No Guidance

Self-governance by providers may be the best way to protect the sale of F&I products.

September 2015, Auto Dealer Today - Feature

by David Gesualdo

David Gesualdo
David Gesualdo

Among the many hats I wear is that of show chair for the annual P&A Leadership Summit, also known as PALS. The event is co-located with Industry Summit and attracts executives, experts and other thought leaders from the F&I product and administration arena. It’s a relatively small but very dedicated group that descends on Paris Las Vegas each year to discuss, debate and deconstruct trends, best practices and new methodologies in a fast-paced, technology-driven segment.

Much of the conversation revolves around how decisions made at the highest levels of our attendees’ companies affect you, the dealer, as well agents and, of course, car buyers. This should come as no surprise; after all, you are their customers, and competition for your business is quite fierce. But what may surprise you is their appreciation for your struggles to remain compliant with a vast and still-growing tangle of rules and regulations.

They want to help. In fact, they want so badly to help that, over the past three years, the scope of PALS has expanded to include more sessions on regulatory compliance, with a focus on the Consumer Financial Protection Bureau. The CFPB, as you know, has put immense pressure on banks and finance companies to change the way dealer-arranged financing is presented and sold. They have investigated, taken action against and settled or attempted to reach settlements with a number of finance sources, including Ally, Capital One, Honda Financial and, most recently, Fifth Third Bank.

Some believe the CFPB wishes to do away with dealer-arranged financing altogether. I disagree. Yes, that is the stated wish of a few, misguided political figures, but they are operating under the assumption that the current model costs every finance customer more money than they otherwise would have paid, which is demonstrably false.

Whether any of the agency’s current directors hold this view is unknown to me, but if they do, they have yet to clearly express it. Instead, their statements and actions are centered on the equally absurd contention that dealers and F&I professionals spend their every waking hour coming up with ways to charge minority car buyers more than nonminority buyers to finance their purchases. They call it “disparate impact,” a theory that has, unaccountably, stood up to challenges in the courts despite relying on every type of conjecture known to man and law.

Your F&I product providers have paid close attention to these developments. They know loans and products go hand-in-hand. They also know what they, you and your customers all stand to lose if the CFPB were to develop an interest in their segment and attempt to control it the way they are attempting to control financing.

As such, the trending buzzword in the F&I products arena is “self-governance” — that is, the preemptive establishment of rules designed to dissuade the CFPB or any other government entity from attempting to establish rules of their own. I realize this may be an unsettling prospect. For the moment, I am keeping an open mind. I can’t predict the outcome of our discussions, but I promise you they will have a profound and beneficial effect on the way we all do business.

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