By: Edward P. Kaye, Esq. and Sloan Schickler, Esq.
After four years of deregulation under the Trump administration and with the global economy grappling with the impacts of COVID-19, auto leasing and finance companies and LHPH dealers are advised to get their houses in order and prepare for the new sheriff in town: Joe Biden.
The Biden administration is likely to make some significant changes regarding consumer protection and compliance in the leasing industry. In fact, the incoming administration supports the Democratic Party Platform that states the administration will work “to ensure equitable access to credit and banking products for all Americans and reinvigorate the Consumer Financial Protection Bureau (CFPB) to ensure that banks, financial institutions, and lenders cannot prey on consumers.”
We cannot say that a change at the top of the CFPB will be the first order of business for the new administration, but most Trump-appointed senior staffers at the CFPB will be terminated in short order, including its current director, Kathleen Kraninger.
What will a new CFPB director look like? Picture Elizabeth Warren! Keep in mind that Senator Warren is credited with establishing the CFPB, and she will have a voice in the Biden administration’s policy decisions. The new CFPB director will likely need Warren’s blessing to be confirmed.
Senator Warren is quoted as saying, “Auto dealers got a specific exemption from CFPB oversight, and it is no coincidence that auto loans are now the most troubled consumer financial product.” This could be an indication that the spotlight will turn to the auto business, including auto leasing and lessors, and we should expect heightened consumer advocacy and enforcement.
Couple the new regulatory environment with the industry’s anticipated higher delinquency rates and it appears lessors need to focus not only on fair lending and documentation compliance, but also on collection practices, policies and procedures. We will not be surprised to see industry wide examinations soon.
But the CFPB will not be acting alone. Congress will surely play a big part in leasing’s future.
It was recently reported that U.S. Representative Maxine Waters, the chairwoman of the House Financial Services Committee, sent a letter to Biden relating to debt collection activities. Waters urged Biden to rescind the recently enacted final debt collection rule when he takes office. The Final Rule brought clarity and uniform standards to the Fair Debt Collection Practices Act that was developed over 40 years ago (The “Final Rule” was discussed in the December 2020 edition of Leasewire)
If Rep. Waters has her way, and she likely will with a Democratic-controlled House and Senate, expect stricter collection policies on the horizon.
While it is unlikely the new sheriff will be greeted with open arms from the auto leasing and finance and LHPH industries, it is not too late to implement best practices for your businesses. A recent enforcement action held dealer principals personally liable for dealership violations and that should be reason enough to get your house in order.
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