The Consumer Financial Protection Bureau’s Encroachment Into the F&I World, from GSFS Group.
When Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, both the auto dealer and insurance industries were at the table to be sure they were carved out from the jurisdiction of the now powerful Consumer Financial Protection Bureau, better known as the CFPB. As is frequently the case, however, legislative exemptions are usually not wholesale in nature, and later interpretations of law can whittle them back from their ostensibly intended purposes. This may indeed be the fate for some insurance and insurance-like products sold to consumers who purchase and finance such products in connection with the purchase or lease of an automobile.
Auto dealers have a broad exemption from the CFPB’s purview but with a limited cut-back. Specifically, the CFPB “…may not exercise any rulemaking, supervisory, enforcement or any other authority, including any authority to order assessments, over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. This exemption does not apply to an auto dealer to the extent it (1) provides services related to residential or commercial mortgage loans, (2) engages in a “line of business” involving the extension of retail credit for purchasing or leasing autos in which the financing agreement is not regularly sold to an unaffiliated lender, a consumer financial product or (3) renders a service not involving the “sale, financing, leasing, rental, repair, refurbishment, maintenance or other servicing of motor vehicle.”
Also excluded from the CFPB’s jurisdiction are the “business of insurance,” which means the writing of insurance or reinsuring of risks by an insurer and a “person regulated by a state insurance regulator.” This means any person engaged in the business of insurance and subject to regulation by any state insurance regulator but only to the extent that such person acts in such capacity.