Solving the CFPB Problem
The man who has led the NADA’s regulatory advocacy efforts since 2006 believes the tide may be turning in the CFPB’s attack on dealer participation.
August 2015, F&I and Showroom - WebXclusive
Since 2006, Andrew Koblenz has been on the frontlines of the National Automobile Dealers Association (NADA)’s efforts to protect franchised new-car dealers from regulatory overreach. And he believes the tide may be turning in the Consumer Financial Protection Bureau (CFPB)’s attack on dealership participation.
Koblenz joined the association in 1999 after serving as a senior attorney for the American Automobile Manufacturers Association. Today, he supervises a staff of six attorneys as the NADA’s executive vice president of legal and regulatory affairs and general counsel. F&I and Showroom went one-on-one with Koblenz to find out where the industry stands in its fight with the CFPB.
F&I: I noticed your degree in political science. Is it possible the man who is protecting the industry from regulatory overreach has political aspirations?
Koblenz: My mother, if she were still alive, would tell you that I aspired to be a U.S. Senator in the third grade. But that aspiration got replaced by a much more realistic one, which was to play third base for the Boston Red Sox. But seriously, I do love debating and advocating on policy matters. I am not as much of a political junkie, which is why my position is more of a policy position than a political position.
F&I: Aside from the CFPB, what else is keeping your team busy these days?
Koblenz: There’s an awful lot of regulatory activity in D.C. that has nothing to do with the consumer credit world, and we play a lot in that. There’s tax. There’s advertising. There’s data security. There’s fuel economy. There’s safety recalls. There’s silica dust and motor vehicle lift issues with the Occupational Safety and Health Administration. There are concerns about leaking underground storage tanks. There are Family Medical Leave Act issues. So there’s no lack of things to do.
Our regulatory affairs group has two functions. First, we advocate on behalf of dealers with the federal regulatory agencies. Then, once it becomes clear what the dealers’ obligations are, we educate dealers about what the rules are, and provide them with the tools that help them maintain compliance.
But let me talk about our regulatory advocacy efforts for a second. It’s different than legislative advocacy because you’re dealing with unelected officials who like to get down into the details. Congress passes broad policy directives, but often leaves the actual operationalization of the laws to the regulatory agencies. So, the old saying, “The devil is in the details,” is frequently true here. And our job is to help the regulatory agencies implement those congressional directives and, in some cases, to stay within those directives.
So our task is to help regulators understand how the world outside of government operates, so when they do their job — write rules to implement the policies that Congress has directed them to implement — they do so in a way that allows markets to operate while providing the best consumer outcomes possible.
F&I: How is working with the CFPB different from working with other regulators?
Koblenz: There’s one major difference: As you know, under Section 1029 of the Dodd-Frank Act, the CFPB has no supervisory, regulatory, enforcement or any other authority over our members who are engaged in originating indirect auto financing. This is in contrast to the FTC (Federal Trade Commission) or the Federal Reserve Board or the IRS — agencies that do have regulatory and/or enforcement authority over our members. But despite this difference, the education process is the same.
F&I: What’s the relationship like between the association and the CFPB?
Koblenz: We have sought out and obtained the ear of the CFPB. They have talked to us and listened to us. We’re educating them about the market and explaining what their proposals, guidance and actions would do or not do, as the case may be.
F&I: Are we winning or losing the battle with the CFPB?
Koblenz: We have had a lot of concerns with the auto financing guidance the CFPB put out in March 2013, and with the pressure the bureau has been exerting on finance sources. Our concerns emanate from the fact that the CFPB’s attempt to address the fair credit concerns it has identified has utilized an approach that we think doesn’t really address those fair credit concerns, and that, additionally, has adverse effects on consumers.
The NADA’s Andrew Koblenz returns to Industry Summit after participating in a compliance panel at the 2013 event.
So, in our view, adoption of the CFPB’s approach would fail to advance the ball from a fair credit perspective, and at the same time would move the ball back from a consumer perspective by reducing the amount of discounts that are available to consumers. What the NADA has tried to do is to explain that there is an approach to the vehicle finance market that both addresses the CFPB’s concerns regarding fair credit and preserves the availability of discounts for consumers, which is the hallmark of this highly competitive marketplace. And that approach, of course, is the Fair Credit Compliance Policy & Program we issued in early 2014 along with the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association. We think that program is the solution to the problem the CFPB says it is attempting to address.
F&I: How is dealer adoption of that program?
Koblenz: I think it’s important to note that the program is optional, so it’s not mandatory, and each dealer has to decide whether it’s right for his or her operation. With that said, some of the internal surveys we’ve seen suggest a fairly high level of use within dealerships.
From the perspective of the regulators, we believe this approach, which is based on a 2007 consent order developed by the Justice Department, remains the single best way of addressing fair credit risk and ensuring the preservation of the ability of consumers to get discounts. And we are heartened by the full-throated endorsements the program has received from some of the most respected compliance attorneys in the dealer and lender communities.