Fair lending is an area that is likely to remain “significantly” scrutinized by regulators — particularly dealer markup — despite the fact that President-elect Donald Trump’s administration could reduce certain regulatory policies, said John Redding, partner at BuckleySandler LLP.
“It’s going to be interesting to see what happens under a Trump administration,” Redding told Powersports Finance. “We are expecting them to try and reduce regulatory burden in the financial services industry, but it’s too early to speculate on what specific actions they may take.”
However, it can be expected that, regardless of Trump changes, the areas regulators may look at within powersports are going to be very similar to the areas regulated within the auto finance industry, he said.
“Specifically, I think fair lending has the potential to be a significant issue,” he said. “I think that’s an area that’s going to remain in focus to some degree, at least at the bureau.” The Consumer Financial Protection Bureau, in particular, has made it clear they don’t like dealer markup. “The CFPB believes that dealer markup leads to disparate impact, but I don’t think that — at least in the near term — that view is going to change,” he added.
It is unclear what the CFPB’s appetite for pursuing dealer markup will be, he said. “It wouldn’t surprise me at all to see them continue to address markup,” but it’s an open question if the incoming administration will have some impact on the level of resources and focus that any agency may devote to that particular issue, Redding said.
Regardless of the potential Trump changes, BuckleySandler advises its clients — including four powersports lenders — to keep in mind that while public actions within the industry have involved both the CFPB and Department of Justice, the CFPB maintains separate enforcement power, Redding said. “So even if we were to see — under Trump administration — a change in the DOJ’s focus, the CFPB could continue down that path,” he added.
Additionally, if the CFPB becomes “not as aggressive,” he said, it’s going to be important that institutions continue to keep an eye on state regulators and state attorney generals. “It would not be surprising to see increased activity there, if there is a perceived need to fill the void, in order to protect consumers.”