WASHINGTON, D.C. -

Perhaps Sen. Richard Shelby, chairman of the Senate Banking Committee, asked the question dealers nationwide would like to pose to Richard Cordray, director of the Consumer Financial Protection Bureau.

Shelby took the opportunity when the committee conducted a hearing this week as Cordray made his latest appearance in front of the Senate gathering and shared the CFPB’s semiannual report. The Alabama Republican phrased his question in the same vein raised by the three major dealership associations, which voiced concerns about the consent order released by the CFPB and Department of Justice involving American Honda Finance Corp.

Shelby asked that since dealers are “explicitly exempted from the CFPB’s jurisdiction, how can this be seen as anything other than a back-door effort to regulate the auto dealers, which were basically exempt from Dodd-Frank?”

Cordray replied with a response that might not please dealers and their associations.

“In terms of responsibility, we’ve been very careful to observe a line that was not necessarily an obvious or logical line that Congress drew, which was to say that the bureau has jurisdiction over auto lenders but does not have jurisdiction over auto dealers,” Cordray said. “That jurisdiction as I understand it has been given to the Federal Trade Commission.

“We feel that means the law has spoken clearly in terms of responsibility to address any sort of issue with regard to discrimination or other violations of the law by lenders, but not by dealers,” he continued. “That may be illogical, but that’s the line we have and have taken our responsibility seriously there.

“As I said, we have a partner in this work, which is the Department of Justice,” Cordray went on to say. “We work together to address these issues. I think that’s been appropriate, but I’m always willing to hear more from the members of this committee and members of Congress. We are simply looking to enforce the law and do it accurately and appropriately.”

Before touching on the “illogical” part of the CFPB’s jurisdiction, Cordray praised American Honda Finance for agreeing to the consent order, which includes the reduction in dealer discretion to mark-up the interest rate to only 1.25 percent above the buy rate for contracts with terms of 5 years or less, and 1 percent for auto loans with longer terms.

“We did resolve a matter with Honda. It’s to Honda’s credit. I would commend them,” Cordray said. “They have taken far-reaching steps to constrain the discretionary markup, which we think has led to discrimination for consumers and the Justice Department thinks has led to discrimination for consumers.

“It was industry leadership that Honda demonstrated and I commend them for that,” he continued.

The nearly 2 1/2-hour hearing that also delved into the mortgage and credit card markets retuned to vehicle financing when Sen. Tim Scott of South Carolina took his turn. The Republican first pointed out the significant auto presence in his state since South Carolina contains manufacturing plants for several foreign OEMs, including BMW and Mercedes-Benz. Scott also referenced the auto finance bulletin the CFPB released in 2013; a policy he called a “one-size-fit-all, cookie-cutter regulation on lenders and dealers.”

Scott went on to say that because of the consent order involving American Honda Finance, “it seems like your bureau is regulating heavily the relationship between lenders and dealers. I’m not as concerned about the dealers or the lenders. I’m really concerned about consumers … who will now perhaps pay a higher price for those vehicles because of the government’s involvement in trying to make things better.

“Director Cordray,” Scott continued, “eliminating the ability for lenders and dealers to compete for a customer’s business will mean that the customer ultimately pays a higher interest rate, how do we explain that back at home if the CFPB’s involvement effectively forces some South Carolinians to pay a higher interest rate on their car note and how does that provide great consumer protection?”

Cordray first replied by referencing the automotive footprint in his home state of Ohio, which boasts installations for General Motors, Fiat-Chrysler as well as Honda. Then he shared what Scott and other lawmakers can convey to their constituencies.

“The last thing I want is to do things that hamstring important markets like auto lending,” Cordray said. “If I do that, it would be to the detriment of my agency and the American public. So we’re very concerned about this.

“We have had the hottest auto market in the last several years than we’ve had in the history of this country,” he continued. “That’s at the same time the bureau was gathering its wings and coming into existence. I’m pleased about that because I believe consumers benefit when they have access to auto transportation.

“Probably in your area as it is in my, if you don’t have the ability to get around through a car or truck you’re really in a lot of trouble in your life,” Cordray went on to say. “Having said that we also believe strongly people should not be subject to higher prices or onerous terms based on their ethnic, racial or gender backgrounds. And the Justice Department feels strongly about that as well.”

Cordray closed his thought by returning to what the CFPB attempted to accomplish with the bulletin release more than two years ago.

“The bulletin was one that was a pretty straightforward restatement of law,” he said. “It wasn’t a change in the law. It simply stated that if you’re a lender and you have an automotive lending program, you’re subject to the Equal Credit Opportunity Act.

“That is an undeniable proposition and you need to think carefully about what your program is,” he added.