As they did this time last year, attorneys from the Maryland law firm Hudson Cook – Eric Johnson, Trisha Cacciola, and Patty Covington – unpacked the time-worn crystal ball to forecast what will happen in the auto sales, finance, and lease industries this year.

Eric, from Hudson Cook’s Oklahoma office, made these predictions:

• The U.S. Supreme Court will disagree with the U.S. Court of Appeals for the Fifth Circuit and find that the CFPB’s funding is constitutional. As a result, the logjam on enforcement activity that was on hold pending the ruling will break. The holding will also embolden the CFPB to take even more aggressive action than it took in 2023.
• The recent hiring of more enforcement attorneys at the CFPB means more enforcement actions in 2024. The CFPB will see “junk fees” everywhere it turns.
• The CFPB will finalize its two new public registry rules (the so-called “repeat offender” registry and the form contract registry) in March or April with a short lead time to comply, and industry will have to play catch-up.
• The FTC will take an auto dealer and/or finance company to task for not following its new Safeguards Rule requirements, including the new requirement to notify the FTC of a notification event (beginning in May). The FTC gave dealers and finance companies ample time to make the changes necessitated by the updated rule and will show little mercy for noncompliance.
• Taking the lead from the FTC’s new CARS Rule, states and state attorneys general will go after dealers, asserting that they charged customers unadvertised and unauthorized “junk fees,” charged consumers for so-called “add-on” products without their knowledge or consent, and/or charged consumers for products that provided little or no value.

Trisha, from Hudson Cook’s New York office, took her turn with the crystal ball and saw signs of these developments taking place this year:

• “Junk fees” will continue to be a focal point, both for the CFPB and the FTC. The CFPB will continue to expand its definition of “junk fees” to seriously curtail the imposition by lenders of fees that are not explicitly authorized by applicable law.
• We will see more activity on the fair lending front, especially with immigration status as a form of racial discrimination, despite the express language of Regulation B.
• Lenders will continue to struggle with 1071 compliance given the lack of real guidance and the conflicting stays. Congress may need to step in to provide direction.
• The FTC’s CARS Rule may trigger state “copycat” rules that will be burdensome for dealers. Even if an actual law or regulation is not enacted or adopted in a state, I will not be surprised if the CARS Rule prohibitions and requirements serve as a basis for heightened scrutiny by state regulators under their general UDAP standards.
• With the additional hiring by the CFPB, there will need to be more public enforcement actions to justify the hires.

Patty, from Hudson Cook’s Virginia office came up with these projections:

• The CFPB will continue with its proposed FCRA rulemaking, throwing the industry one or two bones with respect to the issues identified during the SBREFA process. Otherwise, it’s full steam ahead, which will include rewriting a couple of the FCRA’s statutory provisions, including the definition of “consumer reporting agency.”
• Dealers and finance companies will face a weighty decision regarding when to begin the real work to implement the necessary business changes to comply with the FTC’s CARS Trade Regulation Rule. The NADA and TADA’s lawsuit may lead some to delay their work, expecting the case to “fix” the rule. This will be unwise; some form of the rule will take effect and take much longer than expected to implement. Additionally, some of the requirements are arguably already effective under UDAP or UDAAP, if constructively applied.
• The FTC will continue to partner with state attorneys general to sue dealers under UDAP and applicable state laws for violations related to unlawful discrimination, advertising, and the sale of voluntary protection products.
• We’ll see “junk fee”-related proposed state legislation and regulations. State legislators will join attorneys general in jumping on the “junk fee” bandwagon. “Junk fees” will be the equivalent of rebranded UDAP or UDAAP.
• The CFPB will issue a pejorative “auto lending” report as part of the auto finance data pilot it launched in early 2023, which included a data request issued to nine “auto lenders.” The report’s findings will serve as support for another CFPB initiative against auto finance companies.

*Shelley B. Fowler is managing editor at CounselorLibrary.com, LLC.

© CounselorLibrary.  Based on an article from Spot Delivery. Single publication rights only to “Used Car News.”