NADA and CFPB Take Center Stage in Washington in November
NADA Director Update – Bill Reineke
Richard Cordray, director of the Consumer Financial Protection Bureau, provided the agency’s semi-annual report to Congress in testimony to U.S. Senate Banking Committee on Nov. 12. During questioning from the Senators, Cordray admitted that the CFPB needs to provide more transparency on its methodology, but expressed concern about dealers setting auto loan rates. “Like Congress, NADA is still waiting for the CFBP to share the methodology it uses to determine that statistical discrimination exists in the auto lending,” said NADA President Peter Welch.
Welch stressed that many factors outside of race can impact an interest rate such as the amount financed, vehicle class, whether the car is new or used, the size of the down payment, term of the loan, time of the month and automaker sales incentives, etc. “Without understanding the bureau’s computer modeling there is no way to determine if the CFPB’s conclusions are reliable or come to a resolution that protects the affordability and accessibility that dealers can offer their customers today,” Welch added.
Six of the 22-members on the Senate Banking Committee signed a letter to Cordray on Oct. 30 expressing concern about the CFPB’s guidance issued last March “that could curtail a pro-competitive feature of the indirect vehicle financing market and to request greater transparency for the bureau’s activity related to this matter.” They are Ranking Member Mike Crapo (R-Idaho), Kay Hagan (D-N.C.), Heidi Heitkamp (D-N.D.), Joe Manchin, III, (D-W.V.), Jerry Moran (R-Kan.) and David Vitter (R-La.).
In March, the CFPB—without public comment or formal rulemaking—issued guidance that pressures lenders into compensating dealers arranging financing with flat fees and eliminating any discretion dealers have to “meet or beat” a competitor. Since then, the CFPB has refused to release any of its research that supports the need to force these changes in auto lending. After multiple bipartisan requests from both the House and Senate, the CFPB admitted recently that there was no analysis performed as to how moving to flat fees will help or harm consumers.
“NADA shares the CFPB’s goal of eradicating discrimination. There is no room for discrimination in the car business or any other business,” Welch added. “In the name of fair lending, the CFPB’s actions will eliminate a customer’s right to negotiate a better interest rate. That is akin to eliminating the ability to negotiate a lower sticker price on a car or truck.”
Welch added that consumers benefit from the current system of dealer-assisted financing because consumers can shop at more than 17,000 franchised new-car dealerships that have the ability to “meet or beat” interest rates offered by their competitors. “The current system yields credit that is widely available and competitively priced,” he said. For the latest NADA updates on the CFPB and dealer-assisted financing, visit http://www.nada.org/