BB&T Bank’s move to abandon flat-rate dealer compensation for a more traditional model could signal a greater shift in fair lending compliance, Michael Benoit, partner at Hudson Cook LLP, told Auto Finance News.
“The fact that BB&T has gone back to a dealer-reserve model instead of a flat-fee — that’s telling,” Benoit said. The company’s switch coincided with an announcement that the Consumer Financial Protection Bureau is stripping enforcement powers from the Office of Fair Lending and Equal Opportunity — the division most responsible for advocating flat-rate policies.
“[The reorganization] has really neutered the CFPB’s ability to make any fair lending claims going forward, because unless it’s something that’s grossly obvious or blatant, they don’t have the bandwidth now to bring those claims,” Benoit said.
Though BB&T planned the change prior to the CFPB’s announcement, the pricing move reflects the bureau’s new tone, which includes a five-year strategic plan released this week stating that the regulator will no longer “push the envelope” on enforcement.
“The CFPB came in with an iron club and made us change the way we priced our product [in] our indirect auto purchasing [program] through auto dealerships, and that caused substantial runoff in that business,” Chief Executive of BB&T Kelly King said on a January earnings call.
Moving back to a traditional dealer-compensation model “will increase that volume into the auto portfolio, and the spreads will remain good,” King said. BB&T’s outstandings dropped to $13.4 billion at yearend 2017, down 11.2% from 2015, when flat fees were first introduced, according to Big Wheels Auto Finance 2017.
“While we had some successes with the flat-fee program, BB&T also experienced an overall reduction in volume,” a bank spokesman told AFN. “[We will] provide our dealer clients with more options and better flexibility.” The company remains “committed to the fair and equal treatment of all consumers,” he added.
For more content like this, attend the third annual Auto Finance Innovation event, slated for March 7-8, at the Parc 55 in San Francisco. For information, or to register, visit autofinanceinnovation.com.Like This Post