The Consumer Financial Protection Bureau is poised to target subsets of the auto finance industry — such as powersports lenders — this year, which could start with regulatory scrutiny of servicemember lending practices, said Mary Calkins, partner at Akerman LLP.
The laws that could come into play within powersports are fairly broad, she said, but the Servicemembers Civil Relief Act (SCRA), for example, could be an area the CFPB starts scrutinizing.
“Motorcycles, in particular, attract a lot of servicemembers, and the CFPB has a whole servicemember office built to protect members of the military,” Calkins told Powersports Finance yesterday. “For that reason, I think that CFPB scrutiny is likely to come at the very least into powersports on the servicemember lending side.”
The SCRA protects servicemembers from a group of civil proceedings that could affect their legal rights while they are in military service. The act also requires a court review and approved repossession if the servicemember took out the loan and made a payment before entering military service. The court could delay repossession, or require the lender to refund prior payments before repossessing the vehicle.
Powersports lenders are already on the CFPB’s radar, she said, because the CFPB has been “very focused on the auto finance industry, and the powersports industry is a subset. Regulatory scrutiny has already arisen on the CFPB front with regard to Evergreen Bank, and that was not because the CFPB was focusing on powersports, but it happened to be encompassed in that investigation and action [of disparate impact].”
Last year, the Department of Justice reached a settlement with Oak Brook, Ill.-based Evergreen Bank Group to resolve allegations of discriminatory lending practices relating to indirect motorcycle lending. The consent order required the bank to pay $395,000 in consumer redress and to implement dealer compensation policies.
The best way for powersports lenders to prepare for regulatory examination is to monitor their own compliance systems and lending practices “before they ever hear from a regulator,” Calkins said. “Once regulators come knocking, it could be a little late to make fixes that ward off scrutiny. Lenders need to scrutinize themselves first.”
Akerman’s Calkins will participate as a speaker for Session Seven: Regulatory Compliance Update, at the upcoming PowerSports Finance 2016, Oct. 5 at Bellagio Las Vegas. For more information, visit www.go.powersportsfinance.com, or click here to register.