President Donald Trump signed into law last week legislation that rescinds the Consumer Financial Protection Bureau’s guidance on dealer markup rates, and before the ink was dry Toyota Financial Services announced it will raise caps, Auto Finance News has learned.
The captive was one of four lenders under a consent order that capped markup rates at 1.5% — versus the industry standard of 2.5% — but last week TFS’s consent order was lifted a year early following approval from the CFPB.
Earlier this month, TFS Chief Compliance Officer Veronica Roman had said her team was evaluating
the legislation and would put a program in place to keep compliant no matter what the company decides.
“The interesting thing is that it was guidance, but it meant something,” she said, referring to how the initial CFPB bulletin was based on the Equal Credit Opportunity Act. “Based on those changes [by Toyota Motor Corp.], my program would develop a monitoring plan around that,” she added.
The bulletin was designed to limit discrimination at dealerships, but it restricted profitability at a time when dealerships were consolidating.
Steve Wray, finance manager at Spradley Barr Toyota in Cheyenne, Wyo., is happy that the caps will increase because dealerships are “cannibalizing” themselves in metropolitan areas and it’s becoming harder to capture the gross profit necessary to operate.
“It will be more of a benefit to the captive finance arm of Toyota in that they will capture more business that they have been missing out on, because we’re all trying to stay afloat — not just here at Spradley Barr but at every dealership in the country,” Wray said.
“Toyota Financial really tightened the screws down after they got their hands slapped by the CFPB and, hopefully, this means everything about working with them will become a whole lot easier.”
Source : AutoFinanceNews
