A new survey found financial services and indirect lending professionals saying the regulatory landscape they work in has fundamentally changed.
Carleton, a provider of compliant loan calculation and disclosure solutions, said the survey revealed a widespread compliance confidence crisis. The service provider said a dramatic shift toward state-level regulatory oversight primarily drove the confidence crisis.
Carleton surveyed over 2,000 financial services and automotive lending professionals. Most auto lending professionals surveyed were indirect or captive lenders.
The survey found that 67% of professionals said they were not confident, or only slightly confident, in their organization’s ability to survive a multi-state examination.
Tim Yalich, Carleton’s vice president of business development, said the data showed that lending professionals face more than just regulatory changes. He said professionals require systems precise enough to catch errors before regulators do.
“When nearly three-quarters of lenders have already had to reimburse borrowers for APR miscalculations,” Yalich said, “and the majority are still relying on manual validation, the industry has a structural problem that demands a structural solution.”
Nearly three-quarters of respondents (73%) said state regulators have been more active than their federal counterparts over the last 24 months. Nearly nine in 10 respondents (89%) said regulatory changes requiring system or calculation updates occur frequently or almost always.
Errors regarding loans’ annual percentage rate (APR) were widespread. Nearly three-quarters of respondents (72%) reported having at least one loan requiring APR reimbursement, per regulations under the Truth in Lending Act (TILA), in the past 12 months. The most commonly cited drivers of errors were incorrect application of interest rates, improper calculations or APR disclosures, miscalculated fees and add-on products, and applying complex of tiered rates structures and variable payment schedules.
Carleton said the survey indicated strong demand for tools that reduce errors and close compliance gaps. Top improvements cited included more accurate and reliable calculation software, improved audit readiness and reporting, better real-time monitoring for compliance violations and stronger system integration across lending platforms.
