There are many things that can generate fear: dentists, nervous pilots, lutefisk (as this guy’s facial expression will demonstrate), clowns and above all, clowns who perform dentistry. For Auto dealers, the CFPB does not need to be one of those fearful things. Yes, the CFPB is actively working to subvert the auto dealer exemption by pressuring lenders to only work with dealers who fall in step, and yes this is clearly something to be concerned with. However there are a couple of things that you can do immediately that can help protect your dealership from potential liabilities.
First and foremost, don’t discriminate.
I shouldn’t have to write this, but apparently it’s still a necessity. To be very clear you shouldn’t discriminate because the year is 2016, and discrimination is so last century, time to move on. Discriminatory practices in the sales process also create a clear and easily tracked record that lenders and more importantly, their regulators, can look at to see if there have been violations under ECOA (Equal Credit Opportunity Act) and UDAAP (Unfair, Deceptive, or Abusive Acts and Practices).
Second, documentation is everything.
I’m specifically referring to documenting your sales compliance at the transactional level. Two more for you to add to the list as well:
- the quality of your policies, and
- the understanding of those policies.
Here are few questions that you should invest some time in answering:
- Do you have a Fair Lending Program?
- How well does your staff understand this program and its potential impact?
- Do you use a rate exception form?
- How often do you audit your deal jackets to confirm that all exceptions are documented and their impact understood?
- Do you offer periodic training to your staff so they know what conditions create an acceptable exception?
Lastly, give your dealership’s culture a check-up.
Ask yourself, have we developed a culture within our auto dealership that stamps out discrimination on any level? This last question is the most important one to me, because if a company really cares about creating a business culture free from discrimination, those practices will encompass not just how they deal with their employees but also how they represent their client’s best interest.
So leave the fear where it belongs; in the chair at your friendly, terrifying local house of dentistry. Demonstrate that you’re treating people equally and fairly (both your customers and employees), and you’ll keep yourself out of regulators’ crosshairs.