Infiniti and Nissan dealerships can choose auto lending line caps of 1 or 2 percentage points

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NMAC said its new 2 percentage point option requires dealers to follow the 2014 Fair Credit Compliance Policy and Program created as an optional industry tool by the National Automobile Dealers Association, the National Association of Minority Automobile Dealers and the American International Auto Dealers Association.

Dealers following the NADA, NAMAD, and AIADA playbook choose a standard reserve rate and add that fixed amount to each “buy rate” rather than allowing the margin to fluctuate at the discretion of the F&I manager. (Trading groups leave it up to each participating dealer to set their own fixed rate; in this case, NMAC dealers would choose a rate of up to 2 percentage points.)

The dealership can reduce its rate on a case-by-case basis, but only for one of seven specific reasons, ranging from consumers having competing offers to an incentive for dealership employees. Each deviation and its reason must be documented.

A normalized rate and a formal exception structure aim to reduce the risk that F&I managers intentionally or unintentionally discriminate against applicants through subjective margin adjustments. The policy and documentation also reduce the risk that regulators may accuse them of doing so, perhaps after researching lending statistics for disparate impact. NADA, NAMAD and AIADA modeled the policy on government-approved consent orders.

“While NADA is not aware of any evidence demonstrating that the ability of car dealerships to negotiate contract rates with their customers results in disparate impact discrimination in today’s marketplace, we recognize that our members strive to adopt policies and procedures that will reduce their exposure to litigation while demonstrating their ongoing commitment to regulatory compliance and the fair treatment of their customers,” NADA wrote in the sample policy.

Last year, compliance experts encouraged F&I offices to follow the policy along with a similar strategy recommended by trade groups in 2019 for F&I product margins.

Bob Harkins, vice president of training for American Guardian Warranty Services, who referenced the NMAC change during a Jan. 12 webinar, said Automotive News On Monday, he had heard of another lender planning to require such normalization this quarter.

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