SAN DIEGO — July will mark the fourth anniversary of the Consumer Financial Protection Bureau, and it is now clear that no organization’s founding — other than perhaps General Motors’s launch of the first auto finance company ever in 1919 — has had a greater influence on this industry. Just think about the aspects of auto finance operations that have, if not changed, been reconsidered. It is hard to think of an aspect of auto finance that hasn’t been colored by CFPB’s shadow. This is a different industry than the one it was in June 2011.
It is fair for auto finance executives to lament the CFPB’s launch. Its disparate impact analysis rightly confounds the industry still. But perhaps — and just perhaps — we can find some positives in it.
Recently, I heard a lecture by a teacher who is an expert in ancient texts. She pointed out that disagreement and discord through the ages have had positive consequences: they allow for a better understanding of the issues at hand, and leave an improved practice in their wake, she argued. Consider even the CFPB’s aggressive stance: it has forced auto finance to deeply evaluate every facet of how it operates. What would have precipitated this if not for the CFPB?
Now, I will readily declare that there is much that is wrongheaded about the CFPB’s approach — the continuing lack of guidance from the bureau glaringly stands out — but this is a different industry than it was four years ago. Even the Auto Finance Risk & Compliance Summit this week, precipitated equally by the credit crisis and the CFPB’s founding, has benefitted the industry. And the newly erected barriers-to-entry courtesy of the CFPB have some utility. This is small consolation considering the industry’s increased risk management costs. But know that spending on the IT of risk management worldwide, is also growing, expected to continue at a nearly 7% CAGR over the next few years, according to IDC.
OK, this is certainly a glass-half-full perspective, but better to be positive than not. Part of being positive is endeavoring to embrace the challenge in order to overcome it. I am reading David McCullough’s new biography of the Wright brothers — a wonderful book, parenthetically — and it has made me aware of the depths of the grand challenge that faced Orville and Wilbur. People thought they were literally crazy. They would stand on the sands of Kitty Hawk for hours mimicking the birds above. But they were not crazy. Most certainly not.
The auto finance industry is also faced with a grand challenge. We can lament the discord or we can endeavor to learn from it, or as the Wright brothers did, to soar above it. It’s time to soar.