Off the Lot: Side effects of Trump re-election

Much has been made of the rally in the stock markets since the re-election of Donald Trump . Although several sectors are benefiting in their early estimate of benefits from a change in administration, two that have stood out are the financial and auto industry players. Predictions run the gamut from less regulation , less restriction on mergers and acquisitions to potential lessening of Corporate Average Fuel Economy (CAFE) requirements on auto manufacturers. Trump’s initial cabinet selections appear to espouse a scaling back of many of the agencies they are tapped to oversee. It seems like a good time to consider the possible outcomes of the Trump 2.0. Unless you were around in 1893, when Grover Cleveland re-took the White House as the 24th president, none of us have had the benefit of looking back to the last time an incoming president was in office and what that meant in the policy arena. While there is likely to be a scaling back of regulatory intervention from the Consumer Financial Protection Bureau (CFPB) and the FTC , it should be remembered that during the last Trump term, states’ attorneys general, along with state banking and corporation regulators, adopted the approach that they had to fill the vacuum where federal regulators exited. [caption id="attachment_58337338" align="aligncenter" width="1024"] (Photo/Bloomberg)[/caption] Seemingly in the past few years, the approach was a focus on CFPB and FTC compliance and the assumption was that state regulators would follow their lead . This may lead to a misplaced belief that, during the next presidential term, the cost of compliance will come down and may lead to consideration of reducing staff in compliance departments — but the opposite may be the case. Compliance still key Consider that whether a lender or auto dealer, vehicles are sold mostly under retail installment contracts under the Retail Installment Sales Act (RISA). There is no federal RISA; however, there are RISAs in most states that relegate a great deal of the oversight to that state’s regulatory regimens. Most nonbank lenders are governed by state regulators as well as the CFPB. Auto dealers are governed by their respective state motor vehicle departments, state attorneys general and other regulators. So, while keeping the focus on a potentially scaled-back CFPB, there may be a more confusing and scattered approach to regulatory compliance. Lenders will have to review individual states’ collection and lending laws and focus their efforts on strict compliance as well as anticipate a more muscular effort in some states. It’s often thought that regulators are most aggressive in “blue” states, but there are several “red” states that have aggressive regulatory entities. It would be a huge mistake to abbreviate compliance regimens in anticipation of a lessened regulatory environment during the next administration. Focus on states In fact, it may become more important to have specialists in each state to review policies, procedures, documents, rates and practices, assuming that each state attorney general or regulator will fill the vacuum if one is created federally. Local regulators can have more impact because they often hold licensing authority. Often, state regulators see headline enforcement as a way to make a name for themselves, pursuing what they represent as “bad actors” to reinforce their body of work as they consider higher office. National lenders may want to look for people with experience in several states who they could lean on for expertise. have specialists with a portfolio of states on which they can become experts. Regional lenders have a lesser challenge. Rotating the regional folks so they can develop expertise nationally would be a longer-term goal as well as “deepening the bench.” It’s likely that most compliance leaders will not be experts to perfection in each state nuance, so the regional approach may allow for closer scrutiny and protection. No time to relax This is not the time to relax regulatory compliance. This is the time to review each and every state, top to bottom, and assume that if there were no federal regulator, you must have the intrinsic knowledge of each and every regulation on a state level that could be pursued in an environment of lessened federal oversight. As we enter the holiday season, and the excitement and hopes that come with a new year, my best wishes to all for time with your families and meaningful celebrations and a healthy and prosperous 2025. Bruce Newmark , formally chief adviser of Vroom and United Auto Credit Corp. , is retired and a consultant to the industry. Newmark has more than 45 years of experience in automotive retail and finance. Before joining Vroom, Newmark’s tenure spanned leadership roles at Fimanco , Ford Motor Co. , Hankey Automotive Group and Westlake Financial . Register here for the free Auto Finance News webinar "Tapping Aftermarket Products to Improve Dealer Relations and Profitability," taking place on Tuesday, Jan. 14, at 10:45 a.m. ET.

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