ConsumerFi Podcast: Preparing for Rough Water with Ignite Consulting's Steve Levine
Joel is joined by Ignite Consulting’s Chief Legal & Compliance Officer, Steve Levine, to discuss what’s in store on the compliance side with the new federal CFPB director nominee, how the current trend of ‘regulation by enforcement’ can cause serious challenges for lenders, and where to start when you feel like your compliance might not be what it should, especially if you’re a smaller company.
ConsumerFi is presented by Nortridge Software: Loan Software That Accelerates Change.
And special thanks to The National Automotive Finance Association: The only trade association exclusively serving the nonprime auto finance industry.
[00:00:20] Welcome to the pod today. I’m excited to have, an old friend. In crime, a compliance crime. That would be, uh, here with us today, Steve Levine. Steve is the chief legal officer with ignite consulting. Steve, welcome to the pod. Thanks for having
[00:00:36] Steve Levine: [00:00:36] me.
[00:00:37] Joel Kennedy: [00:00:37] And Steve has joined from, uh, from Dallas Fort worth.
[00:00:40] He was telling me, Steve, you know, for, for COVID and everything you’ve been, you’ve been, you’ve been able to make it into the office for, for a good duration here.
[00:00:48] Steve Levine: [00:00:48] Yeah. For about the first four months we were working from home like everybody else. And then towards the end of the summer started coming in and there’s not a lot of people downtown.
[00:00:57] So, so I feel like I’m being somewhat [00:01:00] safe, but still getting to be efficient. And coming in the office actually traveled a lot in January and it’s the first time I’ve traveled since the whole thing began. And that was a unique experience. Steve,
[00:01:13] Joel Kennedy: [00:01:13] tell, tell the folks who, who may not know just a little bit about your background and then.
[00:01:17] Um, maybe a little bit about the company background with ignite, um, so that they, I want to make sure people know the great value that you and your team deliver.
[00:01:26] Steve Levine: [00:01:26] Sure. Uh, so I’ve been a consumer finance lawyer for about 30 years. I have been in-house I have had my own practice. Uh, I’ve done it. Uh, several different ways spent about the first 10 years of my career.
[00:01:42] Litigating and trying cases. And a lot of them were car finance cases. And then kind of one day I had that epiphany and said, I wish I could stop my clients from getting sued and kind of made the jump to compliance before compliance was a buzzword and fashionable, [00:02:00] uh, you know, just started to teach best practices and some techniques and kind of layer in some training.
[00:02:05] And. Uh, just been lucky enough in my career to really be able to have an impact and, and stop people from getting sued. Uh, my company is ignite consulting partners, and we started this, uh, about four years ago because we thought there was a big need in consumer finance. There’s a lot of great law firms that do consumer finance.
[00:02:27] Uh, but, but a lot of times that the companies don’t know what to do with the information that the law firms have given them. So we kind of combined, uh, the, the legal points of knowledge with a lot of, uh, implementation background. Uh, several of the people here have worked, uh in-house for companies that they’ve been on the front line.
[00:02:47] They know where the sticking points are and they know how to pick the new promotion and, and get the companies to act on it, to protect their business.
[00:02:55] Joel Kennedy: [00:02:55] That’s great. So Steve w you and I were [00:03:00] talking and, and in terms of kind of what we wanted to get into today, um, we’re, we, we, we agree that there’s. A new wave of regulation coming.
[00:03:10] That’s being spawned by a couple of different factors. One, obviously the change in an administration, uh, that comes along with, uh, the immediate departure of the head of the CFPB. And so that was agreed to, we have that. We have state-based regulation as well. Right. That’s been, uh, further emboldened by, I think a lot of the social factors and with the pandemic, I think some regulators have seen some opportunities to take a stronger stand.
[00:03:37] Whether that works for them well or not. Um, I’ll let the people decide, but, uh, there’s also, obviously when you have that kind of wave of change, what comes next is a lot of these, uh, uh, litigation attorneys that are looking. For opportunities to expose these, uh, [00:04:00] cracks in the foundation and try to find a way in, and that’s kinda where you guys come in is, is to, is to help with that.
[00:04:07] Um, but you know, to start from let’s, let’s start with, let’s just start with the CFPB and the, and the, and the regulators, or even at the state level, Steve, you know, what are you seeing? How are you kind of interpreting things? I think, you know, I I’m, I’m a little bearish, I would say, based off what I’ve heard and seen so far, but we haven’t met the new director.
