In our 24/7 news cycle, it’s easy to lose perspective. People overlook the ebb and flow of things – especially anything with political overtones. While the world of finance prefers to keep things consistent, the one thing people can count on is change. Change is especially true when it comes to compliance. From regulation to deregulation, the various local/state/federal agencies that enact laws seem to fluctuate between the two. This seesaw mainly applies to the Consumer Financial Protection Bureau (CFPB).
The agency has been in the news a lot lately. From Acting Director Mick Mulvany’s decommissioning of the Advisory Committee to a federal district judge ruling its structure is unconstitutional, some might think that the CFPB’s days are numbered. But, history has a lesson to offer, compliments of the Federal Trade Commission (FTC). And it’s a lesson those in the auto finance industry should heed.
The FTC was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The regulatory agency opened its doors in 1915, with a mission to protect consumers and promote competition. The FTC building was finished in 1938, with President Franklin D. Roosevelt stating, “May this permanent home of the Federal Trade Commission stand for all time as a symbol of the purpose of the government to insist on a greater application of the golden rule to conduct the corporation and business enterprises in their relationship to the body politic.”
Currently, the FTC houses three bureaus:
- The Bureau of Consumer Protection
- The Bureau of Competition
- The Bureau of Economics
Each bureau has a set of mandates to guide its work. In the early 1970s, the agency became more aggressive in its prosecutions and sanctions. The business community and Congress criticized the FTC’s activism, claiming it had become too powerful, was insensitive to the needs of the public and business, and operated with little oversight from Congress or the president. During President Ronald Reagan’s first term, control of the FTC was moved under the president. Its direction was modified to become more cooperative with business interests while continuing its consumer protective functions.
A Matter of Checks and Balances
Today, the FTC is focused on anti-competitive oversight as well as the monitoring and enforcement of consumer fraud violations. Some feel the fox is guarding the henhouse – which prompted the 2010 creation of the CFPB. As fall-out from the Great Recession, the CFPB was created by the Dodd-Wall Street Reform and Protection Consumer Act of 2010. The organization serves as a regulatory agency, charged with overseeing financial products and services that are offered to consumers. Divided into several units, including research, community affairs, consumer complaints, the Office of Fair Lending and the Office of Financial Opportunity, these units work together to protect and educate consumers about the various types of financial products and services that are available.
Given the lens of history, the CFPB is still in its infancy and will likely be remolded many times as the political tide ebbs and flows. The legacy of the FTC gives us a glimpse into those fluctuations. Trade and commerce regulations have existed since 1903 – and they are not going away anytime soon. Regardless of perspective, we live in a regulatory compliance world that can provide benefit – if viewed with a positive viewpoint.
For retail automotive dealers and lenders, regulatory requirements provide checks and balances that benefit the consumer as well as the business. Protections exist on both sides of the transaction. And for those enlightened dealer principals and managers who abide by the requirements, and strive to educate their customers on the value of those requirements, the business stands to become a “trusted partner” to the consumer. Lenders who provide valuable guidance to their dealers create educated partners who bring solid deals to the table. Trust, security, and protection are vital attributes when building a long-term relationship. And those attributes carry a lot of weight in these ever-changing times.
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