WASHINGTON, D.C. — Dealer associations, legal service
providers and industry organizations have sought clarity as to how the Consumer
Financial Protection Bureau plans to determine if discrimination is taking
place within indirect auto lending.

This week, a bipartisan group of 22 Senators — 11 Republicans
and 11 Democrats — urged the CFPB to be more transparent about policy guidance
it issued for indirect auto lending, which some suggest will curtail a
pro-competitive financing service and may result in increased costs for
consumers.

U.S. Senators Rob Portman, an Ohio Republican, and Jeanne
Shaheen, a Democrat from New Hampshire, authored a letter to CFPB director
Richard Cordray, raising a host of issues previously discussed by the National
Automobile Dealers Association among other entities.

Portman and Shaheen recapped that back on March 21, the CFPB
issued what they described as a controversial fair lending guidance bulletin
that many have interpreted as pressuring lenders to eliminate or severely limit
a dealer's discretion to negotiate competitive financing for their customers,
and instead to compensate auto dealers through a flat fee per transaction. 

The CFPB's guidance bulletin, which the lawmakers pointed
out did not go through a public rulemaking process, suggested that this change
is necessary because allowing negotiation over a consumer's interest rate
creates a "significant risk" of discriminatory pricing disparities.

In the letter, the bipartisan group of senators seeks
answers about the agency's justification for its new guidance, stating,
"Although the CFPB has alleged that ‘disparate impact' discrimination is
present in the indirect auto financing market, the bureau has yet to explain
its basis for this assertion. 

"Nor has the bureau released the complete statistical
methodology it employs for determining whether disparate impact is present in
an auto lender's portfolio and the extent to which it has considered how the
practical effect of its guidance will affect competition in the auto loan
marketplace," the lawmakers continued in the document that can be downloaded
here.

The senators called on the CFPB to provide all relevant data
and noteed that the CFPB has failed to provide information requested by the
House Financial Services Committee, stating, "Unfortunately, the Bureau has not
provided complete responses to several of the questions presented by our House
colleagues. 

"Given your statements that the CFPB will operate as a
‘data-driven' agency, we request that the data used to support the March 21
guidance be made public," they added in letter.

Current NADA chairman David Westcott, a Buick and GMC franchised
dealer from Burlington, N.C., cheered this week's efforts by these lawmakers.

"Dealers are committed to ensuring a competitive marketplace
for auto loans. The policy guidance issued by the CFPB threatens to undermine
that goal by trying to eliminate competitive financing offered by auto
dealership and driving up costs for consumers," Westcott said.

"We commend Senators Portman and Shaheen for demonstrating
leadership and calling for greater transparency from the CFPB," Westcott
continued. The CFPB owes it to consumers to engage in a fair and transparent
process whereby the analysis relating to this policy guidance, and others, is
open and available for everyone to review."

Portman emphasized his position for drafting the CFPB
letter.

"Despite promising to be a data-driven agency, the CFPB has
yet to provide full information about its recent policy guidance, which may
place an unnecessary burden on our nation's auto dealers and could raise
consumer costs," Portman said.

 "While I support the
CFPB's goal to ensure that consumers are not subject to unlawful
discrimination, I am concerned about the bureau's lack of transparency and
unwillingness to make public the basis for its policy decisions, especially
those that could negatively impact competition and consumers," he continued.

Shaheen also restated her position on the issue.

"I'm a strong supporter of the Consumer Financial Protection
Bureau's efforts to protect consumers, and to do that we need to make sure the
bureau's efforts are done in a fair and transparent way that gives the public
an opportunity to weigh in," she said.

"I'm concerned that the recent policy guidance from CFBP
could restrict legitimate credit options and increase costs for many Americans
looking to finance their cars," Shaheen went on to say.

Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.


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