In an era where over 100 million Americans are tethered to car loans that total some $1.6 trillion in debt, the spotlight on the auto finance industry has intensified. This is not just about numbers, it’s about the responsibility that comes with them.

As a veteran of the business and legal aspects of the automotive finance industry, I’ve observed firsthand how the surge in auto loan debt — now the third-largest debt category in the U.S. — has brought about heightened regulatory scrutiny, particularly around F&I products.

The Consumer Financial Protection Bureau (CFPB) has made it abundantly clear in its recent Supervisory Highlights that unfair, deceptive, or abusive acts or practices in the realm of F&I products are unacceptable. The crackdown on such practices has been severe, with multimillion-dollar penalties imposed on auto finance companies. It’s time for smart leaders in this sector to take a hard look at all aspects of the business and heighten their focus and commitment to compliance and consumer protection.

With that said, the complexity of ensuring F&I product compliance cannot be understated. In my view, the challenge lies in putting into place processes to ensure compliance in three distinct areas: clear disclosure of F&I product terms, ethical sales practices, and fair refund processes. Auto finance companies are held accountable for any misconduct in these areas, even if the products are sold by car dealerships and managed by third-party companies. Given the financial and reputational penalties that can be imposed for misconduct, it’s a responsibility that lenders cannot afford to take lightly.

The path to compliance, however, is more than just a regulatory obligation; it’s a cornerstone of good business. Ethical practices in selling F&I products are not just about avoiding penalties; they’re about building trust with consumers. This means ensuring that products are not “packed” into financing without clear consent and that the optional nature of these products is transparent.

Moreover, product cancellations must be handled with consumer ease in mind. The ability for consumers to cancel must be straightforward and accessible, and refunds must be processed accurately and timely. These are not just best practices; they are consumer rights that must be safeguarded.

In the world of auto finance, the road to compliance is continuous and ever evolving. It demands vigilance, commitment, and a proactive approach. This means regularly reviewing processes, training dealership partners, implementing oversight over third-party F&I product companies to align their practices with the realities of your business, and ensuring that every consumer touchpoint reflects a dedication to fairness and transparency.

As the industry navigates these complex waters, we view our role at F&I Sentinel as more than just compliance monitors – we’re partners in shaping an industry that values consumer trust as much as profitability.

To my peers in the auto finance sector, I say: Let’s view compliance not as a hurdle, but as an opportunity to elevate our industry standards. Let’s commit to practices that not only pass regulatory muster but also contribute to a more positive consumer experience. This is our chance to redefine what it means to be leaders in auto finance, and it’s a challenge we must embrace wholeheartedly.

Stephen McDaniel is co-founder and chief executive officer of F&I Sentinel, a compliance and regulatory risk mitigation solutions provider.