[00:04:27] We haven’t met the new director. We saw what the interim guy did. I don’t know, you know, how long that guy is going to be in place or if they approve this guy, what do you think?
[00:04:37] Steve Levine: [00:04:37] So here’s the thing. He hasn’t been approved yet. It hasn’t been confirmed by the, and the gentleman’s
[00:04:44] Joel Kennedy: [00:04:44] name is Chopra. Uh,
[00:04:47] Steve Levine: [00:04:47] yes. So w we actually know a lot about him, uh, because he was at the CFPB before, uh, he was very active in the student lending division.
[00:05:00] [00:05:00] Uh, he is not an attorney. I believe he he’s a Wharton MBA. Uh, it, he, from what I hear is very aggressive, uh, very, uh, an amort w with, uh, metrics and understanding, uh, that the numbers involved. If you read his dissent, Uh, he he’s been on the federal trade commission, uh, for several years now. And if you read his descents, uh, you know, one of his big issues at the FTC was, and of course, that, that has been, uh, under Republican control three to two.
[00:05:34] So, so he’s been writing a lot of the sense where the majority found, uh, corporate wrongdoing. Uh, but didn’t attach what he thought was a significant enough monetary penalty. Uh, and, and, and I encourage anybody that really wants to understand where he’s coming from, read some of those dissents and, and kind of see his acting out and looking at analysis and in his belief that that is the financial penalties, uh, that, that has to [00:06:00] be placed with wrongful conduct.
[00:06:02] So, so, you know, number one, I think we have that, uh, I think that Elizabeth Warren, uh, the, who hired him for the CFPB, uh, is a big proponent of his, I think she has a lot of clout right now in the Biden administration. Uh, and in, in the Senate. And a lot of what she’s been focusing on the past couple of years and not just consumer finance, but, but, but just, you know, banking and finance in general, but, but she’s is going to, uh, be very active, you know, right now I think there there’s a push to really take a look at the way that consumers have been treated, uh, during this crisis.
[00:06:43] And you look at how accounts have been collected, looking at how they can service look at the actions companies have taken. And I think that’s going to be a big early push of the CFPB and also Senator Warren, uh, Congresswoman waters, uh, head of the house financial services committee. So you [00:07:00] have that, you also have what, let’s not forget you have how Harris, his vice president, who was a pretty strong consumer proponents when she was attorney general of California.
[00:07:11] Uh, so, you know, she’s done slash not departments. Uh, she, she brings a lot to the table, too. You have a movement that’s been going on across the country for the past several years, uh, where there has been many CFPB, uh, being created, New Jersey, Pennsylvania, and cup, all the places, the notable one in the last six months has been California.
[00:07:31] Uh, and, and those have been, uh, facilitated to some degree, but by former director Cordray, Uh, he, he basically came in and helped, uh, build some of those, uh, agencies and, and a lot of the zealous consumer advocates that were with the CFPB under Cordray. When the leadership changed, they went and took similar positions at those state agencies.
[00:07:55] So, so you, you, you have a, almost a perfect storm where [00:08:00] there’s been a lot of, uh, circumstances
[00:08:02] Joel Kennedy: [00:08:02] it’s like pre infiltrating, knowing that that, well, not knowing, but it may be turning the tides in a way. You know, uh, potential director Chopra, I’ll call him. You mentioned that his dissents were calling out that he liked to see these bigger penalties.
[00:08:19] And this is something we saw with Cordray as well, where the penalties were massive. And there was this, uh, enforcement through regulation or regulation through enforcement not to get too. Philosophical on this, but why do, what is the moral ground? That one stands on to say that these financial penalties need to be massive because I, as a consumer, I put on my consumer hat and I say, okay, you got $2 billion from a very large banking institution.
[00:08:49] I know you have people that you feel need to be remunerated. Are you guys actually distributing that money? Is that going like, is that why? Because from all I see as a consumer, I see these massive [00:09:00] penalties. Consumers don’t really seem to be taking any steps forward during that kind of, uh, philosophy.
[00:09:06] Right. Um, I think it actually creates more tension, but like, I need to understand, like, am I out of step? Like, what is the philosophical reason why these penalties need to be big?
[00:09:18] Steve Levine: [00:09:18] So I think number one, it’s the punish the wrongdoing and it’s trade a deterrent effect for the entire industry. So for instance, Uh, last year, couple of years ago, San tan dare got hit by the CFPB, uh, with having to do with the way that they were collecting and servicing, uh, military accounts.
