Wells Fargo sticks with dealer reserve

Harp: Looking for a good compliance program and a focus on fair lending.

Wells Fargo, like other auto lenders, is sticking with dealer reserve.

But it is also monitoring the Consumer Financial Protection Bureau's campaign to get lenders to switch to flat fees or some other form of dealership compensation in which stores don't have any discretion in setting their own compensation.

San Francisco-based Wells Fargo's preferred-lender relationship with General Motors boosted the bank's new-car business in 2013, although bank executives said the overall loan mix at Wells Fargo is still around 70 percent used cars, 30 percent new.

GM provides incentives for loans originated at its dealerships through Wells Fargo. The relationship started in 2011 as a pilot program on the West Coast and expanded to additional GM regions in 2012 and 2013. It has been nationwide since September 2013.

In the fourth quarter, Wells Fargo auto-loan originations were $6.8 billion, a 26 percent increase from a year ago.

Dawn Martin Harp, head of Wells Fargo Dealer Services, spoke with Automotive News Special Correspondence Jim Henry last month on the sideline of the National Automobile Dealers Association convention in New Orleans.

Some lenders have said they are trying out alternate forms of dealership compensation, for instance on a regional basis. Are you experimenting?

We are committed to an open dialogue with all our regulators. We will continue to evaluate all our programs and make changes as appropriate. We are making sure we are working with our dealers and dealer groups. We're all working to the same endpoint. We want to be thoughtful how we do it.

Wells Fargo sent letters to dealers last year, pointing out in general that they need to be following fair lending practices.

We told dealers: "Here's what we're looking for -- a good compliance program and a focus on fair lending. We are expecting you to up your game."

And we've taken on responsibility for training internally and communication.

That was sort of a generic message. What about letters other banks sent to individual dealers in 2013, warning them that the bank found differences in dealer pricing?

We did not do that.

Your originations were up 26 percent in the fourth quarter. Where's the growth coming from? Is it your relationship with GM?

We have been consistently in the market for years. It's a byproduct of our relationships with our dealers. Certainly last year we added another approximately 1,000 dealers and overall more than 2,000. We're seeing those relationships bear fruit. In some cases we were already doing some business with some GM dealers and now we are doing more.

We also opened up a Regional Business Center in Pittsburgh in 2013, and that has helped open up some markets.

You can reach Jim Henry at autonews@crain.com

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