Increased scrutiny of F&I likely under Biden administration

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With the Biden administration moving forward with naming its leaders of important enforcement agencies such as the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC), dealers should expect to see an increase in enforcement actions targeting F&I departments. Dealer lending participation and voluntary protection products are likely to receive scrutiny from the CFPB, while the FTC is likely to continue pushing forward sweeping proposed amendments to its Safeguards Rule that governs data security regulations.

Dealers will remember that during the Obama administration, the CFPB indirectly regulated dealerships – which are largely excluded from its direct jurisdiction – by bringing enforcement actions against lenders alleging discrimination against minority borrowers. These actions resulted in consent decrees that limited dealer participation in many cases to flat fees. CFPB attorneys also publicly expressed concerns about the sale of voluntary protection products, openly questioning their value to consumers.

Biden’s administration is likely to pick up these topics again, as indicated by the nomination of Rohit Chopra to lead the agency. Mr. Chopra previously served with the CFPB as an assistant director and spent the last two years as an FTC Commissioner. He is well known for advocating for aggressive enforcement actions and is expected to place more emphasis on this tactic over issuing guidance to industry.

In addition, President Biden has named current FTC Commissioner Rebecca Kelly Slaughter as acting Chairwoman. Ms. Slaughter is a vocal critic of the automotive lending sector, commenting in a formal statement regarding a recent FTC enforcement action that “[t]he automobile-financing market in the United States is profoundly broken.” She has advocated for the FTC to use its rulemaking authority under the Dodd-Frank Act to regulate dealer participation in lending.

Both of these picks for leadership are a signal that dealers should expect to see increased enforcement at the federal level and potential rulemaking that will affect F&I departments. Dealers should therefore place renewed emphasis on compliance and education in order to protect these profit centers in the coming years.