[00:09:38] And they, they happened temporary possessed, a lot of vehicles they shouldn’t have by law. Uh, those affected military members, consumers, uh, did get remediation, uh, And, and, and a lot of what the CFPB did under Drake, that there was renewed orientation, uh, to the individual consumer. And you see that at a state level to [00:10:00] where, uh, that they pushed that remediation, but, but bigger than the individual consumer, uh, it’s really a theory that, that we’ve got to stop the conduct.
[00:10:09] And how did, how do you stop the conduct? Uh, you make it so on appealing to them from a business point of view that they have to stop, uh, Well, let me share a quick story. A couple of years ago that there is a committee on the state bar of Texas. It’s the, the, basically a consumer, uh, committee, and it’s mostly made up of plaintiff’s lawyers, you know, people that Sue creditors and to try to balance it out and make it a little bit more fair.
[00:10:40] They invited a couple of industry attorneys to sit on this committee and I got to sit on the committee for a while. And, and, and it was really interesting to me to sit in the room with those folks. They are truly consumers, Alex, I’m not going to say advocates. I’m going to say zealots that they honestly believed as those Elizabeth Warren, by the way, [00:11:00] uh, that that profits are, are inherently evil.
[00:11:03] And that if you’re putting dollars in a company’s pocket, you’re necessarily taking dollars out of a consumer’s pocket. And, and, you know, I would bring up. All the challenges that businesses have to run the, the, you know, the, the risk losses, uh, the operational issues, you know, just all the expenses and not all companies make a ton of money.
[00:11:25] Uh, some companies just barely get by and some companies get out of business, but they don’t understand that. So,
[00:11:31] Joel Kennedy: [00:11:31] so military lending is, is important. I, I think if you, if you want to do it, you should do it right.
[00:11:39] Steve Levine: [00:11:39] Absolutely seen. And that’s been disturbing. There’ve been military lenders that have been hit by the CFP for not doing
[00:11:47] Joel Kennedy: [00:11:47] this is what I’m saying.
[00:11:48] Again, philosophical break here were these, the, the, the contingent you’re talking about believes that profits are inherently evil and, and that is the driver for bad actors, but you have USAID [00:12:00] that got in trouble for doing some things wrong with their military contingent as well. As far as I check.
[00:12:07] They’re they’re a member organization and they’re not driven by profit. So what would be the motive for them to it? There’s no profit motive. So I, I kind of break these it’s like, I break it down that way, but I do agree that there’s. If there are probably some bad actors, probably on the, I would call them in the smaller, smaller market sizes, right?
[00:12:30] Like smaller regional players that would be happy to just stay under the radar and not get caught. And basically think while we’re so small, we can just do whatever. Right. Just riding dirty. These are the bad actors that I think we’d all agree. Need to clean up their act. If you want to play, you gotta play by the rules.
[00:12:48] Um, but you know, to, to, to broad brush stroke, everybody in that, in that same vein I’ve, I’ve worked with a great many people and that’s the thing. I think it’s a, it’s a good voice that you bring. Cause I’ve worked with a great [00:13:00] many people who also share that consumer passion. They just happen to work from within
[00:13:04] Steve Levine: [00:13:04] look, I’m a consumer too.
[00:13:06] Uh, my, my family, uh, consumers, you know, we have friends or consumers. Uh, I am not anti-consumer, uh, I, I just think it at some point, the, the regulators, uh, and, and really the legislatures have to take a look at what they’re doing now. I’ve been doing this 30 years and I learn new things all the time. Yeah.
[00:13:25] I mean, on a weekly basis, not a daily basis, that this is a complicated business. And, and look, a lot of times those, those big companies, they have huge legal departments, huge compliance departments. And they still run a foul of the law because the laws are complicated and you’re asking for individuals to enforce them.
[00:13:43] Uh, and, and individuals are making decisions on a regular basis. And then those decisions, you know, become their process. Uh, and, and it’s not an intentional thing. It’s just a lot of times people don’t understand all the rules. Yeah. [00:14:00] Yeah, that’s what, it’s. One of the things that, that, uh, w we believe in at ignite is we try to tell you what the rules are.
[00:14:07] We try to train your people. And, and we kind of build in w we inherently know that we’ll do training, and we know within a couple of months, there’s going to be some backsliding. So, so then we, we do a little bit of audit, and then we do some more training because we want to see what message took, what message didn’t take.
