NEWPORT BEACH, Calif. — While officials from the Consumer Financial Protection Bureau might be pleased that BMO Harris Bank last week switched to flat fees for dealer compensation, lenders do not seem to be in any hurry to follow the bank’s lead.
Indeed, a highlight from yesterday’s Auto Finance Risk & Compliance Summit sessions here was the admission by several lenders that BMO is on its own, at least for now.
Neither General Motors Financial Co., Nissan Motor Acceptance Corp., nor TD Auto Finance gave any indication yesterday that they would follow BMO into flat-fee pricing.
Kurt Brown, director, chief compliance and risk – Americas at NMAC, was blunt about the fact that the captive is not shifting its pricing, for now.
“We are monitoring that,” Brown said of BMO’s compensation change. “I am glad someone stepped up to be a guinea pig. I am just glad it is not me.”
That seemed to be the sentiment among several lenders here at the conference, despite the CFPB’s signaling that flats seems to be a better way to compensate dealers — if lenders want to avoid regulatory risk. Eric Reusch of the Office of Installment Lending Markets at CFPB hinted as much during a session at the Risk & Compliance Summit, without mandating flats. That mirrors Richard Cordray’s statement last week in support of BMO Harris Bank’s decision. David Gemperle, a senior attorney at Nisen & Elliott, put it this way: “Everyone but BMO Harris has a red flag” in the eyes of the CFPB. The fact that Cordray even issued a statement should tell lenders that flats are viewed by CFPB as the optimal compensation structure — which means there might be more “guinea pigs” in the industry soon.
