Nonprime lender Veros Credit LLC is seeing lenders pull back compliance initiatives amid the current deregulatory environment, Chief Legal Officer Robert Tennant told Auto Finance News.
“Lenders may think, ‘Can we relax a little bit? Can we focus on other areas of business?’ I think the answer is no,” he said. “I don’t see the stability in Capitol Hill to say that any relaxing of regulations is going to be long term.”
As the Federal Reserve urges regulatory oversight of financial services technology and state attorneys general boost supervision, compliance should be prioritized just as it was following the recession. “We live in the same environment — my concern is for those companies that think compliance can be moved to the backseat again,” he said.
Tennant spoke with AFN about other changes he has seen, including the industry’s shifting emphasis on compliance over the years and Veros Credit’s new eye for technology. What follows is an edited version of that interview.
AFN: You started your auto finance career in 2009. What was it like entering the industry during the Great Recession?
RT: I saw it as a little bit of an advantage because the recession was the only reality that I knew at the time. Others, who had been around a long time, were burdened by the compliance requirements that came out of that period. I was very fortunate to become in-house counsel with a company that had the foresight to put compliance systems in place before Dodd-Frank regulations even took effect. After the recession, it was good being with a company that focused on regulations in an industry where regulations had been forgotten.
AFN: Why do you think Veros Credit had that focus on regulation?
RT: Veros Credit recognizes that customers are more than just a Fico score. We saw companies go in and out of business, but the ones that survived did well because of smart purchasing of contracts and because they took the time to evaluate the whole credit picture — as opposed to others that stepped on the accelerator and bought contracts just because they needed to see some growth.
AFN: Can you compare lender behavior in 2009 to lender behavior today?
RT: After the recession hit, lenders were on the same page and everybody was concerned about federal regulation kicking into high gear under Dodd-Frank. Everybody understood that compliance management systems needed to exist, that you needed to train staff. Not that I want to say the industry operated on fear, but regulators at least had everybody’s attention. The difference I see now, with the caveat that it’s not as bad as I thought it would be, is a general sense that there is a relaxing on the part of the regulators, especially with the Consumer Financial Protection Bureau. We haven’t dealt with that issue here, but I hear rumblings in the industry that maybe [operational resources] could be better allocated elsewhere.
AFN: Why do you think companies are wrestling with whether compliance should remain a top priority?
RT: It depends on the leadership of the company in general and where their focus is. There are many companies like ours where compliance has always been a focus but may have leadership that is [more] numbers-driven. It depends on what [the leader] sees as the most critical piece of the business. It could make the role of the compliance department and the legal department easier or tougher, just depending on the attitudes of the executives at the top.
AFN: How have you seen Veros Credit develop over the years?
RT: When I started, the company was relatively small and primarily did business in California. It had no established in-house legal department. Dodd-Frank was still on the horizon, so the focus back then was on handling the occasional litigation matters and transactional projects. Then several things changed. Obviously, there was an increased focus on compliance in the industry. Veros followed suit, creating a new compliance department and streamlining the customer experience. At the same time, the company has dramatically grown over the past decade, including the expansion of Santa Ana, Calif.-based Veros’ footprint to other states. Most important, Veros has recruited top talent to help lead the company. My role has changed accordingly, not only expanding due to growth but with more of a focus on the future, addressing business and legal issues proactively.
AFN: How are you looking to improve Veros’s business practices?
RT: Every department is working on technology initiatives right now. We are doing a lot of work in the decisioning field and analytics in the buying program. We’re also streamlining the process from end to end and focusing on the consumer experience. We want to make it as easy to buy and finance a car as it is to make any other consumer purchase. Customers today are so used to the Amazon model, where they can go online and make a major purchase in seconds. We want to facilitate that and meet the requirements of our dealers, which are speed and efficiency while making sure operations are done correctly. Obviously, on my end, that means compliance.
Editor’s note: This interview was originally published in the December issue of Auto Finance News magazine and can be viewed here.