The Auto Finance 2025 Playbook: Compliance, Risk & Modernization

Abstract: This article outlines key challenges and opportunities for the automotive lending industry in the year ahead, highlighting issues like platform modernization, fraud prevention, regulatory changes, and consumer protection. A major focus is the modernization of dealership platforms to streamline operations and enhance transparency. Key regulatory challenges include the proposed amendments to Ontario’s Repair and Storage Liens Act (RSLA) and stricter consumer protection laws in Ontario, such as the Better for Consumers, Better for Businesses Act. The industry must also combat rising fraud, strengthen anti-money laundering efforts, and adjust to changes in the maximum allowable interest rate. Collaboration across all stakeholders—lenders, dealerships, and policymakers—is crucial for tackling these issues and ensuring a transparent, innovative, and resilient automotive finance sector.

For lenders, dealerships, and policymakers, 2025 will demand adaptive strategies and unified action to ensure a resilient and thriving industry. There are a number of crucial issues that we need to address this year including —platform modernization, amendments to the Repair and Storage Liens Act (RSLA), the fight against fraud, and evolving consumer protection laws across Canada—stand out as defining issues for the year.

Modernization of Dealership Platforms

In an industry driven by efficiency and transparency, the modernization of dealership platforms has emerged as a cornerstone for success. The CLA ecosystem is working to deliver next-generation technologies, like the innovative frameworks outlined in the Canadian Lenders Association’s (CLA) report, “A Vision for a Next-Generation Dealership Platform.”

These platforms promise to revolutionize the automotive lending experience by integrating real-time credit assessments, fraud detection mechanisms, and streamlined workflows. For lenders, these updates translate to enhanced operational clarity; for consumers, they ensure smoother transactions and greater transparency. The onus is now on stakeholders to champion these tools, closing the gap between legacy systems and the digital-first expectations of today’s borrowers.

Quebec’s Bill 72 presents new regulatory hurdles for dealership platforms. The requirement for paper contracts by default, restrictions on credit rate and fee increases, and expanded cancellation rights for consumers may impact how digital platforms operate in the province. While electronic contracts remain possible, lenders and dealerships must obtain explicit consumer consent, ensure contracts are fully disclosed without hyperlinks, and deliver agreements in a retention-friendly format. These new rules underscore the growing importance of digital compliance in the dealership space.

Reforming the RSLA: Toward Clarity

The CLA has taken an active role in responding to the proposed amendments to Ontario’s Repair and Storage Liens Act (RSLA). The Automotive Financing subcommittee has advocated for a distinction between essential and cosmetic car repairs, aiming to prevent abuse of lien claims. Essential repairs, such as engine or brake fixes, would rightfully take priority, while cosmetic changes like custom paint jobs would be excluded.

The current RSLA framework remains fraught with ambiguity, particularly around lien priority in repossession cases. Proposed reforms also include mandatory transparency for lien registrations and consistent timelines for storage charges, reducing lender liabilities and promoting fairness. Policymakers must now create a balanced, efficient system that safeguards creditors without stifling consumer access to automotive financing.

To review the CLA’s proposed changes to the RSLA, please refer to our legislative amendment recommendations here

Combating Fraud: A Shared Opportunity

Fraud within the automotive financing space has reached alarming levels, with a 54% year-over-year spike in fraudulent activities reported in 2024. This crisis extends beyond mere financial losses, revealing vulnerabilities in governance and compliance across dealerships and lenders. Fraud schemes involving synthetic identities and falsified income statements are particularly prevalent, demanding an urgent response.

To address this, lenders and dealerships must embrace collaborative anti-fraud frameworks. Enhanced identity verification protocols and AI-powered fraud detection systems are vital, but so is the creation of centralized databases to track serial fraudsters. Fraud is not a singular entity’s challenge; it is a collective threat, and its resolution requires the same collective effort. This coming year, the CLA is committed to working with its members to develop longterm solutions.

Navigating the Consumer Protection Landscape in Ontario

The proposed “Better for Consumers, Better for Businesses Act” (Bill 142) represents the first major update to Ontario’s Consumer Protection Act in over 20 years. This overhaul introduces stricter rules on contract amendments, expands consumer rights, and establishes new regulations for auto leases, all of which will impact lenders operating in the province.

For auto lenders, the most significant changes include:

• Stricter contract amendment rules, making any modifications or renewals voidable if not conducted according to forthcoming regulations. Lenders must closely monitor these changes to ensure compliance.
• Expanded consumer rights, allowing borrowers to rescind contracts up to one year after signing or after an unfair practice occurs, creating new risks for lenders regarding contract enforceability.
• New regulations for vehicle leases, introducing a category of purchase-cost-plus leases (PCPLs) that require a structured buyout option, prepayment rights, and a mandatory cooling-off period. These changes will significantly impact how lenders structure auto leases.

Adapting to these changes demands more than reactive compliance. Forward-thinking lenders will seize this as an opportunity to strengthen trust with borrowers by embedding consumer-centric policies within their operations. Transparent practices and proactive engagement with regulatory bodies will be the hallmarks of lenders who lead in this new era.

Strengthening Anti-Money Laundering Measures

On November 3, 2024, the Regulatory Impact Analysis Statement proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), designating financing and leasing entities as reporting entities under Canada’s AML/ATF regime. This includes obligations for transactions involving business-purpose financing, consumer automobiles, and goods valued over $100,000, which pose higher money laundering risks. Excluded from these rules are low-value consumer products like rent-to-own furniture and electronics.

For lenders, this marks a significant expansion of compliance requirements, necessitating robust transaction monitoring systems, thorough training for staff, and enhanced record-keeping. Meeting these standards will not only ensure regulatory compliance but also reinforce the integrity of the automotive financing ecosystem.

Quebec’s Bill 72 reinforces these trends at the provincial level by tightening regulations around electronic contracts and unauthorized account use. Lenders must now bolster compliance frameworks to meet these expanded reporting requirements while continuing to streamline operations.

CLA: Recommendations on Proposed Amendments to the PCMLTFA for the Financing and Leasing Sector

Lowering the Maximum Allowable Rate of Interest

Effective January 1, 2025, the maximum allowable criminal interest rate has been reduced from an Effective Annual Rate (EAR) of 60% to an Annual Percentage Rate (APR) of 35%. While the CLA acknowledges the intent behind this change—to protect consumers from predatory lending practices—it has consistently warned of unintended consequences.

Significantly lower rates may lead lenders to reject a higher proportion of borrowers, particularly those with non-prime credit profiles. The CLA has called for member lenders to provide data on borrower rejection rates since the implementation of the new cap to demonstrate the policy’s practical impact. Policymakers must tread carefully, ensuring that well-intentioned reforms do not inadvertently restrict credit access for the consumers who need it most.

Resources:
1. CLA | OACP Report on the Rise of Illegal Lending
2. CLA | EY Economic Impact Report 
3. CLA: The ABCs of APRs https://www.canadianlenders.org/apr-whitepaper/

Working Together

The automotive lending sector cannot succeed in silos. Technology, regulation, governance, and consumer trust are deeply interwoven, and addressing one without regard for the others is insufficient. The challenges—and opportunities—ahead call for holistic, inclusive strategies that empower lenders, support dealerships, and protect consumers.

In 2025, the Canadian automotive financing community must move forward with a shared commitment to innovation and integrity. In doing so, it will not only overcome the obstacles before it but also set the standard for a robust, transparent, and equitable future.

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