Tag Archive | "regulations"

Four Trade Groups Ask Lawmakers to Instate Five-Person Board to Lead CFPB

WASHINGTON, D.C. —  Four associations representing 12,000 banks and credit unions submitted a letter to Senate leaders urging them to consider replacing the Consumer Financial Protection Bureau (CFPB)’s single-director structure with a five-person bipartisan commission next year.

The associations listed in the letter, which was sent on Wednesday to Senator Majority Leader Mitch McConnell (R-Ky.) and Minority Leader-elect Chuck Schumer (D-NY),  include the Consumer Bankers Association (CBA), the Credit Union National Association (CUNA), the Independent Community Bankers of America (ICBA), and the National Association of Federal Credit Unions (NAFCU).

“The CFPB is an independent regulatory agency that provides the sole director unprecedented authority over financial institutions, with minimal oversight,” read the letter, which was sent to Senate leaders on Wednesday. “As the sole decisionmaker, the director can promulgate regulations and levy enforcement actions that have sweeping and long-lasting effects on credit availability for consumers. The current single-director structure leads to regulatory uncertainty for consumers, industry, and the economy.”

The associations cited the recent federal appellate court decision in PHH Corp. v. CFPB D.C. Circuit Court Case as further evidence of the need to replace the bureau’s structure. In that case, the appellate court ruled the in favor of the mortgage company, deeming the the bureau’s single-director structure unconstitutional. The court also gave the president the power to remove the CFPB’s director at will, as well as direct the regulator’s activities.

“This result makes it even more apparent what a whipsaw effect the single-director model presents, inhibiting the ability for financial institutions to plan for the future, which in turn limits economic growth and hurts consumers,” the associations stated in their letter.

A five-person bipartisan board or commission would be more in line with other financial regulators and would provide a balanced and deliberative approach to supervision, regulation, and enforcement over financial institutions, the associations stated. A five-person commission would also be better suited to handle the bureau’s authority over rules and regulations within the financial industry, the letter added.

“As we approach the beginning of a new administration, it is crucial we finally put in place a governing structure at the CFPB to ensure it does not become a political weapon, something we are certain Senate leaders McConnell and Schumer can appreciate,” said CBA President and CEO Richard Hunt. “In addition, the governing structure of the agency makes the potential for abuse of power and political influence not only possible, but inevitable.”

Posted in Auto Industry NewsComments (0)

Compliance Summit Adds Certification Component

TAMPA, Fla. — Organizers of Compliance Summit have announced that attendees will have the opportunity to earn Certified Automotive Compliance Specialist status at the Las Vegas event, which will be held Aug. 29–30, 2016, at Paris Las Vegas, as part of the annual Industry Summit.

David Gesualdo, who serves as show chair and as publisher of Auto Dealer Today and F&I and Showroom, said the addition of a certification component was in response to demand from past attendees.

“I can’t tell you how many times we have heard, ‘I need something I can take back to the dealership,’” Gesualdo said. “That is a perfectly reasonable request and, with the help of our speakers, we are going to make it happen.”

Certification will require participation in a comprehensive, four-hour review session on Tuesday morning and successful completion of a written exam. The review will be given by Compliance Summit speakers and focus on the following topics:

  • Ethics
  • Reg Z
  • Reg M
  • Risk-Based Pricing Rule
  • Adverse Actions
  • ECOA
  • FCRA
  • Credit Applications
  • Signature Issues
  • Conditional Delivery
  • Monroney Labels
  • Addendum Stickers
  • Magnuson-Moss Warranty Act
  • Used Car Rule
  • Red Flags Rule
  • Safeguards Rule
  • FACT Act
  • Cash Reporting
  • OFAC
  • Discrimination
  • Fair Credit Policies
  • UDAP
  • EH&S Basics

Compliance Summit is a series of regional events that began in Miami in November 2014 and has made stops in Chicago, Austin and Tampa. Attendees are invited to take part in the rest of Industry Summit, which also includes two full days of sales and F&I training, at no additional cost.

To register for the Las Vegas event, visit www.dealercompliancesummit.com. Attendees who register by July 29 will enjoy a $100 discount. For more information about Compliance Summit, including sponsorship and exhibition opportunities, contact David Gesualdo via email hidden; JavaScript is required or at 727-947-4027.

