What keeps a regulatory attorney up at night? Host Kynzie Sims posed that question to our friend and collaborator Eric Johnson during a recent episode of the Smart Compliance Podcast. The two chat about the compliance issues Eric wishes more organizations looked out for.
KYNZIE SIMS: Are there compliance issues that keep you up at night?
ERIC JOHNSON: There are so many. From a dealer perspective, one thing that I see often is just a dealer not tracking their compliance with how they’re advertising. You know, and that’s really where the FTC has been so active the last few years, where the dealership is not compliant with the advertisement requirements under Truth in Lending or Consumer Leasing Act.
Those are really easy violations to find for the most part. And then the FTC will use that as a way to also allege, “this is an unfair, deceptive, or abusive act or practice.”
And those are such easy violations, for the most part, to fix, and there are so many resources out there, I wish dealers would spend more time watching that—having either somebody in house that’s proficient and watching that, or having their counsel look for those types of issues. Because those are just really easy things to spot and it’s such a low-hanging fruit for the FTC and other regulators. Those keep me up at night because they’re just not smart. They’re really easy to fix and it bothers me when people and dealers don’t take steps to correct those issues.
It’s interesting that you say that they’re easy for the regulators to find because the whole goal of the advertisement is to reach as many people as possible and let them what you’re doing. So, you certainly want those to be correct when they go out the door because the goal is to reach a wide audience.
That’s right. Therein lies a problem. You want your advertising to go far and wide. And it’s really changed in the last 10, 15 years or so. It used to be just TV ads, but now, it’s all been pushed to the internet. We have different texts that come through that may or may not comply. The channel for the advertising has changed, but the rules really haven’t changed that much. It’s easier now more than ever for, say, somebody at the FTC or a state regulator to just go on your YouTube channel or go to your website and pull these issues down. It’s very easy for them to do so without spending a lot of time on their end.
Right. So making sure your people are trained on what the advertisement should or should not look like—making sure they’re trained on the front end and then making sure that there’s a check, whether it be internally or externally, before those go out so that you’re not raising flags where you really want to be advertising?
This interview has been edited and condensed. Want to listen to the full podcast?
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Eric Johnson is a partner in the firm’s Oklahoma City office. He assists national and state consumer finance organizations and motor vehicles dealers with nationwide finance, online vehicle sales assistance, litigation funding, and electronic payment programs. He also provides responses to regulator examinations, comments on proposed statutes and regulations to legislators and regulators, and assists financial services providers with statutory and regulatory changes occasioned by the Dodd-Frank Act.
Hudson Cook is one of our esteemed partners who have authored a pre-loaded library of content and trainings that takes the hassle out of staying current with ever-changing compliance requirements. The result? Compli makes it easy to maintain an effective workforce compliance program.
That’s right. Having your employees or whoever is responsible for your marketing trained on the rules. But really, I think it does go back to having a strong policy or CMS in place just to know: “What are the rules? What can we do? What should we not do?” Having that foundational requirements in place first, being trained on those, and then implementing to those—i.e., preparing the marketing on advertising based on those requirements. It rolls back up to having a strong CMS or strong policy in place could prevent a lot of the heartache and getting the old checkbook out to write a check for some of these penalties, and being under an FTC consent order for the next 20 years.
Have you seen FTC consent orders that are lasting that long? What’s life like for those dealers? I’m guessing it’s substantially harder and a huge motivator to avoid those types of citations.
Yeah. If not, it really should be. A lot of times, those consent orders have reporting requirements, where you have to report back to the FTC. Sometimes, you’ll have to report to any new manager that comes in or new owner that comes into the dealership. And you’re always under that scrutiny because once you’ve received that consent order from the FTC—you’re on their radar anyway—but definitely, now, you’re on the shortlist. And we’ve seen cases where the FTC has actually come back to the dealership that was under a consent order to see that they comply with the consent order. And those cases where they don’t, the CFPB pops them again. That just happened here in the last year or so, where they came back.
Typically, in the past, they would just [say], “you’re under a consent order” and “you do what you’re supposed to do,” and there were not too many times when they come back, but they’re actually coming back now and checking and making sure that you comply. And, if you don’t, then get your checkbook ready. It’s even worse for the dealer when they don’t.
It sounds like the strategy should be do it right up front: make sure that you’re being proactive about your compliance obligations?
Yes, yes. It may seem it is a pain to do it right at the start, and compliance is not cheap, but I tell you what: the non-compliance on the back-end is even more expensive.
For the full conversation, listen to the episode of the Smart Compliance Podcast.