Providers & Administrators, 1st Qtr 2019

1ST QTR 2019 P A 11 The need for transparency and accuracy in the industry will be critical to avoiding this legal issue Tuno warned One regulation Id like to see disappear is the Department of Defenses reinterpretation of the Military Lending Act It restricts military personnel and their dependents from a valuable service for no discernable upside Ganther said How many military families lost their cars to Hurricane Michael last October How many were in a negative equity position Given its unholy genesis and effect I remain guardedly optimistic that this travesty will be repealed Its just that there are so many bigger fish to fry in D C this year Van Over also would like the see the MLA reinterpretation rescinded He doesnt see any additional regulations on the horizon however I do fear that the Federales will step up their enforcement actions against dealers for bank fraud misleading advertising and payment packing I also see the finance sources continue to aggressively file litigation against dealers for violating the terms of the dealer lender agreement Excluding the change to MLA rules Tuscan said the past few years have provided a silent period among regulators and the industry has regulated itself remarkably well The political landscape has changed for 2019 and I believe that we will see an uptick in lending institution regulation due to the bad acts of a few that will have an overall impact on regulation in lending Tuscan added The CFPB seems to be more consumed with whether or not they should change the name of the institution than imposing their own disparate impact claims Reed noted that in his home state of Texas an Austin regulator has stepped up to enforce jurisdiction over the same finance companies once strictly regulated by the CFPB Over the past year auto finance companies governed by the Texas Office of Consumer Credit Commissioner have seen a significant level of additional oversight related to the sale and cancelation of GAP and other credit products The current administration has less of an appetite to go after dealers and so lawsuits have subsided Maxim said But we know that similar restrictions could be imposed on F I products regulating margins on profits on products It has not happened yet but that could change We do not see any major changes coming from the trends we are looking at but it is still a very difficult landscape to navigate Quinn said THE SUBSCRIPTION ECONOMY As a primary mode of transportation subscription services still represent only a fraction of the potential car buying public But their influence should not be underestimated Lane said who urged industry members to stay tuned To a certain extent the subscription economy has put the F I industry on notice Lane said That is theres a need for new innovative offerings or else trending new models of vehicle ownership could cause F I departments some headaches We see this as an ongoing challenge yet a big opportunity for F I departments moving forward Kathinokkula noted that autonomous vehicles increasing adoption of rideshare operators and the subscription economy are converging with several manufacturers offering subscription services While most of these services are still confined to premium brands and price points the momentum is towards more of these services launching in the next few months Inevitably F I products must also become subscription products F I product providers who tailor their offerings to be subscription products are going to see a competitive advantage We will see more of these products offered as subscription products in 2019 Kathinokkula said Maxim noted that as companies such as Fair and Flexdrive gain experience while fighting for market share OEMs appear to be pulling back But whatever the source the P A segment will be affected Subscription models also threaten to displace the F I product business unless you are providing to the subscription companies With coverage fully baked into the payment customers will pay a premium so they dont have to worry about aggravation of maintenance breakdowns wear and tear or insurance Maxim said Reed agreed noting that As subscription services grow it will have an impact on the traditional F I process Many of the companies that are offering the subscription service will buy their products direct from the administrator bypassing the dealership as with Fair Vehicle subscriptions are not ownership plans Craigmile stressed but more akin to a short term lease In 2018 Cadillac closed its Book program purportedly for retooling and Care by Volvo was labeled a payment packing and unfair competition scheme by the California New Car Dealers Association He believes subscriptions will gain more traction when dealers begin to participate in force However the impact on F I profitability will be severe Craigmile said Monthly product subscriptions will provide high acceptance rates but will fall short of the revenue recognized by F I departments currently I think the consumer buying process will remain the continued focus and the area where we will see the most changes especially in technology