Posted in P&A News, Summit UpdatesComments (0)

Compliance Best Practices

Corporate legal departments are constantly challenged to juggle scarce resources while delivering accurate, timely and forward-thinking solutions to protect their organization and clients. Further complicating these challenges are internal counsel’s vested interest in the company’s profitability, reputational risk and relationship with customers and distributors. Much like other areas of the business, legal departments are not immune from creating inefficiencies, duplicate processes and “bottlenecks” for the organization.

However, there are several ways to increase efficiencies within a legal department to ensure its internal and external clients are receiving top-notch, timely service. This article is designed to propose a process for internal business clients to submit requests to legal corporate counsel that will improve efficiencies and production.

Let’s take a closer look at the document itself and the benefits of the process.

The Document

Consider implementing a resource request document that all non-executive staff members must complete before engaging legal counsel. (Senior leaders may require different treatment.) A resource request document contains basic information needed for legal corporate counsel to properly assist internal clients. This simple, one-page document should include:

  • Department name
  • Date
  • Requestor’s name
  • A tick-box indicating they have secured manager approval
  • Jurisdictions impacted
  • Client’s name
  • Product involved
  • Distribution channel
  • Volume/sales dollars
  • A brief description of additional detail and support

Completed forms should be submitted electronically via email or a central legal department sharepoint to ensure the submission date and time is properly tracked. If not already in place, you may also want to consider implementing an intake and screening process to ensure requests are immediately identified and distributed to the proper legal contact.

The Benefits

The benefits of a resource request document process are myriad. Let’s review the Top Five:

  1. Eliminate drive-by conversations: In a corporate setting in which attorneys are in the office next door, there’s a tendency to have “drive-by” conversations that often lead to lengthy discussions and disruptions in productivity. Collaboration and dialogue are good, but they need to be tempered against productivity. By having the submittal document process, a cadence is created to secure legal counsel’s time to engage in fruitful conversations while maintaining productivity.
  2. Ensure the business client has all the facts: Occasionally, conversations with legal counsel ensue and then, halfway through the conversation, it becomes apparent that there are salient facts. So another meeting is required once the missing facts are secured, thereby adding more time to already busy schedules. To help eliminate these unproductive sessions, the resource request document ensures the most pertinent facts are secured, thought through and available for the initial conversation with the legal team. This helps reduce back-and-forth dialogue, setting the groundwork for a successful project.
  3. Enable the business to self-regulate: Requiring a manager’s approval on the resource request document creates an initial layer of dialogue within the business to discuss the issue — which can sometimes be answered without the need for legal counsel. It’s akin to a mini peer review that requires dialogue or “practice” before submitting the question or concern to legal counsel. For example, a junior employee may want to ask whether a product change (e.g. adding coverage) is acceptable in a certain state. If they go to their manager first, it’s possible the manager can provide the answer based on previous experience.
  4. Encourage departmental/organization prioritization: Through the process of securing manager approval, the manager may indicate that the question or request can wait. After all, they may have several other issues of higher priority pending with legal counsel. This helps eliminate the challenges of legal counsel trying their best to prioritize amongst competing internal clients.
  5. Track issues and responses: The submittal process also allows for better tracking. Each company has its own internal systems, but creating a simple email process with a sharepoint site to house legal questions and responses can create a library of useful knowledge for future legal questions. Very often, the same legal questions are recycled, and having departmental access to a library of standard information is a useful tool. Obviously, each organization will have to determine legal best practices to protect privileged information.

There is no perfect solution to improve operational efficiencies within a legal department, but creating an organized cadence will pay large dividends by way of increased productivity from the legal department. Although there may be some initial resistance to the new process, if properly implemented, internal business clients will be pleased with the decreased turnaround times and efficiencies gained through the process.

Posted in ComplianceComments (0)

Will CFPB Regulations Trickle Down to Providers & Administrators?

Alright, as an owner or executive of a company, waking up in a cold sweat at 2am happens more often than you would like. There are many different reasons for this (e.g. stress over money, kids, a big business relationship, heartburn from eating a meatball sub too late at night, etc.), but regardless of the reason, it is always unpleasant (especially the meatball sub). For some, the fear of the unknown is the worst kind of insomnia. You may think, “what can happen tomorrow which can cause everything we have built to come crashing down?” If only we could channel our inner Nostradamus and be prophetic in our thoughts about the future.

