Some worry about F&I product regs, but not Jackson

Jackson: "Focus is on the reserve amount."

AutoNation CEO Mike Jackson says that unlike some in the retail industry, he’s not worried the Consumer Financial Protection Bureau could have plans to impose stricter monitoring of financing for F&I products.

“We have seen zero real activity in that area,” Jackson said during a conference call last week for analysts and investors. “All the focus is on the reserve amount.”

Even so, some legal experts are convinced the CFPB is drawing a bead on F&I products. It’s an important topic because many dealership groups, including AutoNation, rely on F&I products to make up both for thinner margins on other profitable products and for the threat to dealer reserve already posed by the CFPB.

At AutoNation, dealer reserve takes a back seat to revenue from the sale of F&I products. The company has said about two-thirds of its F&I revenue per vehicle comes from the sale of F&I products, mostly extended service contracts and prepaid maintenance. The company said it is purposely reducing its dependence on dealer reserve.

Jackson said last week AutoNation averages about 90 basis points -- nine-tenths of 1 percent -- in dealer reserve. Most auto lenders observe voluntary caps on dealer reserve of 2 or 3 percentage points, depending on the term.

Jackson said that AutoNation’s 90 basis point amount is “in line with” the CFPB’s thinking.

However, the CFPB says it wants to eliminate dealer reserve entirely. The bureau objects to the idea that dealerships can charge customers different amounts for dealer reserve.

The CFPB says that dealer discretion often produces higher prices for legally protected classes of borrowers, such as women and minorities. Instead, the CFPB wants lenders to switch to flat fees or some other form of dealer compensation.

Some industry watchers predict F&I products could come under similar scrutiny by regulators. Today, for example, RouteOne plans to host a webinar on “the forthcoming scrutiny of F&I products by the Consumer Financial Protection Bureau and the Federal Trade Commission.”

David Bafumo, president of FNI Inc. in Cary, N.C., and a consultant for lenders and dealerships, said in an interview this month that lenders and dealerships can probably expect the CFPB to extend some of the same arguments it has used against dealer reserve to F&I products.

Marc Cannon, senior vice president of corporate communications and public policy for AutoNation, said separately that AutoNation is keeping an eye on the situation regarding F&I products and the CFPB.

But Jackson said last week he’s not that concerned. “It’s always hard to predict the future with the government,” he said. “But I do not see a lot of scrutiny around the product issue.”

You can reach Jim Henry at



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