For those of you who do indirect auto lending, do you have formal training programs for the dealerships you do business with? If so, how do you execute it?

What would you train them on and do you think they would care?

They need fair lending training whether they care or not.

I understand they need fair lending training but at the end of the day, the bank is responsible. Indirect lending is difficult at the end of the day, the dealer wants to move cars and create fees. Secondly, if the bank puts to much pressure on the dealer, the dealer will stop sending them deals.

Fair lending principals should be outlined in your dealer contracts. If you want them to have required training, put it as a condition in the contract. Actually performing and delivering the training to them just increases your risks exponentially if a problem arises.

My 2 cents.
Train them on bank policy, including pricing. What the bank allows, does not allow and will not tolerate.

Most indirect issues are discretionary pricing, or getting the highest rate they can. Unfortunately, credit is usually less of an issue than race/gender as protected class applicants have a tendency to accept what's offered rather than bargain for a better rate or terms. (Many years ago, mid 1990's, DOJ sued Chicago auto dealers for rate issues. White male, least, followed by black male, white female, with the highest black female.) DOJ claimed discrimination, auto dealers claimed better knowledge of prices and bargaining. Dealers lost.) Rates have been issues in many of the cases recently. I believe Nissan Credit in Texas had an issue by mismarking the credit grouping for black females, bumping them up 1 - 2 risk levels.

To come back to my question, I wasn't asking IF the dealers need training. I absolutely believe the bank has some responsibility for training dealers on various compliance issues.

Currently, we provide written communications in the form of newsletters and announcements on the dealer software systems, in addition to having a market representative who makes visits to the dealers and is supposed to reiterate the information included in the communications with them. I'm wondering if we should have a more formal plan, which might include online or in-person training devoted to consumer compliance issues.

(I am working on a fair lending risk assessment currently, and trying to decide if I should include this as a recommendation in my report).

Thank you rlcarey and Rocky P.

I don't believe that is the correct mindset. Your risk is buying paper that might exhibit evidence of discrimination on a prohibit basis (pricing, terms ,etc.). Your internal monitoring and analysis of the contracts that you perform should tell you whether or not you have a problem. What happens in the dealership prior to the contract landing on your desk is none of your concern. The more involvement you have with the dealers, the more you are involving the bank in their operations and increasing your risks. You care about the compliance of the contracts that you purchase - that is the extent of your concern.

We offer, but do not require, web-based and/or in-person training to the dealerships from whom we purchase paper. Very few take us up on the offer. The exception is a few mega-dealers have signed up for web-based training.

We also incorporate our expectations for fair lending in our contracts, and send reminders of our expectations twice a year. We also require dealers to certify that they have a fair lending policy.

If a dealer triggers our monitoring, we have an escalating process for lack of improvement that culminates in moving the dealer to flats or terminating the relationship.

Thanks, InFairness!