How the 2008 Financial Crisis can Inform Lender Compliance

The demands of regulatory compliance are difficult enough when the industry is healthy and the economy is strong. But what happens when a crisis hits?

It’s a question that auto finance companies need to answer for themselves, as troubling signs have emerged recently, from a sharp increase in early loan delinquencies to the collapse of some smaller subprime lenders. These events, combined with other market conditions, are eerily similar to the buildup before the mortgage crisis a decade ago.

Whether or not we’re headed for a similar crisis, this is a good time to learn from the past. Looking at the regulatory response to the mortgage crisis will help anticipate the challenges in store for vehicle lenders and loan servicers during and after a potential crisis.

After the housing market meltdown in 2008, we learned several important lessons:

• Federal regulators and state governments responded with new laws and regulations
• Authorities stiffened their enforcement of consumer protection laws
• Companies that were able to implement changes quickly fared the best in the aftermath of the crisis

Compliant Notices

In the event of a crisis in the auto finance industry, compliant notifications would become more important than ever — especially those that are required to be sent before, during and after repossession.

Agile Implementation

The 2008 crisis led to the rapid-fire adoption of new rules and even the creation of a new federal regulatory agency, the Consumer Financial Protection Bureau (CFPB­). If the mortgage crisis taught us anything, it’s that the government will move quickly to protect consumers, and auto finance companies need to be ready to keep up.

Solid Compliance Partner

At LenderLive, a team of regulatory compliance professionals monitors new legislation and compliance trends, helping clients stay current with new developments and ensuring that their most critical notices stay in compliance with current regulations.

Download LenderLive’s new whitepaper, “Warning Signs on the Road for Auto Loans,” to learn more about how lenders can be prepared if the economy falters.