What the Car Finance Industry Can Learn From the Lessons of History

In our everyday 24/7 news cycle, perspective can be momentary. We don't take into account the ebb and flow of events, particularly anything with political overtones.

Though the world of finance prefers consistency, the one thing we can count on is change. Lately, the subject of compliance was buffeted by change.

From regulation to deregulation, the different local, state, And federal agencies that enact laws appear to fluctuate between the two. This seesaw especially applies to the Consumer Federal Protection Bureau (CFPB).

The bureau has been in the news a lot recently. From Acting Director Mick Mulvaney's decommissioning of the Advisory Committee to a federal district judge judgment its construction unconstitutional, some may believe the CFPB's days are numbered.

History has a lesson to offer, however, compliments of the Federal Trade Commission (FTC). And it is a lesson those in the auto finance industry should heed.

A brief history lesson

The FTC was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The regulatory agency opened its doors in 1915 with a mission to protect consumers and promote competition.

The FTC building was completed in 1938, together with President Franklin D. Roosevelt saying, "May this permanent home of the Federal Trade Commission endure for all time as a sign of the aim of the authorities to insist on a larger application of the golden rule to run the company and business enterprises in their relationship to the body politic."

Currently, the FTC homes three bureaus: the Bureau of Consumer Protection, the Bureau of Competition, and the Bureau of Economics. Each agency has a set of mandates to guide its work.

From the early 1970s, the agency became more competitive in prosecutions and sanctions. The business community and Congress criticized the FTC's activism, asserting it had become too strong, was conducive to the demands of the general public and business, and operated with minimal oversight from Congress or the president.

Throughout President Ronald Reagan's first term, control of the FTC was transferred under the president. Its leadership was altered to become more cooperative with business interests, while continuing its customer protective functions.

A correlation can be made between these modifications in the FTC And the brief, but storied, history of the CFPB. The CFPB was made as a legislative response to the fiscal crisis of 2007-2008, and the following Great Recession. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the bureau.

Though a new director awaits approval, the real status of The CFPB as an independent agency is now under question, because of a circuit split in the U.S. Court of Appeals along with a New York Federal District Court.

Over the span of eight years, We've experienced the spectre Of law followed by deregulation, together with executive and judicial branch infighting. Sound familiar?

A matter of checks and balances

The FTC is focused on anticompetitive supervision as well as the monitoring and enforcement of consumer fraud violations. Some believed that the fox was guarding the henhouse, which prompted the 2010 production of the CFPB, which functions as a regulatory agency, charged with overseeing financial services and products which are provided to consumers.

The CFPB has been divided into several components, including research, Community affairs, customer complaints, the Office of Fair Lending, and the Office of Financial Opportunity, which work together to protect and educate consumers about the many kinds of financial services and products that are available.

Some still feel that the fox is watching over the henhouse, however. Considering that the lens of history, the CFPB remains in its infancy, and will probably be remoulded many occasions as the political tide ebbs and flows.

The heritage of the FTC gives us a glimpse into those changes. Trade and trade regulations have existed since 1903, and they're not going away anytime soon.

Irrespective of view, we live in a regulatory Compliance world, which is beneficial if seen with a favorable outlook.

For retail auto dealers and creditors, regulatory Requirements provide checks and balances that benefit the customer, in addition to the business. Protections exist on each side of the transaction.

And, for those educated trader principals and supervisors Who abide by the requirements--and try to educate their clients about the value of those requirements--the company stands to become a "trusted partner" to the customer.

Lenders who provide invaluable guidance to their traders Create educated partners who deliver strong deals to the table. Trust, security, and protection are key characteristics when building a long-term relationship. And, these characteristics carry a whole lot of weight in these ever-changing times.

The daily news feed is rife with instances of suspected fraud and corporations confessing wrongdoing. It is no wonder that the average consumer is leery. It is this climate that offers an opportunity for those companies that apply the principles of compliance as a differentiator, a type of shield designed to protect, not harm.

No Matter the ebbs and flows of law or Deregulation, a customer's trust in a respectable dealership won't ever prove a wrong move.