Birmingham, AL — December 5, 2017 —President Donald Trump’s signing of an executive order designed to scale back the Dodd-Frank Act could have major ramifications in the automotive industry. An Alabama lawyer who represents auto dealers says they should be aware of the implications for automotive compliance with the Consumer Financial Protection Bureau (CFPB), which was established under the Dodd-Frank.
W. Scott Simpson, Managing Partner of Simpson, McMahan, Glick & Burford PLLC, says Trump’s rollback of regulations affects the CFPB as it oversees automotive and other lenders, including automakers’ captive finance companies and banks. New-car dealers’ practice of setting interest rates on vehicle loans—and the fees they collect for arranging financing—has been a frequent target of the bureau. The CFPB has also settled with Ally Financial, American Honda Finance Corp. and Toyota Motor Credit Corp. for alleged discriminatory auto lending practices. By law, the CFPB has oversight of lenders but not new-vehicle dealers.
The Administration is reviewing and examining possible personnel changes and structural adjustments to the CFPB. White House officials have declined to answer whether President Trump intends to fire CFPB’s Director, Richard Cordray. Some have suggested that the CFPB should be scrapped as an unconstitutional agency; however, most believe that the CFPB should be preserved with the caveat that Congress should take more direct control of its budget. (Editor’s note: Cordray left the CFPB in November; Mick Mulvaney was named by the White House as temporary CFPB director on November 24.)
Auto dealers want to know whether the administration’s proposed changes will directly affect their businesses and operations. Most of the changes to the CFPB structure and/or leadership will have little to no effect on franchised dealership compliance obligations. Since its inception in 2011, the CFPB has not brought investigations against auto dealers. As mentioned previously, the main impact has been placed on auto finance companies and the net effect of these actions was minimal.
In 2017, dealers still need to comply with the Equal Credit Opportunity Act (ECOA), Consumer Leasing Act (CLA), the Truth in Lending Act (TILA), the Office of Foreign Asset Control (OFAC), the Gramm-Leach Bliley Act (GLBA), Unfair or Deceptive Acts of Practices (UDAP), the Fair Credit Report Act (FCRA), the Used Car Rule and various state laws and regulations. Compliance with these regulations was important Pre-CFPB and will remain that way.
Currently, dealerships are expected to have a documented compliance program in place. That expectation has not disappeared since President Trump took office. The CFPB has created no new regulations or rules for auto dealers, however, it is still vital to maintain a strong consumer financial compliance program for your customers and your dealership.
About Simpson, McMahan, Glick & Burford PLLC
Founded in 2007, Simpson, McMahan, Glick and Burford is one of the largest and most well-known law firms in the Birmingham area, representing clients in Alabama and throughout the United States. smgblawyers.com
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