Mick Mulvaney, acting director of the Bureau of Consumer Financial Protection, said the bureau would depend on state regulators more often for enforcement. Photo credit: BLOOMBERG
As the Bureau of Consumer Financial Protection scales back its regulatory oversight of auto finance lenders, more auto retail compliance cases may fall to state attorneys general.
The change at the bureau, prompted by the election of a Republican president and Republican Congress, may lead auto dealers to think that political affiliation is a proven indicator of regulatory leanings that applies to the state level, too. But that’s not necessarily the case.
While political affiliation plays a role in a state attorney general’s likelihood of pursuing auto retail compliance cases, other factors can also have an effect. To stay out of regulators’ crosshairs, dealers should remain vigilant about compliance training, experts say.
The bureau has no jurisdiction over franchised dealerships, which are regulated at the federal level by the Federal Trade Commission and the Department of Justice. During the Obama administration, though, the bureau went after auto retail lenders in ways that were felt in dealerships. But in a February speech to state attorneys general, Mick Mulvaney, acting director of the bureau, said the bureau would depend on state regulators more often to enforce consumer protection laws.
In 2015-17, 15 major auto retail compliance cases were pursued in states with Democratic attorneys general, six in New York alone, according to Terry O’Loughlin, director of compliance for Reynolds and Reynolds’ document solutions. Republican state attorneys general pursued six major cases in that time frame, O’Loughlin said.
“You’re always going to see more activity at the state AG levels than you would [at the federal level], even at the Federal Trade Commission,” said Michael Benoit, partner at Hudson Cook, a law firm that focuses on consumer financial services. When it comes to smaller cases, “the FTC has to manage its resources, and may not want to go after two rooftops in Iowa.”
Political leanings often determine the likelihood that attorneys general investigate dealership operations. But dealers should also note which way the political winds are blowing, Benoit said.
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