The business community and Congress criticized the FTC’s activism, claiming it had become too powerful, was insensitive to the needs of the public and business, and operated with little oversight from Congress or the president.

During President Ronald Reagan’s first term, control of the FTC was moved under the president. Its direction was modified to become more cooperative with business interests, while continuing its consumer protective functions.

A correlation can be made between these changes at the FTC and the short, but storied, history of the CFPB. The CFPB was created as a legislative response to the financial crisis of 2007-2008, and the subsequent Great Recession. The agency was authorized by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

While a new director awaits approval, the actual status of the CFPB as an independent agency is currently under question, thanks to a circuit split in the U.S. Court of Appeals and a New York Federal District Court.

Within the span of eight years, we have experienced the specter of regulation followed by deregulation, combined with judicial and executive branch infighting. Sound familiar?

A matter of checks and balances

The FTC is focused on anticompetitive oversight as well as the monitoring and enforcement of consumer fraud violations. Some felt that the fox was guarding the henhouse, which prompted the 2010 creation of the CFPB, which serves as a regulatory agency, charged with overseeing financial products and services that are offered to consumers.

The CFPB is divided into several units, including research, community affairs, consumer complaints, the Office of Fair Lending, and the Office of Financial Opportunity, which work together to protect and educate consumers about the various types of financial products and services that are available.

Some still feel the fox is watching over the henhouse, however. Given the lens of history, the CFPB is still in its infancy, and will likely be remolded many times as the political tide ebbs and flows.

The legacy of the FTC gives us a glimpse into those fluctuations. Trade and commerce regulations have existed since 1903, and they are not going away anytime soon.

Regardless of perspective, we live in a regulatory compliance world, which can be beneficial if viewed with a positive viewpoint.

For retail automotive dealers and lenders, regulatory requirements provide checks and balances that benefit the consumer, as well as the business. Protections exist on both sides of the transaction.

And, for those enlightened dealer principals and managers who abide by the requirements—and strive to educate their customers on the value of those requirements—the business stands to become a “trusted partner” to the consumer.

Lenders who provide valuable guidance to their dealers create educated partners who bring solid deals to the table. Trust, security, and protection are key attributes when building a long-term relationship. And, these attributes carry a lot of weight in these ever-changing times.


The daily news feed is rife with cases of suspected fraud and corporations confessing wrongdoing. It’s no wonder the average consumer is leery. It’s this climate that provides an opportunity for those businesses that apply the rules of compliance as a differentiator, a kind of shield designed to protect, not harm.

Regardless of the ebbs and flows of regulation or deregulation, a consumer’s trust in a reputable dealership will never prove a wrong move.

Steve Roennau is vice president of compliance at EFG Companies. In his role, Steve guides EFG’s clients on compliance procedures at the local, state, and federal levels. An AFIP Senior Certified Professional in Financial Services, Steve has developed numerous training modules and regularly conducts compliance courses internally, at dealerships, OEMs, and industry associations. He is also the host of the monthly Common Sense Compliance podcast, available on iTunes.

Steve Roennau

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