[00:14:26] And, and I think that’s a really good way to do it because, you know, I, I don’t want to cast dispersions, but, but I think a lot of people are in love with the efficiency of online training or, Ooh, there’s a little test at the end and you check off, you know, five questions and you pass the test. Uh, and, and those tests are designed to be passed.
[00:14:47] Uh, they’re designed on not, not the challenge, uh, and, and people aren’t really getting an education that they need. Uh, so I, I really like, uh, Talking to people, having them ask questions, telling me about [00:15:00] their challenges and the situations and the facing and, and we kind of we’ve let them build the training.
[00:15:05] Joel Kennedy: [00:15:05] Yeah. When I, when I I’ve sat in on some national automotive finance association, kind of, uh, compliance, working groups, regional working groups, we’re never short on conversation. We always go the full limit. Nobody’s ever hurrying to get out to a meeting or get back home. Um, it’s, it’s fruitful conversation and it’s actionable.
[00:15:24] Hey, I have this particular issue with my loan package. Somebody told me that this doesn’t really fly. What do you guys think? You’ll get some honest answers. It’s it’s not, uh, it’s not anything you shouldn’t be talking about in a competitive environment. I mean, this is about everybody getting together and making sure that we understand the rules.
[00:15:44] Steve Levine: [00:15:44] Um, um, I’m much huge believer in that ignite. We put a lot of our own auto finance compliance conference every night. And, and one of the reasons that we do that, you know, we, we provide a lot of education, great speakers, everything like that. But [00:16:00] one of the big values, I think our various compliance people getting together, meeting, uh, partners in arms.
[00:16:09] Uh, developing their own network of people that they could call when they have questions, because let’s face it. A lot of times you don’t want to call the lawyer. You don’t want to call, uh, compliance people. You want to call somebody else that deals with your same issues on a day-to-day basis and have a Frank conversation.
[00:16:26] Joel Kennedy: [00:16:26] I did that quite a lot actually. And not just within compliance, I would do it within it. Um, I would find people interesting or I found them to be innovative or knowledgeable. They kind of possess these qualities that I, I found desirable and I made a conscious effort to cultivate relationships, but I knew that it was a give and take.
[00:16:45] Right. You know, you can’t just keep calling the same compliance guy for, for free information. You gotta, you gotta kinda. It’s a relationship. It’s a, it’s a big relationship thing and that’s, that’s always fun. But it’s talking about when relationships aren’t really, there would be on the [00:17:00] litigation side, Steve.
[00:17:00] So when we think about, we’ve got, we’re setting up this picture, we’re painting a picture for everybody right now. We’ve got the changes that the CFPB already in motion, we’ve got things happening at the state level prior to that. So we have basically a revisiting of, of Cordray’s, uh, people. If not, if not his complete philosophy and regime, um, on the litigation side.
[00:17:28] What have you been seeing, you know, pre COVID during the, the Trump administration? Uh, maybe even during, and then, and then what are you forecasting is going to come forward in terms of that kind of activity.
[00:17:42] Steve Levine: [00:17:42] So, so let me go back in time a little bit to answer your question. So, so the CFPB put out, uh, oral finance, uh, bulletin in 2012.
[00:17:51] Yeah, and they basically kind of gave the standard for best practices in the industry, you know, their perception of best practices and [00:18:00] the way the industry should be operated. There were a lot of plaintiff’s lawyers around the country that took that, and that became the basis of their legal theories.
[00:18:10] And, you know, with a lot of our smaller clients, I don’t worry about the CFPB walked in the door, not going to happen. I worry about the local lawyers. In their County, in their town that Sue creditors all the time and, you know, with that guidance. So a lot of people got educated as to, Hey, this, this is the way companies should be run.
[00:18:32] I’ll give you a good example. Uh, so it used to be that, you know, car dealers, finance companies got sued all the time because of repossessions gone bad. And there was pretty much a formula as to how those cases were going to be brought and how those cases were going to be. Then the CFPB came in with our guidance and talked about vendor management and all of a sudden those cases became a lot harder to settle.
[00:18:57] Like it became a lot more expensive because the lawyers [00:19:00] started harping on, well, do you have a contract with this vendor? What was your due diligence? What standards you holding them to, you know, basically gave them a laundry list of questions that they need to be asking. Those cases became a lot more powerful.
