There are many things we should be afraid of: cruise ships with no lifeboats, lutefisk (most Scandinavian fish dishes for that matter), nervous surgeons and above all, clowns. 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 even write this, but apparently it is still necessary. To be very clear you shouldn’t discriminate because the year is 2013, and discrimination is so last century, time to move on. Discrimination also creates 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).
Secondly, and we here at Complí are big believers in this, documentation is everything. When I say document everything, I’m specifically referring to documenting the voracity of your compliance at the transactional level, and also in 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 Policy?
- How well does your staff understand this policy 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, ask yourself, do we foster a culture that doesn’t tolerate 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. The easiest way to negate potential liabilities is by not creating them in the first place, and if that means treating everyone equally and fairly, than that sounds like a good place to start.