SAN DIEGO — The Consumer Financial Protection Bureau is increasingly asking lenders about their ancillary product programs during examinations — particularly about the percentage of consumers buying these products — Calvin Hagins, deputy assistant director for originations at the bureau, said during a regulatory panel at the Auto Finance Risk and Compliance Summit yesterday.
Ancillary products, such as GAP insurance, aren’t “necessarily a big piece of the examination,” but lenders should expect to get questions, he said.
Specifically, Hagins laid out a few aspects of ancillary products the bureau looks out for, including how the product is offered to the consumer, at what state in the process is it offered, how are the disclosures being provided to the consumer, and what is the acceptance rate.
“If the acceptance rate is 95%, and you’re telling me it’s optional, my oh my, 95% is a pretty high acceptance rate,” he said during the panel. “I’m not saying there’s anything wrong with it, I’m just asking, if it’s optional, why is the rate so high?”
The Federal Trade Commission is also interested in ancillary products, however the regulator looks at it more from the perspective of how the borrower might get deceived, said Colin Hector, attorney for the division of financial practices at the FTC.
“One of the things we have focused on in some of our enforcement work, is that with ancillary products sold at the end of the sales process people are saying, ‘you need this product in order to get financing,’” he said during the panel. “At that point, the consumer has already invested a lot of time and energy into the process, and to leverage that with a point of deception can cause real serious harm.”