Being unprepared and caught off guard by something we could have prevented is the worst kind of feeling. However, if it is impossible to predict the future, how can we make good business decisions today? A good place to start is to look around at other industries to try to identify trends. When it comes to regulatory trends, these tend to spread from one industry to another. When asked about new government regulations, there are few who see this as a positive in their business. As many are aware, the Consumer Financial Protection Bureau (CFPB) is expanding their reach into the F&I space. As a provider and administrator, you may feel this move by the CFPB does not directly impact your operations. However, regulations tend to beget more regulations. Let’s take a look at a completely unrelated industry for a hint at how P&A companies can be affected by CFPB oversight to nonbank auto finance companies.

Title and Escrow Industry

In April 2012, the CFPB issued Bulletin 2012-03 titled “Service Providers”. The CFPB bulletin included expectations around supervised banks and non-banks (i.e. lenders) to oversee business relationships, including compliance initiatives, with their service providers. The bulletin was meant to ensure practices were in place to meet Federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm. Since title and escrow companies are considered “Service Providers” to lenders, they now had to create compliance programs to demonstrate their internal controls to their lenders.

The title and escrow marketplace was baffled on the best way to demonstrate adherence to the new CFPB guidance. Amid the fog of uncertainty, the SSAE 16 (also known as SOC 1) audit became the prevailing compliance vehicle of choice when meeting the CFPB requirements. This is due to several reasons, the primary ones being; (1) the scope of the audit focused on internal controls and (2) the audit had to be performed by an independent CPA firm. To be clear, the CFPB never issued guidance “requiring” title and escrow companies to undergo the SSAE 16 audit. However, since most lenders have a preferred set of trusted title and escrow companies they typically use, it is up to the lenders discretion to monitor enforcement of compliance for their vendors. As such, although the SSAE 16 is not required, many lenders are choosing to only submit title and escrow orders to those companies who can produce evidence of a competent internal control environment which was independently audited by a CPA firm. Hence, the SSAE 16 audit is the compliance vehicle of choice.

We have seen the CFPB require lenders to monitor compliance activities of service providers. How many providers and administrators consider themselves “service providers” to lenders? Sure, no company wants their hand forced to expend precious company resources (both time and money) to comply with new government regulations. Unfortunately, we all know you can’t fight city hall. Instead of being proactive, many title and escrow companies are in reactionary mode. Reacting to compliance initiatives tends to create additional stress on internal resources, costs more money, and puts off more strategic initiatives until the compliance program is in place.

On the other hand, some title and escrow companies are choosing to be proactive. Leading from the front, rather than following from behind, is a good place to be. Besides the competitive and strategic advantages a good compliance program creates for a company, the company is also in a much better position to manage the timing of its compliance initiatives against other internal projects.

What can P&A companies do to prepare?

Clearly, title and escrow companies were caught off guard by the CFPB bulletin. Prior to the CFPB bulletin, formal compliance programs to test internal controls, although excellent business practice, was never on their radar. To these companies’ shock and dismay, they now had to create a formal internal control environment and prove the controls were in place.

Being good stewards of the company coffers is a prime reason you are in the position you are in with your company. Spending money on a “nice to have” and not a “need to have” can be a tricky sell. However, compliance is not going away anytime soon. Rather, compliance requirements will likely accelerate now and into the future. Even if spending money on a formalized compliance program may not be in your budget, there are things you can do to minimize costs while still moving in the right direction. The most basic start to a good compliance program is a strong set of policies and procedures. Not only do policies and procedures provide guidance on your internal control environment, they also provide a means of sharing knowledge transfer, which provides the added benefit of making sure key operational knowledge does not quit and walk out of your front door. Once you have a solid set of policies and procedures in place, you can then take your compliance program to the next step.

Choose the right Compliance Programs

The key to any good compliance program is flexibility. The goal is to design your internal controls to meet as many compliance initiatives as possible (e.g. SSAE 16, PCI, ISO 27001, common questions found in customer information security questionnaires, etc.). Many times, you can design an internal control structure which has controls that meet multiple compliance requirements. This is not only cost effective, but also creates a streamlined compliance program. The best time to design your compliance environment is before you are forced to undergo an audit to comply with a contractual obligation. I have spoken to many companies who have agreed to undergo compliance audits as part of the terms and conditions of doing business with a customer. Unfortunately, they executed the contract only to find out what they agreed to was excessive and cost prohibitive. A good, ethical CPA firm will give you advice before you lock yourself into a bad contractual agreement.

