This fall, we announced our partnership with F&I Sentinel. Together, we will evolve digital lending by providing a comprehensive service focused on verification and compliance. Informed’s AI-based software verifies, streamlines, and optimizes loan processing. F&I Sentinel’s CITADEL® provides a turnkey compliance solution for the financing and resolution of F&I products.
CITADEL addresses the rapidly changing regulatory environment, CFPB and state regulations, limits class action exposure and protects financial institutions and consumers. As a result, loans are processed faster and more accurately with less fraud and audit risk, providing real-time verifications backed by compliance experts.
We recently sat down with F&I Sentinel CEO, Stephen McDaniel to discuss some regulatory and compliance themes we’re seeing in the industry and talk more about our partnership. Stephen is an industry veteran in the F&I space, originally spending 13 years as regulatory counsel creating compliant F&I product programs as well as enacting legislation across the country regulating the product offering. In 2018 Stephen started F&I Sentinel to tackle some of the acute issues he found during his time practicing law.
Informed: Stephen, thanks for joining us. There has been a ton of recent news regarding regulation of GAP in the F&I product space. Can you give us some highlights of the developments in the last year?
Stephen: A prime example is what we saw happen in California on GAP waivers. There were two pieces of legislation that California enacted this year, signed into law by Governor Newsom – Assembly Bill 2311 and Senate Bill 1311. The impetus for those bills was what we saw in Colorado, another state that has been very active on GAP waivers. A lot of what we saw with those pieces of legislation is really more of a codification of things that were being borne out in litigation.
There’s been a lot of class action or individual actions with respect to GAP waivers and finance companies. As we continue to see these issues pop up, I think that we’ll see other state legislatures follow suit with trying to ensure that consumers are protected when they’re buying these products. While we understand the concerns that they are trying to address, we’ve taken a view on these products that there’s truly value here for a consumer if the products are sold correctly. As a result, things like Assembly Bill 2311 focused primarily on disclosure, cancellation and refund issues that continue to heat up when it comes to lenders.
Informed: Can you walk us through some of the recent developments with the FTC and CFPB? How are they impacting compliance and regulation for lenders in regard to F&I products?
Stephen: One of the things that we’re watching closely is the FTC and their notice of proposed rulemaking on what are known as junk fees or “add on” products. One of our concerns with respect to lenders is if you have the FTC defining quite a few practices in connection with F&I products as being unfair or deceptive, and the lender is advancing dollars on that particular product, could the CFPB potentially take the position that a lender is providing substantial assistance to a dealer commission of a UDAP.
And so, that’s something that we’re paying close attention to, even though the FTC rule is specifically focused on the dealerships and what they must do. I think it’s no secret that the CFPB seems to be in lockstep with the FTC with respect to these issues. So, from a legislation and rulemaking perspective, both at the state and federal level, we continue to see the headwinds being that there’s higher scrutiny being placed on these products.
Informed: How will a partnership with Informed allow us to bring the innovations your team has seen in the F&I space to more lenders leveraging the Informed platform?
Stephen: One of the reasons we’re excited about the relationship with Informed is it allows us to close what we call the “lifecycle” of an F&I product. Our solutions fit so well together because one of the things lenders struggle with is that they sometimes don’t know how to operationalize the use of our technology. Funding teams know that they have to review F&I product forms and some are biting the bullet and just doing that manually.
You can’t open an article in Auto Finance News and not see that it’s all about speed to funding these days. That’s where we see the Informed relationship coming into play — allowing lenders to instantaneously access our database of credentialed F&I product forms at the time of funding.
Because Informed sits within the origination workflow and helps the lender organize and classify the deal jackets, clear credits stips, etc, you’re in a unique position to be able to pull data from the F&I product forms, in addition to the loan documentation, and then ping our database which will tell the lender if it’s a regulatory-compliant F&I product. It completely removes the human element and allows a lender to increase the speed to decisioning a deal.
We have a huge database of over 44,000 F&I product forms that have been credentialed to ensure they’re not going to create regulatory issues for a lender or dealer. Informed has the technology and is in a position to enable a lender to seamlessly access our repository of compliant F&I forms without interrupting the funding workflow, so it’s a perfect fit for us. We’re excited about the opportunity to show lenders there’s a partner we have that can operationalize our F&I product solution, and by the way, Informed also does a quite a few other things outside of the solution I am talking about here that really helps streamline the funding process.
If you’d like to learn more about how Informed + F&I Sentinel can help you, contact us today.
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