The Recreation Vehicle Industry Association commissioned an Economic Impact Study on the RV industry, released on June 7, 2016. The study found that the RV industry contributes about $49.7 billion in economic output or 0.28 percent of the Gross Domestic Product. Through its production and distribution linkages, the industry impacts firms in 426 of the 440 sectors of the United States economy.
Nationwide, the industry is responsible for 216,170 jobs, both directly and inderectly, creating an economic impact of $37.5 billion. The full study results, along with each individual state and congressional district's economic impact is available on the website by clicking here .
Tue Nov 21, 2017
Author: Jeff Wyatt
The following column is by DLR Financial Owner Jeff Wyatt, about the recent changes to the leadership of the Consumer Financial Protection Bureau and what the new direction could mean going forward to members of the RV industry.
The recent resignation of Richard Cordray as the director of the Consumer Financial Protection Bureau (CFPB) signals a significant change in the direction and appetite of the regulatory bureau.
Cordray was at the center of the highly criticized agency formed in 2010 from the Dodd-Frank reform which stemmed from the financial crisis of 2007-08. The agency was designed to be independent and to protect consumers, but many times acted outside of its authority and imposed fines on banks that were already regulated by the Federal Trade Commission.
The impact on the F&I industry for RV dealers across the country will be a shift back to “pro” business instead of “pro” fines and legislation aimed at the major lenders. Looking back, too much of its previous focus was on the publicity it gained by punishing banks for trivial offenses. The bureau fined multiple banks for several million dollars in fines for alleged violations related to disparate impact. This approach assumed if one class of minority borrower, based on a hugely flawed proxy utilizing last name and zip code, paid a fraction of a percent more than non-minorities, then there is indirect discrimination.
The bureau used this tactic to impose its will without setting law. It had no jurisdiction to set law over lenders in this arena, so it chose to “bully” and fine banks even with no proof of actual or intentional discrimination. In addition, the bulk of the fines imposed and collected were retained by the CFPB and not distributed back to the people they were supposedly protecting.
To avoid potential fines, the only choice large dealers, lenders and service companies had was to adopt National Automotive Dealers Association’s (NADA) Fair Credit Compliance program on how to deviate from standard rate markups or monitor the results across the protected classes. The latter posed serious problems for all parties. The bureau either did not think this effect through or did not care that it left a problem without a solution. For example, If the rollup of your lending efforts had one protected class paying more than another over time, now what? Do you then start looking at race and charging everyone else a higher rate to level the playing field, or instruct your staff and partners to start discounting loans for a specific class of people? That’s ridiculous and the opposite of what was envisioned for protecting consumers in the first place.
The reason for the witch hunt on discretion in the auto world was that the director was in heavy pursuit of imposing flat rate markups. The RV industry usually lags behind the auto industry, but if lenders impose flats there, it is only a matter of time before they adapt the RV space. Risk-based pricing was not under attack, just the discretionary profit margin that makes the entire process work. It sounds like a huge win for consumers and adds fuel to the CFPB in creating additional reliance on them as regulators. Several studies proved that with discretionary markups, the end result to consumers within a free market is lower rates than if flats were imposed.
Are there areas that need regulation and improvement? Yes, but this is not one of them and we are all better off with common sense regulations. There are plans for bi-partisan direction from this bureau going forward which should be welcomed. If the bureau replaces Cordray with a director that focuses on real and direct violations of law and unethical practices, we can all get behind that and support regulations that we can see and adhere to.
The final impact with new leadership in the bureau should be to see things from both sides of the aisle and understand that capitalism usually produces competitive results. Consider the impact to the business, the economy and the consumer in no particular order and all parties will move forward. Flat fees already exist in certain areas but the push to eliminate varying profit margins and discretion has taken a significant hit and we can take a breath and get back to placing a competitive loan and turning a fair profit.
Jeff Wyatt has been the owner of DLR Financial since February 2017. Prior to that, he was the Chief Financial Officer of Priority One Financial Services from January 2009 until January 2017.