WASHINGTON, D.C. — Nearly simultaneously as the director of
the Consumer Financial Protection Bureau reportedly responded to a series of
policy questions from the House Democrats, lawmakers from the other side of the
aisle fired a list of inquiries about how the agency intends to regulate auto
lending.

A total of 35 Republicans led by Rep. Spencer Bachus,
chairman emeritus of the House Financial Services Committee, asked for clarity
about the concept of disparate impact, the legal theory the CFPB is using to
determine if dealers are involved in discriminatory lending practices
associated with vehicle financing. Bachus made his points in light of the CFPB
issuing its guidance for indirect auto lending back in March.

"It is highly concerning that the agency the agency is
issuing such significant new directives without affording the public a proper
opportunity to comment on its methodology and analysis for determining whether
discrimination has occurred and without addressing the effect its directives on
consumer financing and choice in the intensely competitive auto lending market,"
Bachus wrote in a letter addressed to Patrice Ficklin, the bureau's assistant
director of the office of fair lending and equal opportunity.

Within 30 days of receiving the letter that went to the CFPB
last week, the Alabama representative requested the full set of details
concerning the bureau's statistical disparate impact methodology, including
four segments:

—Proxies used to determine the background of consumer credit
applicants.

—Factors held constant to isolate the applicant's background
as the sole reason for any alleged pricing disparity.

—Metric used to measure whether pricing disparities exist.

—Numerical threshold at which it was determined that a
pricing disparity on a prohibited basis constitutes an Equal Credit Opportunity
Act (ECOA) violation.

"Because allegation of disparate impact do not involve any
intentional conduct, but instead consist solely of statistical analysis of past
transactions, it is essential that the model used for this purpose have a very
high degree of accuracy and demonstrated reliability," Bachus said in the
letter obtained by SubPrime Auto Finance News.

Bachus articulated two other specific requests in his
letter. He wanted to know details about the CFPB's coordination with the other
federal agencies — primarily the Federal Reserve and the Federal Trade
Commission — that Congress granted authority to implement and enforce ECOA on
dealers. Bachus also is interested in why the standard rulemaking process "apparently
wasn't utilized" before the CFPB issued its vehicle financing guidance nearly
three months ago.

Besides Bachus, the other representatives who signed this
latest letter to the CFPB included:

Rep. Shelley Moore Capito
Rep. Gary Miller
Rep. Lynn Westmoreland
Rep. Scott Garrett
Rep. Randy Neugebauer
Rep. Patrick McHenry
Rep. John Campbell
Rep. Peter King
Rep. Edward Royce
Rep. Michele Bachmann
Rep. Stevan Pearce
Rep. Blaine Luetkemeyer
Rep. Bill Huizenga
Rep. Sean Duffy
Rep. Robert Hurt
Rep. Michael Grimm
Rep. Steve Stivers
Rep. Stephen Fincher
Rep. Marlin Stutzman
Rep. Mick Mulvancy
Rep. Dennis Ross
Rep. Robert Pittenger
Rep. Ann Wagner
Rep. Garland Barr
Rep. Tom Cotton
Rep. Keith Rothfus
Rep. Tom Latham
Rep. Jack Kingston
Rep. Steve King
Rep. Mark Meadows
Rep. Steve Stockman
Rep. George Holding
Rep. Walter Jones
Rep. Tom Marino

"In sum, it appears to us that a loss to consumers would
occur if the CFPB uses its supervisory and/or enforcement authority to weaken
the intense competition that results from the ability to negotiate with the
dealer to obtain financing terms that are more competitive than the best terms
the consumer can secure from any other source," Bachus said.

"It is troubling that the agency has initiated this process
without a public hearing, without public comment and without releasing the
data, methodology or analysis relied up to support such an important change in
policy," Bachus continued.

Similar Request from House Democrats

Last month, Rep. Terri Sewell championed a similar request
to the CFPB. SubPrime Auto Finance News published the details of Sewell's
inquiry here.

CFPB director Richard Cordray reportedly responded to Sewell's
inquiry last week. The bureau refused to provide SubPrime Auto Finance News a
copy of Cordray's letter, but Bloomberg published a portion of the director's
response.

According to this online report, Cordray told Sewell that "We
have found frequent instances where lenders had robust fair lending compliance
programs for mortgage lending but weak or non-existent fair-lending compliance
programs for other types of consumer lending.

Bloomberg's report indicated that Cordray made clear in his
letter that the bureau is examining possible discrimination beyond the housing
and auto finance market.

"Determining whether discrimination has occurred is a
case-specific and fact-intensive inquiry," Cordray wrote. "The bureau is
accordingly evaluating possible discrimination in both auto lending and in
other markets on a case-by-case basis."

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