At the FTC, Fair Lending Enforcement Is Back in a Big Way
Four dealerships are in trouble with federal regulators for violating fair lending laws by, among other things, allegedly embellishing consumers’ income and creating misleading ads.
…Wait, what is this, a news flash from 2015? Didn’t Congress nix the Consumer Financial Protection Bureau’s auto lending guidelines? Isn’t Director Mick Mulvaney pulling the CFPB away from dealers?
Yes, Congress did vote to end the CFPB’s auto lending guidelines, and yes, Mulvaney did say the Bureau would be reprioritizing its focus and paying less attention to the auto industry. But for once, we’re not talking about the CFPB. The regulators in this story are the Federal Trade Commission.
As reported in SubPrime Auto Finance News:
“This week, the Federal Trade Commission charged a group of four dealers operating in Arizona and New Mexico, near the border of the Navajo Nation, with a range of illegal activities, including falsifying consumers’ income and down payment information on vehicle financing applications and misrepresenting important financial terms in vehicle advertisements.
Officials pointed out this development is the FTC’s first action alleging income falsification by dealers.
The complaint also names the dealerships’ owner and manager, Richard Berry, as a defendant; and owner and president, Linda Tate, as a relief defendant.
According to the complaint, since at least 2014, Tate’s Auto has sought to increase its sales by falsifying consumers’ monthly income and down payments on financing applications and contracts submitted to third-party financing companies. The four dealerships named in the complaint are Tate’s Auto Center of Winslow, Tate’s Automotive, Tate Ford-Lincoln-Mercury and Tate’s Auto Center of Gallup.”
Read “FTC charges 4 dealers with illegally enhancing credit applications.”
Dealers and lenders who have been paying close attention to regulatory developments (for instance, by reading our blog) probably won’t find this story surprising at all. In December, we covered another SubPrime Auto News story demonstrating why organizations involved in consumer finance can’t afford to ignore the FTC regardless of what happens with the CFPB. In March, Compli Sales Director and fair lending pro Brian Larson wrote that “the CFPB could disappear altogether (it won’t) and lenders would almost certainly need to answer to—and prove compliance to—the Federal Trade Commission.” And in April, together with the American Financial Services Association, we hosted a webinar about how the FTC and state attorneys general are inheriting the CFPB’s legacy.
For more on these developments, check out a recent article titled “The CFPB’s Spirit Lives On” in F&I and Showroom, which features an interview with Eric Johnson of Hudson Cook. Here’s an especially pertinent excerpt:
“Question: Do you suspect the FTC will start investigating dealers now that the CFPB’s claws have been clipped?
Johnson: Yes, I believe so. Remember, the FTC has primary enforcement authority over dealers that are exempt from the CFPB’s authority, which are primarily franchised dealers. They’ve exercised this authority fairly regularly—and quite painfully to those affected dealers—over the past few years. Do a Google search on ‘FTC sues dealer’ and you’ll see what I mean.
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The FTC also issued a recent ‘Staff Perspective’ document that indicated the regulator’s renewed attention on several more areas of fair lending compliance, as well as Military Lending Act issues and other issues that affect military consumers. Illegal debt collection practices and UDAPs were also listed.
The FTC also has a fully staffed commission for the first time in many years, as well as an extremely sharp new director of its Bureau of Consumer Protection. With the perception that the CFPB is backing off of consumer protection, the FTC is anxious and more than willing to increase its role in protecting America’s consumers.”
That reminds me: we did our own interview with Eric on the Smart Compliance Podcast. You can listen to his episode here.
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