[00:19:12] Uh, I think we’re going to see a lot of that again and, and let me couple that with, so the virus hits and the plaintiff’s lawyers around the country. Uh, that, that practice and consumer law, uh, really have not been filing a lot of cases in the past year. Uh, the courts got back logged. A lot of courts were under stay at home orders.
[00:19:35] Uh, judges, uh, ordered their staffs home for, for an amount of time. And when they came back, there’s this huge backlog. So like I was talking to a plaintiff’s lawyer, uh, in my building a couple of weeks ago. Uh, he was telling me that, that he didn’t file a case for eight months.
[00:19:52] Joel Kennedy: [00:19:52] I believe it. So, wait, hold on.
[00:19:54] Are all, are, would you say a preponderance of these cases are all taken on contingency?
[00:20:00] [00:19:59] Steve Levine: [00:19:59] Uh, I wouldn’t say I wouldn’t say a preponderance. No, it really depends in my career. I defended a lot of cases that were taken on contingency, but I’d say just as many, uh, maybe, maybe the, the customer was able to pay a little bit upfront.
[00:20:17] Um, maybe they were getting help from, uh, legal aid association or someplace else. So, so a lot, but not all.
[00:20:27] Joel Kennedy: [00:20:27] Yeah, I can imagine during COVID it would be very difficult to get, um, A good jury. If it was a jury situation,
[00:20:35] Steve Levine: [00:20:35] I forget about a good juror jury. You’re not going to get to court. There are. So they’ve been so backlog, you know, because they had an advanced, a new way of doing business on the fly, you know, basically a zoom hearings and things like that.
[00:20:49] And, and, you know, a lot of really good trial lawyers. Uh, they want to be in front of the jury. They don’t want to be in front of a screen, but they actually want to be in front of the jury. So, [00:21:00] so like there’s one attorney who was telling me he started to file the best cases that he’s accumulated over the past eight months.
[00:21:07] He started to follow them now because he feels like by the time he gets through the initial discovery process, the courts are going to be opening up more. There’s going to be live proceedings and he thinks this is the good time. And that varies by state and County. Uh, some places are more backlog than others.
[00:21:24] My point is, so you’ve got this class of attorneys that, that just are, are pent up and they’ve yeah. To make revenue too. And then they’ve got to run their practices, uh, and they haven’t been able to really do that, do that effectively for the past year. So you have that coming at the same time, but you have all this regulation and all this energy about consumer protection.
[00:21:45] So I think there’s going to be a lot of energy. Uh, out there and, and it’s going to be incumbent upon the industry to keep up with all yeah,
[00:21:57] Joel Kennedy: [00:21:57] the, so I feel like we’ve [00:22:00] we’ve, if we haven’t already put the fear into people, you know, um, please rewind and listen again. Uh we’re. We’re kind of, yeah, I don’t
[00:22:08] Steve Levine: [00:22:08] mean to put the fear in people.
[00:22:09] I’m just, I’m just reading the tea leaves.
[00:22:12] Joel Kennedy: [00:22:12] No, I, I, I think we have to be very Frank about these things and it’s better to be honest and hug the monster. We’ve got a situation. Now it’s the meat of the conversation that I really wanted to get to Steve. So I’m, I’m, uh, uh, a luster, uh, or, you know, a sizable dealership or, you know, somebody with some market price or, or not.
[00:22:33] Right. I’m just, I’m hearing all this and I’m saying, okay, good Lord. Where do I start to get prepared to make sure that I’m safe? I
[00:22:44] Steve Levine: [00:22:44] think there was a couple of places where you have to start. Uh, but my observation over the past several years is that people got a little soft on compliance. Uh, maybe they repurpose some personnel, uh, maybe they put some business issues ahead of compliance.
[00:23:00] [00:22:59] Now’s the time to turn the attention back on compliance. Uh, I think you need to. Look at your written policies and procedures and make sure they actually match what your business is doing. And I don’t say that lightly because a lot of businesses have changed the way they were doing business because of the virus, uh, remote workforces, uh, reductions in staff, uh, change in job descriptions.
[00:23:22] So, so I think you’d have to get that all into gear and make sure that that all lines, uh, then I think you really need to have a demonstrable training program. Take a look at your company, take a look at the riskiest aspects of what you do and develop a training contents around it. If I am a small lender or dealer, uh, I want to have all my documents looked at all my origination documents, all my collection letters, you know, everything that has to say.
