As a new presidential administration and Congress outline their priorities for the year, dealers are likely to face a number of regulatory issues, but front and center are matters involving the dealer finance office, according to NADA's Paul Metrey.
2020 started with a "success story" when the Department of Defense in February reversed its guidance on the Military Lending Act, clearing confusion that prevented dealers from selling guaranteed asset protection to military members and covered relatives, Metrey said. But the celebration was short-lived after COVID-19 was declared a pandemic.
"It has been quite the year," said Metrey, vice president of regulatory affairs. "Between the pandemic, civil unrest, the national elections, a lot has happened — much of it having a very significant effect, or certainly expected effect, on public policy."
Metrey was joined by Doug Greenhaus, who is NADA's chief regulatory counsel for environment, health and safety, during a Tuesday workshop discussion on recent federal laws, regulations, guidance documents and court cases that affect dealerships.
Pandemic aside, several regulatory issues should be on top of dealers' watchlists, the duo said.
They include the Federal Trade Commission's scrutiny of dealer participation and voluntary protection products as well as a series of sweeping amendments proposed by the commission to its Safeguards Rule. The proposed changes would require certain financial institutions to have measures in place to protect customer data, such as encryption and multifactor authentication.
Metrey, citing an NADA cost study, said the expense incurred by an average-sized U.S. franchised dealership could top nearly $300,000 in upfront costs to comply and roughly that amount each year after to maintain compliance.
"They're not suggesting you only do the ones where it makes sense from a cost perspective," Metrey said. "They are saying ... you would have to do all of these. It doesn't matter if you're a large multinational corporation or a small rural dealership. So it's a very blunt, imprecise instrument that they have proposed."
Commissioner Rohit Chopra — President Joe Biden's pick to head the Consumer Financial Protection Bureau — has been an outspoken critic of some dealership practices related to customer financing. Rebecca Slaughter, the acting FTC chair who could become the permanent head, also has been critical of dealer practices.
"Elections have consequences," Metrey said. "They did in 2016 when President Trump was elected. They did when President Obama was elected — President George W. Bush, President Clinton and on back. They always do. This year, they're very significant."