The New Rules of F&I

with Peter Jones

The New Rules of F&I

What are the Rules?

• Red Flag Rule

• Graham / Leach / Bliley Act

• Privacy Notice

• Safeguard Rule

• Form 8300

• Regulation Z

• Payment Packing

• Application Retention

• Dodd-Frank Wall Street Reform and Consumer Protection Act

The New Rules of F&I

The Red Flag Rule• The Red Flags Rule requires dealerships to implement a written Identity Theft

Prevention Program to detect the warning signs – or “red flags” – of identity theft.

• Program must be supervised by owner or senior manager.

• Program must be updated annually.

• “Incidents” must be documented.

• A “red flag” is simply an incident that happens that either involves identity theft or

could be the indication of potential identity theft.

• Maximum civil penalties are set at

$3,500 per incident.

The New Rules of F&I

G/L/B Act• Enacted November 12, 1999

• Phase 1 – The Financial Privacy Rule

• Requires institutions to provide each consumer with a privacy notice at the time the relationship is established and

annually thereafter.

• Consumers must be notified in writing of any changes.

• Must advise consumer what information is collected about the consumer, where the information is shared, how it is

used and how it is protected. It must also identify the consumers right to opt out of the information being shared.

• Phase 2 – The Safeguards Rule

• Requires institutions to develop a written information security plan that describes how the company is prepared for, and

plans to continue to protect customers nonpublic personal information.

• Designate at least one employee to manage the safeguards

• Construct a thorough risk management on each department handling the information.

• Develop, monitor and test a program to secure information.

• Change the safeguards as needed with the changes in how information is collected, stored and used.

The New Rules of F&I

Form 8300What payments must be reported?

If a cash payment is over $10,000

Received as:

One lump sum of over $10,000

Two or more related payments that total in excess of $10,000 or

Payments received as part of a single transaction that cause the total cash received within a 12 month period to total

more than $10,000

What does Cash Mean?

Currency of the United States or other Country

A cashiers check, bank draft, travelers check or money order – if it has a face amount of $10,000 ore less and the

business received it in:

A designated reporting transaction.

Or the seller knows the buyer is trying to avoid form 8300.

When is the form due?

15 days after the cash is received.

The New Rules of F&I

Regulation ZRequires complete disclosure of all the terms related to a credit transaction for the consumer.

What’s most often missed by dealerships? Triggering Terms.

• If one part of a transaction is disclosed in an advertisement in any medium full and complete

disclosure is then “triggered”.

• Payments that are quoted by salespeople on the floor or on a hang tag require full and complete

disclosure of all terms.

• Payments may not be “packed”. (Covered Next)

• Internet, Newspaper, Radio and TV ads must include full disclosure of financing terms.

The New Rules of F&I

Payment Packing (leg)

Payment packing is the deceptive act of presenting inflated monthly loan payments to

customers during negotiations.

It Actually becomes illegal when:

• A credit report has been obtained.

• The sale price has been disclosed.

• The term of the loan has been disclosed.

• The finance rate has been disclosed.

Several Dealer Principals and Finance Managers are currently in prison for this and/or

other violations.

The New Rules of F&I

Application Retention

According to Regulation B and the ECOA, credit applications must be retained

for a period of 25 months after the date of the customer’s notification of the

action taken.

Any customer who completes an application must, must, must be provided

with an adverse action letter. Dealers may not review a credit bureau and

then decide not to send the application anywhere.

The New Rules of F&I

Dodd-Frank Wall Street Reform

ActNot much information is known yet about this Act which was signed into law by President

Obama.

• Does create a new federal agency housed at the Federal Reserve.

• Provides the agency with the authority to ensure American Consumers get the clear,

accurate information they need to shop for mortgages, credit cards and other financial

products and protect them from hidden fees, abusive terms and deceptive practices.

• How they will go about the enforcement and implementation of this Act is what we are still

waiting to find out.

Thank You!

Questions?

The New Rules of F&I

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