[00:23:54] I want to have that look that if I’m a bigger company, Uh, I can’t stress enough [00:24:00] how important I think it is for even medium-sized companies, larger companies to do risk assessments and a risk assessment. Sounds scary. It doesn’t have to be you basically. You’re looking at the various functions in your business and you’re trying to identify where you have risk and then what controls you have in place to protect yourself from that risk.
[00:24:20] And I think that is a great exercise for company to go through. You don’t want to have to do it all in a month or two. You can decide to spread it out over the year, but I think you really need to take that, look into your business and understand your business when that risk perspective, and then do something about it.
[00:24:39] Joel Kennedy: [00:24:39] You know, for, for that one, I have a particular passion. I want to tell a story. So when I had my auto finance company, we got to the point where we were really putting down the pedal to the metal and starting to originate more. And we were accumulating a portfolio with some trajectory, and we knew that we wanted to be on the front foot relative to compliance.
[00:24:59] And so I [00:25:00] actually engaged in audit, you know, uh, A group that does, uh, compliance and financial. I mean, I think about doing a financial audit, right? You have to be a company that has a certain level of sophistication in order to go from, you know, uh, just a review to an audit it’s very costly and it can be frustrating because you have people pointing out things that you just don’t feel from a risk assessment standpoint are really worth your time to, to improve a control.
[00:25:26] You may say I’m going to accept this risk, right. But the fact that you go through this exercise, To look at the controls. It’s, it’s such a great exercise because you’re going to end up exposing your system of record. Your system of record is a great place to apply controls or to apply automation to a lot of these things.
[00:25:46] You’ve got, um, your, your, how your people interact with that system. What type of information are they available to see? Uh, is there any there that they could do some kind of financial crime, right? There’s all these things you can do. [00:26:00] And that kind of view is super helpful when you describe, there’s kind of the formula that a lot of people, when you’re process compliance plan, do check, act something, some kind of rotation like that, like, you know, um, so I, I can’t, I can’t emphasize enough how much, I think the value of doing an audit there, because if you structure it right.
[00:26:29] You could phase it where you have the review of your current policies and procedures. Invariably, they’re going to request certain documents. Do you have a fair lending policy? Do you have a TCPA policy? Do you have any of these? And you may say, well, I mean, we try to comply with these things, but I don’t know that we have really have anything written down.
[00:26:49] Well, okay. Warning signs right there. Let’s let’s get something written down, but then. Are you actually executing on it with people with, with, with technology, where do those [00:27:00] things come together and then to go back and check and you do the training and you have this, this life cycle. And I don’t think, I don’t think you have to do it every year.
[00:27:10] I mean, you need to look at, Hey, what things changed between the last snapshot now, do we have a lot of employee turnover? Did we have a change in systems and process you name it? Um, That’s that’s kind of what I’ve seen, but I also realized that for the really, really small guys that may not be doable. So if for the, for the really, really small guys, Steve, the folks that say, you know what, I it’s like, I’m doing all the underwriting and my partner’s doing all the collections.
[00:27:40] We’re really small. We’re a startup. What would you, what would you say to somebody like that? Um, if they wanted to make sure that they’re starting off and growing right. Right with the right kind of policies, but right. Sized.
[00:27:53] Steve Levine: [00:27:53] Well, it’s still, you know, you’re, you’re taking the risk assessments and, and, and you’re [00:28:00] crystallizing it to that smaller company, but you’re still asking the same type of questions.
[00:28:04] If I do a risk assessment at a larger company, I will may well end up talking to 40 different people throughout that company about various things. Uh, if I’m dealing with, with a smaller shop, I may only talk to three or four people. Right. Uh, so, so, so it’s much a scale bail, but, but you’re still asking the same kind of questions and you still get it.
[00:28:24] It still comes down to what. Factors are creating risks. And what controls do you have in place to manage those spectrums? For instance, I was working with a company recently and I mean, they only have a couple of thousand accounts. It’s a smaller, uh, it’s a buy here, pay here dealer and related finance company.
[00:28:43] And yeah, I want to say in, in, in 15 hours we did a pretty stout risk assessment, you know, for a company that size and, and made a lot of progress to tightening them up. So, so it doesn’t have to be a, you know, a hundred, [00:29:00] 200 hour project, you know, somebody that size, it didn’t take a whole lot for us to ask the crucial questions, interview folks, look at the documentation and, you know, give them a write-up, which basically lays out the year ahead of them.
