Automotive legal expert reveals 10 questions every lender and buy-here-pay-here dealer must ask themselves in response to CFPB Larger Participant Rule

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SecureClose Chief Legal Officer Steve Levine says the rule will ultimately affect all auto finance players – not just large participants.

Example of SecureClose computerized avatar used to automate the closing process

SecureClose uses a computerized avatar to verbally walk car buyers through each document in legally compliant, easy-to-understand language. Closings are recorded and stored in cloud.

Car buyers are often confused about the terms of their deal, and this misunderstanding - combined with inadequate disclosures or proof of disclosures - leads to unnecessary conflict and often legal action.

While this month’s Consumer Financial Protection Bureau issuance of the Larger Participant Rule came as no surprise to the automotive finance industry, SecureClose Chief Legal Officer Steve Levine said many dealers and lenders may not realize how far the rule will reach – likely impacting more than just large participants.

The official language extends the CFPB’s supervision to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases per year. “But that’s only the technical threshold. In reality, trickle-down pressure from capital sources, floor plan providers and credit reporting agencies – all of whom are accountable for the actions of dealers they do business with – will place even the smallest dealers and lenders under the microscope,” Levine said. “Not to mention plaintiff’s attorneys who seek out new cases based on the CFPB’s focus areas, as well as local and state regulators who regularly pursue businesses below the 10,000-loan-or-lease threshold.”

Levine asserted that every lender and buy-here-pay-here dealer should assess whether they provide consumers with truly understandable explanations of what they are agreeing to. “Car buyers are often confused about the terms of their deal, and this misunderstanding – combined with inadequate disclosures or proof of disclosures – leads to unnecessary conflict and often legal action,” he said. “We see time and time again that the best-informed customers end up being the best-performing customers.”

Levine said SecureClose offers a solution that fully satisfies these disclosure and documentation needs from the perspective of regulators, lawyers and car buyers. SecureClose technology automates the closing process by using a computerized avatar to verbally walk each customer through his or her deal terms, while sharing legally compliant, easy-to-understand commentary along the way. “It’s like having a lawyer close every deal – and having a cloud-based video record to prove it,” Levine added.

He said traditional scripts or videotapes of closings – while sometimes helpful – are not nearly enough in today’s environment, due to the high price of human error. “Dealers must ensure that customers receive the right message, every time – and that closings are not compromised because an employee is tired, untrained or wants to close the deal at any cost,” Levine said. “I’ve written countless closing scripts, and with SecureClose, for the first time I’m truly confident that my legal work is actually provided correctly to the consumer,” he continued.

Levine recommended that all dealers and lenders respond to the CFPB’s latest rule by asking themselves 10 questions, categorized by the bureau’s areas of concern:

FAIRLY MARKETING AND DISCLOSING FINANCING TERMS
1) Do our advertising and marketing materials accurately disclose the true deal terms?

2) Do we provide simple checklists that explain the auto financing terms in a customer-friendly way?

PROVIDING ACCURATE INFORMATION TO CREDIT BUREAUS
3) Do we have a documented process that matches the complexity of our business?

4) Do we provide credit reporting training and testing at least twice per year to employees tasked with this function, and do we document their personnel files accordingly?

5) Do we conduct adequate investigations of every single dispute, and can we demonstrate the process?

TREATING CONSUMERS FAIRLY WHEN COLLECTING DEBTS
6) Do our customers know all the payment options available to them?

7) Are our invoices, collection letters, and call strategies synchronized so customers receive a consistent message instead of a confusing one?

8) Are we taking advantage of online payments, Interactive Voice Response (IVR) and text messaging, all of which leverage technology and avoid confrontation with the customer?

LENDING FAIRLY
9) Do we practice menu selling so no customer can claim different treatment?

10) Do we provide written explanations of each add-on product’s key benefits?

Levine and other SecureClose executives – including Chief Executive Officer Allen Dobbins, formerly of AutoStar Solutions, and Founder and Chief Vision Officer Ace Christian, owner of Rock Solid Auto in Mesa, Ariz. – are on hand to discuss the full impact of the CFPB’s announcement at the NIADA Convention & Expo in Las Vegas, June 22-25. They will also attend the Texas Independent Automobile Dealers Association Annual Conference & Expo in San Antonio, Aug. 9-12, and Innovate: The Independent Dealer Industry Conference in Fort Worth, Texas, Sept. 20-23.

ABOUT SECURECLOSE
SecureClose provides automated closing technology that uses a computerized avatar to verbally walk car buyers through each document in legally compliant, easy-to-understand language. Both English and Spanish are available.

Closings are recorded and stored in cloud, where all parties can access the files at any time. This process fills the gaps left by traditional scripts and videotapes, removing the element of human error while offering unlimited storage space, security and ease of access.

SecureClose maintains offices in Fort Worth, Texas, and Mesa, Ariz. For more information, call (888) 807-0404 or visit http://www.secureclose.net.

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