Editor’s Note: The following was sent to Recreation Vehicle Dealers Association (RVDA) members offering an update by Chairman Jeff Hirsch on dealer-assisted financing and its status with the Consumer Financial Protection Bureau (CFPB). Hirsch delivered the update at RVDA’s board meeting.
During the RVDA Board of Directors meeting earlier this month, the board and staff spent a good deal of time reviewing the ongoing efforts of RVDA and others to protect dealer-assisted financing – our top advocacy goal again this year.
To recap, a little over a year ago the Consumer Financial Protection Bureau (CFPB) issued guidance to vehicle lenders basically finding fault with the current indirect financing system. The agency said it found a “disparate impact” (discrimination) on protected classes of consumers, meaning they paid higher interest rates. The CFPB expressed a preference for a flat fee compensation plan for dealer-arranged financing. The industry’s attempts to get the CFPB to share its data and methodology have not been successful so far. The whole premise of the agency’s action is questionable.
Over the past several months there have been a number of actions by lenders, dealers, and the CFPB that have brought some clarity to the situation, but the issue is far from resolved. RVDA continues to educate lawmakers, regulators, and consumers about the benefits of dealer-assisted financing, which we firmly believe improves competition, saves consumers time and money, and is an efficient means for lenders to deliver RV financing.
At the National Automobile Dealers Association’s annual convention in January, the association endorsed a plan to counter the CFPB’s push for flat fee compensation. Their plan provides auto dealers (and may be adopted for RV dealers) with a voluntary, internal compliance program template that establishes a fair credit policy stating the dealership’s unambiguous commitment to fair credit compliance. It also creates a general framework for the dealership to document compliance with fair credit laws.
The NADA plan is modeled on the approach to fair credit compliance contained in consent orders the Department of Justice entered into with two car dealerships in 2007, Pacifico Ford Inc. and Springfield Ford Inc. Last November, a DOJ representative said during a motor vehicle finance summit that the Pacifico case might be a possible model for dealer compliance with the Equal Credit Opportunity Act.
NADA’s voluntary policy and program recommends that each auto dealership independently establish a standardized markup as its dealer reserve — the money paid to the dealership for its role in arranging car loans for retail customers — and if that markup needs to be adjusted downward for a specific transaction, the dealership must document and justify the change. This model is similar to the 2007 consent orders, which required the dealerships to establish a uniform rate for all customers unless legitimate business reasons applied, in which case the rate could be reduced but never increased.
I’ve talked with Pete McNamara of the New Hampshire Automobile Dealers Association, and he is advising his members to review and consider the voluntary NADA policy. Many on the RVDA Board of Directors agree that the NADA recommendations are worth considering but are seeking more input from RV dealers and RV lenders. Click here for a copy of the NADA policy.
As of this writing, the CFPB hasn’t commented on the NADA plan. It is possible that lenders could recommend these or similar guidelines, so NADA’s guidance is worth a review.
Be assured that RVDA will continue to work on this issue on behalf of RV dealers, consumers, and the entire industry. We will continue to advocate for your best interests. It doesn’t make sense to change a financing model that provides choice, saves customers money and time, and is efficient for our lending partners.