[00:29:12] Here’s how you’re going to tighten up. Yeah. And that
[00:29:14] Joel Kennedy: [00:29:14] is exactly what I did. So get my audit report and there will be like, you know, Uh, red, these things gotta change yellow. Hey, caution here. And then green is, these are aspirational. You know, you guys decide what you want to do. And that’s actually where most of the, the, the dialogue and back and forth went when I was arguing with the auditors in a constructive way saying, Hey, I have a difference of opinion on things.
[00:29:39] Um, but I use that as my template. And so each month when I did my management review, I would show. We had these 10 things listed. We knocked off this one or this too, and I’m working on this third one and this will be done in the next two months. You know, it’s a little longer in duration, but it was a great way to continue that plan, do check act.
[00:29:58] And I would. I would find it [00:30:00] really hard to believe that if a regulator saw that this type of discipline had been laid down to question my intention. I mean, that is not just a, that is not just a, Hey, I bought, I’ve got a buddy who has a bunch of compliance materials and policies and procedures. And I just, I took him out to dinner and he gave me the PDFs.
[00:30:17] I mean that, that’s, that’s a joke. That’s so important.
[00:30:20] Steve Levine: [00:30:20] What you just said that the monster double compliance. And then I always tell people when I go back to my days, Uh, during litigation that doing the fence work, you’ve got to give me the ability to tell a story. What am I going to tell the judge and the jury or the regulator, you know, am I going to be able to show them your training materials?
[00:30:40] I’m going to be able to be able to show them your schedule, your documentation, all the things that you’re doing to try to do business the right way. Uh, if I could show them that, that, that I could argue that that whatever happened, it was the result of a misunderstanding and, and, you know, there shouldn’t be damages.
[00:30:57] There, there shouldn’t be a [00:31:00] big number attached to that conduct. If I’ve got nothing. And the plaintiff has just welling away. You know, you have, you, haven’t invested in compliance. You don’t have anything in writing. You don’t do any tricks. You know, it just sets that a plaintiff’s lawyer up to go on a roll and he’s playing the lottery at that point.
[00:31:18] Joel Kennedy: [00:31:18] Yeah. And fortunately for me, I’ve not had to spend too much time in lit, um, uh, at all. Uh, you’re you’re alive while you play, you try to, I mean, this is what we’re, this is what a lot of us in compliance have to sell internally is pay me now or pay me later. But either way, you’re going to pay me. You might as well just pay me now and not look like a, like a Jobrani and, and show a poor in court.
[00:31:44] You know, like these things are painful, you know, you never really see the leadership or the board gets quite so pissed off when. All the dirty laundry is exposed and you’ve been telling a month in and month out that everything’s great. Well, if you want to, [00:32:00] I like a better insurance policy than that, you know, I I’d rather hedge that bet.
[00:32:05] Steve Levine: [00:32:05] You want to bring a company’s progress to a grinding halt, uh, get them tied up the litigation to where people are having to take time off to do depositions and prepare depositions. Meet with the lawyers, uh, produce reams of documents. Yeah, it’s really hard to be an official around company when you’re spending a lot of time doing that.
[00:32:25] Most companies don’t have the resources to dedicate to that. Yeah.
[00:32:31] Joel Kennedy: [00:32:31] I, I think it’s, I think it’s great to keep an eye on the forecast as to what’s coming. Um, thanks for sharing your perspective. And, you know, to bring it together with, with the preparation side, you know, I’m just going to echo what you said and I’ll, I’ll, I’ll let you have the last word to make sure that I don’t butcher this, but, you know, look at your, you know, there’s the three steps that you laid out.
[00:32:54] I really liked. So the first one has to do with. Taking an inventory of what you have looking [00:33:00] at your policies and procedures, uh, everything that impacts the employee and the customer, you know, so things that kind of cover both of those number two would be training. Some kind of training program that to me also in first there’s some, there’s some auditing, right.
[00:33:16] You’re kind of taking a peak at stuff. And then you have a bit of a document or policy review, and you mentioned a risk assessment, you know, and that, that, that may be kind of the overarching, um, kind of, kind of a thing where you kind of initially take that, that audit based look to say, where is, uh, where’s the heat?
[00:33:33] Where do we really want to start and focus? Um, I’ll let you have the last word on, on getting prepared there.
