CFPB pressures 3 captives to limit dealer discretion on pricing

CFPB pressures 3 captives to limit dealer discretion on pricing

In response to news that the Consumer Financial Protection Bureau (CFPB) plans to cite the three biggest Japanese OEM captive finance companies for –unintentional” discrimination, NADA called it –a very sad day for consumers.” The CFPB has proposed consent orders for American Honda Finance Corp., Toyota Motor Credit Corp. and Nissan Motor Acceptance Corp., reports American Banker.

Under the consent orders, the companies would pay from $8 million to $102 million to affected consumers to settle complaints of discrimination against minorities who allegedly received less favorable vehicle finance rate offers. The captives would not have to pay additional civil penalties, but only by agreeing to limit dealer discretion in pricing finance contracts.

The exact amount of proposed payment is not final, according to American Banker. But previously discussed settlement terms were 1) Honda to limit dealer discretion to 125 basis points on contracts 60 months or less, and 100 basis points on longer contracts; and 2) Nissan and Toyota, to limit dealer discretion to 100 basis points on contracts of 60 months or less and 75 basis points on longer contracts. Three CFPB regulators from the agencyês Office of Fair Lending and Equal Opportunity wrote in a memo that limiting dealer credit arranger discretion on rate offers was one of their goals, American Banker reported.

The dealer position through NADA came back loud and clear challenging the regulators: –By denying millions of consumers the right to negotiate a better deal for themselves when they finance the purchase of a new vehicle, these types of enforcement actions will bring economic harm to the very people that the CFPB was mandated by Congress to protect.”

NADA encourages dealers to press their members of Congress to support HR 1737, a bipartisan bill that would require the CFPB to be transparent in its effort to change the mechanics of the auto finance market. Committee action on the bill is expected in the near future, NADA says.

To stress its point that there is no place for discrimination in the marketplace, dealers are urged to review and adopt its NADA Fair Credit Compliance Policy and Program. NADA touts their program as –the most effective way to address fair credit risks, while preserving the robust competition that exists in todayês marketplace.”

Download Bulletin PDF