May 2017 SDADA Column

Relying on the government to protect your privacy is like asking a peeping tom to install your window blinds.

– John Perry Barlow

New technology related to connected cars is evolving quickly. Many of the new features associated with this connectivity require new types of data, which puts privacy in the spotlight for manufacturers, government and consumers. Needless to say, that means that the dealers need to be on top of the issue as well.

When that vehicle is traded and that info remains, both the customer and the dealer remain at risk. Do you have a procedure for deleting the info from a trade?

The Future of Privacy Forum (FPF) and the National Automobile Dealers Association (NADA) released a first-of-its kind consumer guide, Personal Data In Your Car. The Guide helps consumers understand the kind of personal information collected by the latest generation of vehicles, which use data to further safety, infotainment and customer experience.

The Guide describes several components that are integral to properly protecting consumer data. For example, services that collect and share personal information should be accompanied by a clear privacy policy. The reality is that yes, cars are starting to know more about you, but what it knows may save your life.

Personal Data In Your Car highlights that nearly all leading automakers have committed to protecting consumer information by committing to the Automotive Privacy Principles. These Principles guide privacy practices in the automotive industry. They went into effect beginning with model year 2017 vehicles and for subscription services beginning on January 2, 2016.

This guide will help you and your customer protect their private information.

March 2014 SDADA Column

I really don't like to write about the Consumer Finance Protection Bureau each month but they seem to make themselves such an easy target. Every week brings another story that is just so outrageous that it bears mention. Plus they have placed our finance model under direct attack without regard for the adverse affects to the consumer. 

As you probably know, The Emperor's Clothes is a childhood story by Hans Christen Anderson. In this column, Randy Henrick,  associate general counsel and lead regulatory and compliance Counsel for DealerTrack, Inc., draws a very striking analogy between the CFPB and the Emperor:

The CFPB reminds me of the Emperor. They must know that the legal arguments they hope to validate in the Ally Bank Consent Order will not hold up in a court. My fear is that other lenders will be like the Emperor’s ministers and go along for fear that they will be the next entity upon which the CFPB will try to impose similar conditions and thus they go along as well.

If you want a very good analysis of why Ally Financial's recent settlement with the government over auto dealer markups on indirect auto loans is dangerous, read Richard Riese's column in American Banker.  Riese is senior vice president of the Center for Regulatory Compliance at the American Bankers Association.  Riese argues that the settlement was based on based on leverage, not law.  

He makes a very strong argument against the CFPB that can be summed up in the final paragraph of his column:

The government has overwhelming power and resources to pursue enforcement.  Leveraging a settlement on threat of litigation with less evidence than is required to prove intentional discrimination is an abuse of power. Compensating presumptively-minority borrowers who pay the same markup as individual non-minority borrowers undermines equal credit opportunity policy.

Ironically, at the same time the CFPB is accusing others of disparate impact, CFPB's own managers have shown distinctly different patterns in how they rate employees of different races. This report in American Banker details the findings that show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses.

Ronald J. Rubin, a partner at Hunton &Williams LLP, comments on this issue in the Wall Street Journal. 

The lesson the CFPB should learn from its own disparate-impact experience: Statistics are complicated. Numbers don't lie, but people often misinterpret them. Effect does not necessarily equal cause.

It is inconceivable that CFPB's management could be discriminating against its workers. But disparate-impact statistics equal discrimination. As they say, what's good for the goose is good for the gander!

It is likely that CFPB will continue to ignore all public accusations, Congressional inquiries and media investigations because that is what they do. 

NADA’s Service Provider Data Access Addendum Now Available for Download

Last month, NADA’s Legal and Regulatory Affairs department issued a sample Service Provider Dealer Data Access Addendum (“Addendum”) and cover memo for dealers to use with their third party service provider vendors. This follows a memo sent last August from NADA to all members that contained an overview of the primary regulatory issues surrounding dealer data, numerous practical tips for dealers to consider when protecting their data, as well as samples of the contract provisions required under federal law when a dealer wishes to allow access to dealer data with a third party service provider. The Addendum is now available to dealers as a Word document at www.nada.org/dealerdata.

January 2014 SDADA Column

I am writing this on my return from the NADA Convention in New Orleans. My un-scientific survey of cabbies, bartenders, shoe shiners and bell men would suggest the retail automobile business is strong. My informal canvas proclaims that dealers left some cash in the French Quarter over the past week.

Six days in New Orleans is enough for me. I am ready to get home. I've had more than enough shrimp, andouille, bourbon and Consumer Finance Protection Bureau. I hope you're not as tired of reading about the CFPB as I am writing about it but it is a looming threat to our business model and we must be vigilant.

I attended the AFSA meeting in New Orleans and listened to Patrice Ficklin, CFPB Fair Lending Director (I'll let you decide what that means), address a room full of automotive lenders. She told them that current dealer reserve system causes unfair lending issues. She did not tell them the methodology in deciding that.

She suggested that flat fees were only one example of an alternative she believes "there may be a variety of alternatives to discretionary markup". She offered no other example other than flat fees.

This lady is smart, has an agenda (one that is not favorable to dealers) and answers to no one (other than, perhaps, CFPB Director Richard Cordray). Citing bureau policy, Ficklin declined to answer media questions after her presentation.

It was none other than the Christopher Dodd, co-sponsor of the Dodd-Frank (which established the Consumer Finance Protection Bureau), who said "When the public's right to know is threatened, and when the rights of free speech and free press are at risk, all of the other liberties we hold dear are endangered."

While NADA continues to fight for the dealer reserve system, they have issued guidelines recommending each dealer set a standard interest-rate charge to borrowers, which could only be modified for specific reasons like a competing offer from another lender or dealer.

NADA will be offering this step-by-step program for dealerships of all sizes. While the program does not offer "Safe Harbor", it addresses the fair-lending concerns the CFPB has raised.

It strongly recommend that you look at it and consider whether or not it will work for you.

McConnell Takes Helm at NADA

Forrest McConnell, a Honda and Acura from Montgomery, AL, assumed the position of NADA Chairman in New Orleans. Forrest came on to the board the same time I did. He is smart, has agree at sense of humor and is an attorney. He will do a great job.

NADA Releases Additional ‘Dealer Data’ Guidance

NADA’s Legal and Regulatory Affairs department has issued a sample Service Provider Dealer Data Access Addendum (“Addendum”) and cover memo for dealers to use with their third party service provider vendors. This follows a memo sent last August from NADA Legal and Regulatory Affairs to all NADA members that contained an overview of the primary regulatory issues surrounding Dealer Data, numerous practical tips for dealers to consider when protecting their data, as well as samples of the contract provisions required under federal law when a dealer wishes to allow access to Dealer Data with a third party service provider.

The Addendum was drafted for dealers in an effort to clarify and simplify dealers’ obligation to ensure that their applicable vendor contracts contain certain provisions required under federal law. It’s only a sample, and should be used by dealers only after consultation with their legal counsel. Adoption of the Addendum is not the only way dealers can meet their legal obligations and it may not be right for every situation. However, dealers can choose to use the Addendum to amend their service provider legal agreements to satisfy the applicable contractual requirements. NADA is encouraging dealers to review the Addendum and cover memo with legal counsel, and if applicable, to present the Addendum to service provider vendors for signature.