The recent consent orders agreed to by U.S. Bank, Dealers' Financial Services and the Consumer Financial Protection Bureau provide a hint at what disclosure forms might look like if the CFPB were to design them. And dealerships likely would not like their structure.
Minneapolis-based U.S. Bank and DFS, of Lexington, Ky., got in trouble late last month with the CFPB for not adequately disclosing all fees for military service members who signed up for automatic monthly allotments to pay off their auto loans and for not making some disclosures related to add-on F&I products.
For F&I products, DFS agreed to "clearly and prominently" disclose:
- The total cash price.
- That all add-on products are optional.
- That the consumer is not required to finance add-on products.
- That a difference in cost exists for paying cash vs. financing.
- That the product can be canceled.
- That extended-service contracts don't cover all repairs and which repairs aren't covered.
Potentially, that's a significant change. Experts say finance contracts usually disclose the price of add-on products as a separate line item that goes into the total amount financed, but they typically don't spell out "clearly and prominently" how it would be cheaper to pay cash for F&I products.
U.S. Bank also agreed to provisions not to "misrepresent" add-on products. And both U.S. Bank and DFS agreed to take "reasonable steps" to make sure that dealers don't violate the rules either.
The consent orders are narrow. They apply only to those two companies and only to programs directed at service members. They're a cautionary tale for other F&I vendors and other lenders.
Time will tell if they are a taste of things to come across the board.