WASHINGTON, D.C. — In what the compliance counsel from
Dealertrack Technologies cautioned might be coming, an online report earlier
this week said the Consumer Financial Protection Bureau has told at least four
banks that it may sue them over vehicle loans and interest-rate markups by
dealers that appear discriminatory, according to three people familiar with the
matter.

At least four banks received letters from the CFPB last week,
giving those institutions 15 days to provide an explanation, the sources told
Bloomberg BusinessWeek. The individuals asked not to be identified because the
plans aren't public.

The letters indicate the bureau believes the banks may have
violated the Equal Credit Opportunity Act, a 1974 law that bars discrimination
in lending.

Bloomberg noted auto lending has been an area of growing
revenue for banks. As the economy has improved, new loan originations have been
on the rise, reaching $85.8 billion in the third quarter of 2012, according to
the Federal Reserve.

The report quoted CFPB director Richard Cordray from a
conference call with credit unions on Feb. 5 saying. "Auto lending is within
our jurisdiction."

Without referencing any enforcement plans, Cordray added, "We
are examining institutions around auto lending just as we are looking at them
on mortgage, credit cards, student loans."

The National Automobile Dealers Association responded to the
Bloomberg report by issuing a strong statement about the value dealerships
bring to the auto financing market.

"Dealers are committed to ensuring that all categories of
consumers are protected and treated fairly. And, as NADA demonstrated during
the FTC Roundtable process, dealer-assisted financing provides overwhelming
consumer benefits in the marketplace today, including access to affordable
credit for millions of Americans who do not have traditional banking
relationships," NADA officials said.

"It is essential to note that the rumored allegations
referenced in the article do not involve intentional discrimination in auto
finance, but instead are based on unintentional (and unproven) conduct under
the disputed ‘disparate impact' theory of liability," they continued. "This
theory, which bases findings of discrimination solely on an after-the-fact
analysis of financing rates offered to consumers, requires a highly
sophisticated statistical methodology which fully accounts for the wide variety
of factors that affect those rates.

"However, the report contains no indication as to the nature
of any specific findings in this regard by the CFPB, the specific statistical
methodology it may have relied upon or the extent to which that methodology has
been subject to appropriate and vigorous third party review," NADA went on to
say.

During a webinar Dealertrack Technologies conducted last
month, compliance counsel Randy Henrick hinted a development like what
Bloomberg reported might be in the regulatory pipeline.

"There is a new philosophy in Washington on how to regulate
auto dealers," Henrick said. "It really comes from the CFPB philosophy of
regulation. That is not to write rules but to bring enforcement action. The
enforcement action in effect becomes the rules. You may not know what you're
doing is deceptive, unfair or abusive. But they'll file an action against you
and when that gets publicized, that in effect becomes the rule."

Nick Zulovich can be reached at nzulovich@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.