CFPB: Attack on dealers as credit arrangers and F&I product providers
WANADAês Dealer Law Panel turned its attention finally to regulatory attacks against dealers by the Consumer Financial Protection Bureau. Dealers continue to deal with the fallout from the CFPBês 2013 auto lending advisory to financial institutions, including captives and banks. The CFPB has no jurisdiction over dealers, but the agency is clearly trying to limit or eliminate dealersê role as credit arrangers, said co-panelist Mike Charapp.
The problem, says the CFPB, is racial discrimination even if unintended reflected in the rates African Americans get on auto loans compared with non minorities. Toyota and Honda have created voluntary programs to eliminate disparate impact on minorities. Charapp recommends that dealers use a written fair lending policy, such as the one developed by NADA.
Under the NADA Fair Credit Compliance Program, the dealer chooses the margin it will hold above the wholesale buy rate of the financial institution and uses that margin as the starting point in every transaction. Deviations are permitted for established, nondiscriminatory reasons and management approval is required for other deviations. The dealership should keep records to support all deviations.
In another area, the CFPB is pressuring West Coast dealers on prices for F&I products — such as extended service agreements — to make sure they donêt vary widely, Charapp said. The Briefing Panel suggests using a transparent process for selling F&I products, such as menus. The dealership should establish fixed selling prices for each product, with deviations permitted for established competitive reasons.Download Bulletin PDF