In a week, Compli will be heading to the 2018 American Financial Services Association Vehicle Finance Conference & Exposition in Las Vegas. As the auto finance industry’s premier conference, the event is a rare opportunity to take the pulse of today’s organizations and get a glimpse of what the next year holds in terms of regulatory updates, business trends, and new technology.
In light of the 2017 AFSA Annual Meeting, which took place right before Richard Cordray left the Consumer Financial Protection Bureau—and featured Cordray and his replacement, current Director Mick Mulvaney, as speakers—I can’t help but wonder how the conference will foreshadow the next chapter in our nation’s ongoing regulatory saga. What conversations, presentations, and developments will show up in tomorrow’s headlines? If you’ll be attending the Annual Meeting next week, and you’re concerned about what’s ahead for the industry, you’ll want to pay close attention to the following topics:
Regulatory Shifts Driven by the New CFPB and State AGs
As we’ve covered in 2 of our recent webinars, the CFPB may not be going away, but it has been defanged to a degree. The conference next week will be the first AFSA event held with Mulvaney in charge of the agency, and it will be interesting to learn from members of the industry about they view the new Director’s somewhat hands-off approach. As the legal battle over who’s in charge of the CFPB continues, many within Congress are voicing their support for Mulvaney, and I hope to hear some perspectives directly from lenders.
Ultimately, however, the fate of the CFPB may not matter in terms of day-to-day compliance. While a reined-in Bureau may sound like a weight off of the industry’s collective shoulders, the fact is that lenders now have bigger things to worry about—namely, the state attorneys general in the locations in which they operate.
States are stepping in to take on the role of the consumer finance authority, and, in some cases, more aggressively pursuing lenders and passing legislation more rigorous than that at the federal level. Legislatures in states such as Ohio, New Mexico, and Florida, for instance, are considering or have already issued new payday lending rules.
The Same Goes for Cyber Security, Which Continues to Pose Challenges for Organizations of all Sizes.
In the wake of news-generating incidents such as the Equifax hack, a handful of states are advancing cyber security legislation that goes above and beyond any federal laws we’ve seen. Massachusetts and New York have each emerged as leaders in this arena.
All of which is to say 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, as well as state AGs whose breadth of enforcement eclipses that of the CFPB under Director Cordray. In other words, regulations and compliance aren’t going anywhere. Truth in Lending Act violations are still violations, and where there’s smoke (i.e. consumer complaints), lenders can expect regulatory attention. Most financial organizations, especially small and mid-sized lenders, are learning to shift their focus to state regulations.
Here at Compli, we’ve been telling the organizations we work with that now is a great time to review their compliance programs and get their houses in order, so to speak. Lenders should be proactive and implement compliance management systems that will keep them covered well into future—not just because of current pressure from the states, but because federal lawmaking is a pendulum. Consider what could happen when the current administration changes, particularly if political analysts are correct and the upcoming midterm elections bring a reinvigorated wave of Democrats to Washington. Regulatory lookback periods cover 2–3 years, and organizations that choose to “coast” right now by letting themselves fall out of compliance and failing to sufficiently enact a robust compliance management program could find themselves in a heap of legal trouble when the pendulum swings back. (Do the special election results in Pennsylvania give us a glimpse of the future?)
What About Dodd–Frank Reform?
In a similar vein, lenders should be careful not to pin their hopes on the end of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Right now, a Dodd–Frank reform bill is floating around Congress, and while anything could happen, chances are slim it will lead to a repeal of the law entirely.
History shows that once a law is passed, very rarely does it get “rolled back”; rather, we can expect to see some easing of regulations and updates to the law to reflect the technological advancements of the last decade. Keep in mind that Dodd–Frank was passed 8 years ago in response to the 2007–8 financial crisis. As such, it’s safe to say that aspects of the law are outdated, while other parts may now appear overly reactionary in retrospect.
Schedule Some Time to Talk to Us
Whatever the future has in store, we will continue to ensure that our compliance solution set keeps lenders on the right side of the law. I’m looking forward to demoing our platform’s features—including our recently-expanded cyber security initiative—for AFSA attendees and learning how we can continue to optimize and enhance our product for lenders’ most critical compliance concerns.
If you’ll be attending and have questions about compliance management systems, state AGs, or anything else related to Fair Lending regulations and compliance, find me during the breakouts and luncheons. I’d be happy to discuss your organization’s unique compliance challenges one-on-one. Please send me an email if you’d like to schedule some time for a conversation. See you there!