Ralph Petta, president and chief executive of the Equipment Leasing and Finance Association, who is preparing for retirement after 36 years in the industry, forecasted more financing facilitating equipment transactions.
“Companies all over the world need productive assets to operate their businesses, and the equipment finance industry finances about half of all business investment in equipment,” he told Equipment Finance News. “You’re looking at half or two-thirds of all the investment in business equipment being financed. That’s going to continue.”
As Petta prepares for retirement, he is reflective on industry changes during his years as a leader, as well as the industry’s outlook with regard to government policy, macroeconomics, technology, and diversity, equity and inclusion.
The Equipment Leasing and Finance Association (ELFA), founded in 1961, has more than 575 members organizations. Petta served as vice president of research and information services in April 1987, and spent 36 years with the organization, including the last eight years as the president and CEO. His official last day is Dec. 31.
Petta sat down with EFN to discuss the industry’s past, present and future. What follows is an edited version of the conversation.
Equipment Finance News: As your time leading the ELFA comes to an end, what’s your evaluation of industry at this moment?
Ralph Petta: The industry is healthy and strong. The equipment finance industry goes in cycles, and we’re in one of those cycles.
In terms of marketplace players, there’s a bit of stress in the bank sector with some of the bank failures last summer. It’s created a liquidity issue that’s being felt by some of the members of the association. It’s created uncertainty about whether, and to what extent, bank leasing and finance companies might be challenged. In general, our statistics show that the industry is healthy as originations are growing every month.
Once this cycle, with some of the challenges that banks are feeling, subsides, there’s no reason to believe that the industry won’t continue to succeed and grow. What my time in the industry has taught me is that companies always need equipment. They’re always going to need productive assets to operate their businesses.
Whether it’s technology equipment, rail, heavy iron, agricultural equipment, office equipment or food service, companies are going to need equipment. If that’s the case, then our members are going to do well because they’re the ones that are financing most of this equipment.
EFN: How has the industry changed since you took over leadership of ELFA?
Ralph Petta: One is technology. There’s this huge emphasis on technology, the role of technology, its increasing emphasis on how companies do business, and whether it can make their business operations more efficient and more effective in delivering products.
In the last eight to 10 years, there have been huge strides in assets, technology and AI. You can’t pick up a newspaper or read a news article or trade publication without a reference to artificial intelligence. Leasing and finance companies are no exception. They’re still trying to figure out how we can leverage AI to make our businesses more successful, so technology is a big change agent.
The other thing is bringing more diversity to the industry. Our board of directors and staff are trying to make everything that the association does more inclusive. We can impact what we do as the leading association representing the equipment finance industry. We’re hoping that will rub off and have a positive impact on companies in our space, and vice versa.
EFN: Leigh Lytle will be your successor. How has the transition unfolded and what do you see coming from her leadership?
Ralph Petta: It’s been a very exhaustive process. Leigh has been in the financial services world, the fintech world, and she did some time at the Federal Reserve in San Francisco, so she has policy chops. She has experience in monetary policy, data and statistics, and she’s a well-rounded person in terms of her technical background.
A lot of these associations in D.C. hire somebody who knows association management, but they may not know much about the subject matter represented by that industry trade association. Leigh knows a little about both. She has the financial services and financial technology expertise, and she’s held various roles in companies with large staffs.
At ELFA, she’s going to have a learning curve because she’s coming from the outside, she doesn’t know the nuances of the equipment finance and leasing industry, and she doesn’t know ELFA’s members well, but that’s going to take time. I feel really good that she’ll be a good leader and that the search committee and our board really made a good strong selection.
EFN: Section 1071 of the Dodd-Frank Act was a top advocacy priority for ELFA during the past year. How important was the nationwide injunction to those efforts?
Ralph Petta: We’re not finished with the issue. We’ve gotten a positive development in terms of the federal district court allowing equipment finance companies and the members of ELFA to be included in the injunction against enforcing 1071 regulations, but that’s a temporary stay, and will then be adjudicated further after the Supreme Court rules in the spring or summer on the underlying constitutionality of the Consumer Financial Protection Bureau (CFPB). That might be one of the things that the Supreme Court opines on, which may have a big impact on the CFPB and 1071. We’re thinking beyond that.
The odds are that 1071 is not going to go away, and we’re going to be dealing with 1071 even after the Supreme Court rules. It’s been more than 10 years that we’ve been at this with 1071. We have worked with the CFPB, we have sent comment letters to them, we’ve met with them, and we have had members of our organization participate in various forums sponsored by the CFPB on 1071.
We’ve made many proposed revisions to 1071. A few of them the CFPB has accepted, some they have not. We still think the rule is onerous to anybody who offers credit, whether it’s an equipment finance company or a hardware store. The record-keeping is going to be extremely burdensome, and we don’t think that’s good for business or for consumers.
[Editor’s Note: Section 1071 of the Dodd-Frank Act deals with financial institutions being required to collect and report small business lending, including equipment financing, business and demographic data to the CFPB.]
EFN: What does the future of ELFA and the equipment finance industry look like, and what role do you see yourself playing?
Ralph Petta: I won’t be playing a role in it. At the end of this month, I am finished, and some people have asked me about consulting or joining another organization, and my answer is the same: I don’t plan to do that at all. I’m going to take a breather.
I have music that I want to get into and get better at playing the keyboard, so that’s what I’m going to be involved in. I also want to see if I can lower my golf score. I’m going to do some volunteering, as well catch up on some reading. I’m going to be pretty busy, as well as traveling with my wife as she loves to travel.
The industry itself has a bright future. It is the most adaptable, resilient industry that one can imagine. It’s like a baseball player, when the pitcher throws a curveball that is down in the dirt, and the batter is so good that he digs it out and hits a double. That’s the industry.