Posted in ActuaryComments (0)

US Equity Advantage Temporarily Suspends Business in 16 States

ORLANDO, Fla. — US Equity Advantage (USEA) will temporarily suspend its biweekly loan payment service in 16 of the 50 states in which it does business at the end of September. The decision comes in response to recent regulatory changes concerning licensed money transmission and related restrictions placed on the company by its banking partners.

USEA officials said the company has a robust commitment to ethical business practices led by a full time compliance officer whose department actively works to meet all regulatory issues in the marketplace, including adherence to state money transmission licensing in all 50 states.

“Due to evolving regulatory oversight, we are ending a business process that has allowed us to offer our biweekly loan payment services in states where we do not hold licenses,” CEO Robert Steenbergh said. “Our company remains strong despite this temporary situation. It affects less than one percent of our customers and nonetheless, we continue to operate in more states than any of our competitors.

“Our goal remains to serve customers in all 50 states, and we envision completing the necessary licensing requirements to do so in the near future,” he added.

In anticipation of the Sept. 30 deadline, USEA stopped accepting new enrollments from the affected states on Sept. 5. The company will continue its biweekly loan payment service to existing customers through the end of the month and is developing information and assistance to help them temporarily convert responsibility for their auto loan payments in an efficient and thoughtful manner.

During the loan service suspension, these customers can continue to take advantage of the company’s other AutoPayPlus benefits including several free financial planning tools launching later this month that will make it easier for customers to automate their bill payments, organize their finances, monitor their credit, and create a budget and savings plan for the future.

The affected states are: Alabama, Alaska, Arkansas, California, Colorado, Idaho, Mississippi, Nebraska, Nevada, New York, Oregon, South Dakota, Texas, Utah, Wyoming and also Washington, D.C.

Posted in P&A NewsComments (0)

Democrats Reintroduce Auto Safety Reform Bill

Washington — A group of House Democrats is reintroducing sweeping auto safety reform legislation a year after General Motors Co. recalled 2.6 million vehicles now linked to at least 57 deaths, reported The Detroit News.

Rep. Jan Schakowsky, D-Ill., is reintroducing a measure that would dramatically hike the National Highway Traffic Safety Administration’s auto safety budget by at least $100 million by 2017 by imposing a $3 fee on all new car sales that would rise to $9 by 2018. The bill is backed by Rep. Frank Pallone, D-N.J., and at least four other Democrats, her office said.

Despite withering criticism of NHTSA and congressional hearings into GM’s delayed recall, as well another round of hearings into millions of defective Takata air bags, the prospects for sweeping auto safety reform legislation are hazy. Many auto industry officials think it is unlikely major reforms are approved. In 2010, after harsh criticism of NHTSA after Toyota Motor Corp. recalled millions of vehicles, Congress considered but never voted on major auto safety legislation.

The bill would require auto dealers to repair recalled used cars before selling them and require disclosure of recalls and the status to prospective buyers. It would also give NHTSA sweeping new authority to get unsafe vehicles off the road immediately for “any condition that substantially increases the likelihood of serious injury or death if not remedied immediately.”

The bill would require NHTSA to create new regulations, including new standards for passenger motor vehicles to reduce the number of pedestrian and cyclist injuries and fatalities. NHTSA would also have to research the development of safety standards to improve the crash worthiness and survivability for back-seat passengers.

The Alliance of Automobile Manufacturers, the trade group representing major automakers, didn’t immediately comment.

The measure would bar automakers from conducting regional recalls limited to high humidity areas or places where road salt is used.

The bill requires that a remedy for a defective vehicle be provided without charge, regardless of when the motor vehicle or replacement equipment was purchased. Under the current law, remedies are not required without charge for vehicles or equipment purchased more than 10 years before a recall.

On Thursday, a Senate panel approved a bill to allow for additional compensation for auto sector whistleblowers, but Republicans have shown no interest in taking up broader auto safety legislation. Rep. Fred Upton, R-St. Joseph, chairman of the House Energy and Commerce Committee, has held hearings and met with automakers and others, but hasn’t proposed any reforms.

The Democrats’ bill would eliminate the $35 million cap on fines for most delayed auto safety recalls. The Obama administration has called for hiking it to $300 million per delay.

Posted in Auto Industry NewsComments (0)