People can debate the extent to which the impact of the pandemic on minorities spurred increased social justice activities. One cannot debate that social justice activities have increased.
One area where you may not yet have seen fallout is in your F&I department. Some dealers believe that when the CFPB was prohibited from pursuing regulation of dealer reserve, that was the end of that threat. Some dealers are not even aware of the challenges that may lay ahead on pricing voluntary protection products. Calls for increased social justice activism may very well affect the F&I departments of motor vehicle dealerships.
There are multiple ways in ways in which fair lending challenges can be brought against dealers.
- State regulators and private litigants can bring legal actions under federal and state fair lending statutes.
- The Federal Trade Commission is the #1 federal agency reviewing activities of car dealers. It can bring administrative and court lawsuits.
- The Consumer Financial Protection Bureau has no regulatory or enforcement authority over franchised auto dealers. It has authority over the banks and finance companies that provide the vast majority of financing to buyers of motor vehicles. Because of congressional action it cannot take action on dealer reserve, but it can take action on voluntary protection products if it feels that disparities in prices and terms of selling voluntary protection products to consumers in protected classes justify prohibitions on finance sources funding certain deals.
- The Department of Justice is in charge of federal law enforcement and has the authority to bring civil and criminal actions to enforce equal credit laws.
So what does this mean?
Understand that social justice movements may spur regulatory examinations of pricing credit and voluntary protection products. How will your dealership look in the event of such an examination? If the review shows that consumers in protected classes paid more for credit or voluntary protection products than those not in those classes, dealers may face lawsuits.
The National Automobile Dealers Association, in conjunction with attorneys around the country and other associations, worked diligently to create programs a dealership can put in place to protect itself against charges of unequal treatment of protected classes of consumers in the F&I department. It has developed a fair lending policy designed to limit the discretion of F&I personnel in offering credit terms, with deviations only for non-discriminatory reasons.
NADA has also developed a policy on the sale of voluntary protection products to ensure they are offered at uniform prices and that deviations from those prices are made on a non-discriminatory basis. Both programs are available from the NADA website, and you should give careful thought to implementing them if you have not.