What's Driving Regulation of Auto Ancillary Products
Bloomberg BNAJonice Gray Tucker, Kristopher R. Knabe
Federal and state regulatory scrutiny of the automobile finance industry has accelerated over the last several months. The Consumer Financial Protection Bureau (CFPB or the Bureau) and the Department of Justice (DOJ) recently announced the fourth public resolution with an indirect auto finance company in a series of joint efforts to address perceived fair lending risks from discretionary pricing and compensation policies.
Similarly, other federal and state regulators have increased their attention on the auto industry, taking a broad look at various practices. This heightened, industry-wide scrutiny is carrying over to another area that has been targeted by regulators—ancillary products sold in connection with automobiles.
Sales and marketing of ancillary or add-on products have been a top priority for regulators for more than five years—with regulators initially focusing on the offering of such products in connection with credit cards. Most enforcement actions relating to ancillary products have been predicated on allegations of unfair, deceptive, and/or abusive acts and practices (UDAAP or UDAP) — a broadly applied, subjective, and contextspecific theory of liability.
Originally published in Bloomberg BNA; reprinted with permission.