New Year, Same Challenges

I’m writing this article in early December, with holiday preparations underway, to then be followed by the annual ritual of reflecting upon the year soon coming to an end. This article won’t be published, though, until after the New Year, when everyone will have closed their books on 2024 and will feverishly be focused on how to successfully fill in the blank canvas of the coming year. I’ll confess that I find both "year end summaries" and "how to win in the New Year" articles difficult to write, to me they are predictable and merely seek to fulfill our need to close one chapter and optimistically open the next.

The only thing that really changes is the name of the month on the calendar. Does it really matter whether it's December or January? The challenges remain the same. Challenges? That word seems to be a bit of an understatement. Between the difficulty in finding reasonably priced inventory and hiring a motivated workforce to rising fuel, grocery and just about all other prices, to consumer discontent over higher energy and other bills, the struggles we all face are very real.

From an auto finance compliance perspective, the landscape is still threatening. For starters, we’re dealing with two powerful federal regulators, the CFPB and FTC, each of which has aggressively pursued our industry in the last year. Although we expect a Trump Administration to be focused on deregulation, at this point we don’t know who will be put in charge of either of these regulators, and it’s difficult to anticipate whether car sales and finance will be among their first priorities. Many people are asking whether I think the FTC Vehicle Shopping Rule will go into effect, and at this point I have no idea. Between waiting for the 5th Circuit to decide on the NADA’s legal challenge and waiting for the announcement of new leadership, there’s lots of uncertainty.

Then there’s the wave of consumer protection advocates that have seemingly multiplied and achieved influence throughout state Attorneys General and other regulatory agencies. It’s important to remember that during President Trump’s first administration, many state regulators got more aggressive and stepped into the vacuum created when the CFPB and FTC backed off a bit, and I anticipate this will happen again. My expectation is that the Pennsylvania Department of Banking will continue to be aggressive in its examination of dealers and other licensees. In the past year we’ve heard that they’ve investigated compliance content such as safeguards and information security policies, GAP/debt cancellation penetration, OFAC and Red Flags policies, and repossession practices and use of post repossession and deficiency balance letters, just to name a few issues to put on your radar.

Let’s not forget about the army of plaintiff lawyers that stand ready to use this favorable climate and the bevy of consumer protection laws at their disposal to run roughshod over the industry. Last but not least, today’s consumers have never been more empowered to take the fight to car dealers and creditors through the troves of available tools (much of them being used as weapons) found on social media and the internet.

Putting aside the name of the month on the calendar, does the year on the calendar matter to a significant degree? I’ve been writing these articles for a long time, and my "year end - new year" mantra hasn’t changed all that much. "Do an annual review of your deal paperwork, update policies and procedures, audit high risk areas, develop robust complaint management skills, and train your staff". Stop me if you’ve heard this before. The recipe hasn’t changed folks.

What has changed are the penalties for non-compliance. The regulatory fines have never been greater. The costs of defending lawsuits have only increased. The power of one consumer to negatively impact your business through social media terror tactics has led to a whole new degree of accountability.

In my travels, I have the opportunity to meet a lot of dealers and other industry participants, and the overwhelming sentiment I hear is "I know I need to get better at compliance, I just need to find the time". I’ve run into lots of the same folks year after year, and when I ask them what changes they’ve made from one year to the next to protect their business, I’m usually met with the same sheepish looks.

Do something different. Take a good hard look at yourself through the eyes of a regulator or consumer advocate and commit to a plan of proactive steps to protect your business.

I can’t do it for you! Are you content with the status quo and having a target on your back, or are you willing to up your game? I’ll say it again..."do an annual review of your deal paperwork, update policies and procedures, audit high risk areas, develop robust complaint management skills, and train your staff". The solution isn’t a secret. In my experience, the difference between success and failure is whether ownership and management are willing to give these tasks some level of priority, or will they be the first things to be moved down the list when things get busy?

The choice is yours. That blank 2025 canvas is staring at you. How will you choose to complete it?