As of June 20, the first 150 days of the Trump administration had come and gone. Regardless of which side of the aisle you hail from, it is safe to say the days have been interesting, different, confusing at times, and either productive or a failure depending on your point of view.
The question that concerns us, however, is: What has changed in the industry?
Business as usual
The administration has frozen the creation of new regulations, and the Consumer Financial Protection Bureau (CFPB) has determined it is not in its best interest to unleash its rule on consumer arbitration.
Other than these events, it is business as usual in the auto industry.
Dealership compliance with federal and state consumer and worker safety laws and regulations remains a part of retail automotive. Most of the rules that must be complied with have been in existence for a long time, and have survived through numerous administrations.
Currently, no changes have been proposed by the Federal Trade Commission (FTC). State attorneys general in many states have taken the position that they must protect their states or commonwealths from President Trump. And yes, the CFPB still exists under the control of Director Richard Cordray.
So again, the question is: What’s new?
Dealership compliance is here to stay
The answer is that your dealership compliance programs are here to stay. The messages from the recent American Financial Services Association Spring Conference and the Hudson Cook 2017 Consumer Financial Services Conference were in agreement and straightforward:
Although the CFPB’s approach was heavy-handed, the creation of compliance management systems over the past few years has been a benefit to those companies, including dealerships, which have bought into a compliance system.
For those enterprises not making compliance a priority, and which choose to maintain a head-in-the-sand approach, there have been fines and penalties paid to the FTC, state attorneys general, and plaintiffs’ attorneys.
In addition to regulatory fallout, the lack of a robust compliance system at your dealership can result in the loss of relationships with the lifeblood of your store: finance companies.
Santander Consumer USA, having recently settled cases brought by the states of Massachusetts and Delaware, announced that it has terminated more than 800 dealerships since 2015, based on “performance-related issues.”
“We believe there’s a direct connection between strong consumer practices, a culture of compliance, and the creation of shareholder value,” said CEO Jason Kulas of Santander in a conference call this past April 26. “Simply stated, the companies that embrace and execute on these concepts will be more successful than those who do not. ”
Obviously, more than the government is interested in what kind of compliance program you have at your dealership.
In this era of the CFPB, it is not unusual for a finance source or lender to not only inquire about your dealership compliance program, but to review it as well.
Are you ready?
Is your dealership ready for a compliance inquiry from a financial source? Does it have a readily accessible compliance program with documented proof of:
- Ownership involvement in compliance;
- Records of employee training;
- Documented audits and corrective action; and
- History of adjustments based on a review of customer complaints?
Given the past five years of emphasis, any entity involved in a consumer financing transaction should be able to demonstrate these four areas with little difficulty.
The benefits to a company with a robust compliance management system are starting to roll in, and include:
- Transparency with customers;
- Improved customer satisfaction (a result of transparency);
- Better relationships with finance sources;
- The ability to shut down plaintiffs’ attorney inquiries quickly and decisively;
- Less complicated regulatory review; and
- Deference in some cases where a regulator sees a commitment to compliance.
Compliance brings opportunities
Yes, the Trump administration’s first 150 days have been exciting.
They have not, however, changed sound business practices, which include compliance practices at the dealership. Full disclosure and transparency translate to more satisfied customers.
It may have been a little painful for many dealers when they initially implemented a complete dealership compliance program, but ask any dealer who did so if they are sorry.
I would bet not a single dealer who bought into dealership compliance will say it was a bad idea. The overwhelming refrain has been quite the opposite, in fact.
So, if your dealership has been waiting for all this “compliance stuff” to go away . . . well, you are going to wait a very long time, and miss an awful lot of opportunities along the way.
David R. Missimer, [email protected], is general counsel for Automotive Compliance Consultants Inc. He spent 28 years in private practice as a litigator representing lenders, auto dealers, and numerous other entities and individuals. He has worked with dealership compliance issues since 2003 as co-founder of ACC. He is a member of the National Association of Dealer Counsel, American Financial Services Association, and National Automotive Finance Association.