With the Consumer Financial Protection Bureau cracking down on auto lending practices, auto lenders and dealerships are expanding their compliance staffs. Lenders are adding more staff to monitor dealerships, while dealerships are debating whether to increase the responsibilities of existing compliance staff.
The move comes after auto lenders were given a choice by the CFPB to either adopt a compensation plan in which dealerships have no discretion, or maintain the dealer reserve and more strictly monitor loans originated at dealerships to identify any disparate impact on protected borrowers. Lenders have indicated that they would not switch to flat fees or another form of dealership compensation, unless all lenders did so at the same time, to avoid losing share.
Terri Horn, managing director for People Strategies, a El Cajon, Calif.-based recruiting, training, and consulting firm, says, “It’s kind of uncharted waters. Nobody knows just what to expect, but they do know that monitoring is definitely going to continue to be a part of meeting these government expectations.”