Dealer Insights - Jan/Feb 2014 - Dealer Digest

Published: Jan 13, 2014
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LENDERS SHOULD ATTEMPT TO FIX CREDIT REPORT ERRORS

All consumer lenders, including automobile dealerships, should be aware of Consumer Financial Protection Bureau (CFPB) efforts to crack down on lenders and debt collectors that fail to investigate consumers’ complaints about credit report errors, as federal law requires them to do.

Lenders must conduct a careful review of documents submitted by consumers to contest errors, says the CFPB, and then report any mistakes to the major credit-reporting agencies (Equifax, Experian and TransUnion). Last summer, the agencies began passing documents submitted by consumers (such as proof of repaid debt) to banks and debt collectors, who are then responsible for investigating the disputes.

In a 2013 report, the CFPB highlighted what it said were the limitations of an automated system used by the credit-reporting agencies to handle disputes. Specifically, the system didn’t permit documents submitted by consumers to be forwarded to lenders. A new system now “allows all lenders to more thoroughly evaluate a customer’s complaint, which is good for lenders and for their customers,” said an American Bankers Association executive.

The CFPB warned lenders to “take immediate steps to comply with the requirements of the law.” It noted that it would “take appropriate supervisory and enforcement actions to address violations” of the law, including seeking compensation for harmed consumers.

MANUFACTURERS CHALLENGE DEALER FRANCHISE PROTECTIONS

The Alliance of Motor Vehicle Manufacturers has filed lawsuits in Florida and Connecticut challenging franchise protection laws in those states. These protections include warranty reimbursement at retail, a prohibition on surcharging dealers to recoup the additional warranty reimbursement to be paid, restrictions on manufacturers’ ability to charge dealers back for vehicles exported, and restrictions on manufacturers withholding incentives tied to facility upgrades.

The Alliance is arguing that these franchise protection laws are unconstitutional. Both the Florida and Connecticut Automobile Dealers Associations are expected to fight the lawsuits. Some in the industry fear that other dealer franchise protections will be jeopardized if the Alliance wins this suit.

ROBUST GROWTH IN NEW CAR SALES FORECAST FOR 2014

Deliveries of new cars and light trucks are forecast to hit 16.1 million this year, according to the estimates of 13 analysts in a Bloomberg News survey. That’s just shy of the 16.15 million new cars and light trucks that were sold in 2007, before the financial crisis and subsequent recession.

If the estimate is accurate, this would mark just the second time since World War II that the U.S. auto market experienced five straight years of growth.

Dealer Insights - Jan/Feb 2014 Issue