[00:33:40] Steve Levine: [00:33:40] Yeah, no, I think you, you laid it out. Great. So you take those steps. I don’t care whether you’re a big company or a small company. The conversation’s pretty much the same, you know, that the levels of depth that we have to go into change, but, but the conversation’s pretty much the same.
[00:33:56] And what you’re trying to do is you’re trying to identify [00:34:00] those risk weaknesses that you have. And you’re trying to recognize how do I build strong controls. And, and, and a lot of your controls have to do with your people, giving them the knowledge, uh, making them understand the role that they play in protecting your business.
[00:34:15] And I think if you do those things, then you’re setting yourself up nice. Uh, the next several years are going to be challenging. There is going to be some really scary headlines. Uh, you’re going to be a more active, say a CFPB FTC, uh, the state agencies. We know that’s coming. But you don’t have to lose sleep about it.
[00:34:35] And if you’re taking care of your house, if you’re doing the type of things that we’ve talked about, uh, that then you’re going to be able to feel pretty good that you’re going to be able to get through it because you’re taking those a multiple steps.
[00:34:48] Joel Kennedy: [00:34:48] I think if people take one thing away from the, from the pot, and I know I said, it lets you have the last word and I’m going to let you do it.
[00:34:54] But you said something that really, that really kind of struck me and it was, um, [00:35:00] Oh God. And then I do, I do that thing to try to be nice. And then I, and then I, my brain, my brain gets all locked up. Um, no, but I, I do think, I do think compliance is, is an important feature and work on it now. Um, the worst is, well, here’s what I was, I, it just came to me.
[00:35:18] I can derive fear from a couple of different places. If I’m deriving fear from a reality point of view that. I know that my policies and procedures are not right. I know that we’re doing things incorrectly. That’s far different than just having fear about not knowing the state of affairs and whether you would fare well within some kind of an audit or a regulator looking at you.
[00:35:44] That type of fear to me is. Ridiculous. Like you got to get that fear of the unknown out of the way and just deal with the realities. Um, and I think that’s gonna help a lot of people to make sure that as they move into these, these more bearish times, that they’re, that [00:36:00] they’re well situated.
[00:36:02] Steve Levine: [00:36:02] I encourage everybody, you know, don’t wait, I hear a lot about, you know, we’re gonna get to it next quarter and then next year don’t wait.
[00:36:12] Take take a look at all this stuff. See what you have to do. Come up with a reasonable plan based on your resources. Uh, A reasonable plan to accomplish some things, you know, this year, so that you’re in a better position. Yeah. I think, you know, people got lacks the last couple of years, uh, and, and now it’s time to tighten up and protect your business.
[00:36:32] You know, everybody does listen to, this has a business that the value that we want to protect, you know, jobs, depending on protecting that business. Uh, so you got to do the right thing and take those steps if you do that. And you’ll be fine. Yeah.
[00:36:46] Joel Kennedy: [00:36:46] Well, folks, this has been Steve from. Ignite consulting.
[00:36:50] Steve. If, if folks want to get ahold of you and the team, maybe they want to, uh, uh, kick around some ideas. What’s the best way for folks to get it.
[00:36:59] Steve Levine: [00:36:59] Just shoot an [00:37:00] email to firstname.lastname@example.org or go to our website, a website ignite cp.com. We do monthly training webinars. Uh, that they’re free. Uh, just shoot us an email and we’ll get you on that list.
[00:37:15] Like I mentioned, we’ve got a auto finance compliance conference in may that if you practice compliance in that area, that you really want to attend, uh, w we take the, the training and protecting of your businesses very seriously. So just reach out to us. Great.
[00:37:32] Joel Kennedy: [00:37:32] And I have to thank you guys. You guys have been fantastic partners with the national automotive finance association, particularly last year in years prior.
[00:37:40] So, so thanks for,
[00:37:42] Steve Levine: [00:37:42] we are huge believers in NAF and everything that it accomplishes.
[00:37:47] Joel Kennedy: [00:37:47] Outstanding. Well, folks it’s been great. Uh, Steve Levine, he’s the chief legal officer with ignite consulting.
[00:37:54] Steve Levine: [00:37:54] Thanks for having me. The consumer
[00:37:56] Joel Kennedy: [00:37:56] five podcast has been brought to you by Northbridge loan software. That [00:38:00] accelerates change.
[00:38:02] We’d also like to thank the national automotive finance association, the only trade association, exclusively serving the non-prime auto financing industry.
[00:38:16] Steve Levine: [00:38:16] Um,