NAF Association’s Compliance Roundtable Explains Connection Between Behavioral Economics and Vehicle Financing
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HANOVER, Md. — Executives from 20 auto lenders holding a
portfolio of $200 million or less paused almost in unison when Hudson Cook's
legal experts made the connection between behavioral economics and vehicle
financing.
During a roundtable session organized by the National
Automotive Finance Association last week, presenters Tom Hudson and Patty
Covington explained why lender compliance is becoming even more vital in light
of the Consumer Financial Protection Bureau taking a larger regulatory role.
NAF Association executive director Jack Tracey said Hudson
and Covington showed why the CFPB looks at rules through the prism of behavioral
economics, a consumer perspective on monetary issues as well as financial
products and services.
"If something is confusing or easily misunderstood, or if
the consumer isn't reasonably able to confirm or shop a product or service,
that's going to be the area that the CFPB focuses on," Tracey said. "The
companies out there have to look at what they're doing from this behavioral
economics perspective and build their products so they can't be challenged on
this front."
Tracey noted recommendation from the presenters prompted
lenders as well as dealers to be aware of products that regulators might view
as items not "necessarily in their best interest."
Tracey said, "Review it from the consumer's perspective.
Have they been sold something they don't need or only remotely need? Adjust
your policies to reflect that."
Association members with smaller portfolios and personnel
resources especially benefitted from the roundtable's discussion, according to
Tracey.
"We had felt the new compliance requirements that the CFPB
has instituted and the industry is anticipating require organization,
procedural or other changes. We felt the bigger players could address those
challenges and issues differently than the smaller ones. They have more resources,
more people to do things," Tracey said.
"A lot of the small- to medium-sized companies are sort of
one product lines. They just do auto financing, unlike the banks and others
that can switch," he continued. "If one area gets too difficult, they pull out
and go into another area. The smaller guys have the same task at hand, but the
ability to solve it is just different."
To help these companies, Tracey organized the five-hour
session in Tampa, Fla., last week in hopes attendees left with potential
strategy that came from more constructive dialogue that occurred because it
came during a roundtable setting.
"We encouraged a lot of dialogue with Patty Covington and
Tom Hudson and the players that were there," Tracey said. "Once Patty explained
something then the group would discuss how they could do it, what they would
have to do. Would it be a new procedure, hiring a new person, training a new
person in a different area or outsourcing it to a provider of some kind that
could do it for them.
"There was overwhelming satisfaction with the format,"
Tracey continued. "Unlike a conference where you've got a presentation for 45
minutes and 15 minutes for Q&A, I explained when we opened up saying, this
presentation that Patty and Tom have prepared a presentation that will last
about 90 minutes and we're scheduled to be here for five hours. That worked.
Everyone ended up getting ideas or a better understanding of what they were
faced with."
Along with the attendees, Tracey said he gathered some
valuable background in order to shape the agenda for the NAF Association's
annual conference June 5–7 in Fort Worth, Texas.
"I want it to be relevant and timely," he said.
More information about the conference and future roundtables
will be posted on the organization's website at www.nafassociation.com.
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