Auto lenders in 2016 may consider monitoring dealer pricing on aftermarket F&I products if they don’t have such controls already, said Steve Klees, senior vice president, specialty channels for EFG Companies.
“They [lenders] are going to look at monitoring those products,” Klees told Auto Finance News in a recent interview. “In the auto lending initiative to ensure CFPB compliance, more lenders will focus on F&I product sales in advance of any new regulation,” Klees said.
“They [lenders] will become more involved in vetting product providers, reviewing contractual language and working with dealers to ensure the F&I products that they sell are in line with lender compliance guidelines,” he said in a set of predictions for 2016.
EFG Companies, based in Irving Texas, provide F&I products as well as consulting, training, recruiting, and other services for OEMs, lenders and dealers.
Experts have been predicting for a few years now that the Consumer Financial Protection Bureau would turn its attention to what the CFPB calls “ancillary” products, like extended service contracts and Guaranteed Asset Protection. (If a car is stolen or totaled in an accident, GAP covers the difference between an insurance settlement and what the customer still owes on a loan or lease.)
The bureau has reached settlements with several big credit card issuers accused of misleading marketing for add-ons, but it has been much less active in that area of the auto finance segment. In auto finance, the CFPB has paid much more attention to dealer reserve, also called dealer markup, on auto loans.
In June 2013, the CFPB announced a consent order with U.S. Bank and a partner, Dealers’ Financial Services of Lexington, Ky., for “deceptive marketing and lending practices” in a program called MILES, for Military Installment Loans and Educational Services, aimed at military service members.
According to the CFPB, marketers in the MILES program understated the costs and overstated the benefits of add-on products. In the consent order, the businesses neither admitted nor denied the CFPB charges, but they agreed to refund a total of $6.5 million. U.S. Bank also dropped the program.
However, in auto finance the CFPB hasn’t been heard from since then, in the area of aftermarket products.Like This Post