Regulators Want to Examine Your Historical GAP Waiver Refunds. Are you Ready?

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Regulators have begun serious examinations over how lenders have managed GAP waiver financing and their associated refunds for accounts that have terminated early. Such examinations have resulted in serious financial penalties for some financial institutions. One such example is Wells Fargo being ordered to pay $3.7B by the CFPB for violations across several product lines, including specific mention of failing to provide GAP waiver refunds to consumers. While the CFPB has expanded their efforts toward greater regulation of the automotive F&I product space, this targeted pursuit of verifying whether a lender appropriately issued GAP waiver refunds is unprecedented.

Managing and appropriately tracking GAP waiver refunds requires trained employees, a traceable and repeatable process, and most crucially, the ability to expediently exchange complex sets of data between the multiple parties involved in the transaction. This last requirement involves not only having established communication channels, but also the relationships in place with F&I product companies, dealerships, and the technology providers who allow for efficient data transfer between all parties.

Most lenders today struggle with ensuring they have the systems and technical expertise required to achieve compliance excellence for F&I products financed in their loan portfolio. As regulators seek to understand how lenders have attempted to ensure fair treatment of consumers who financed F&I products with them, most lenders are looking for support in preparing appropriately and gaining confidence in their compliance practices.

F&I Sentinel is currently helping lenders do exactly that. While we have products that can help ensure that compliance and regulatory standards for F&I products are met moving forward, F&I Sentinel also provides the technology and support to allow lenders to complete large-scale historical look-backs on GAP waivers they have financed in recent years. While these measures are first meant to inform the lender, they are crucial to demonstrating to the CFPB a lender’s focus on meeting all compliance and regulatory requirements, and in seeking to rectify any lapses in execution around refunding GAP waiver amounts due a consumer.

If you’re involved in automotive finance at your financial institution and recognize that aftermarket product compliance is a priority for regulators, please get in touch with the team here at F&I Sentinel.

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