Cordray is confirmed as CFPB director. Whats next?
After months of wrangling, the United States Senate came together and confirmed Richard Cordray as director of the Consumer Financial Protection Bureau by a vote of 66 to 34. President Obama nominated Cordray in July, 2011 and appointed him on an interim basis during a Congressional recess in January 2012. His appointment would have expired at the end of this year.
Republicans objected not so much to Cordray himself as to the way the Bureau is structured. They wanted a bipartisan committee to head it, rather than a single director. Legislation introduced last week by Sen. Rob Portman (R-Ohio) would require the Senate to confirm a separate inspector general for the CFPB, instead of sharing one with the Federal Reserve as it does now.
Analysts say that Cordrays confirmation makes it more likely that the Bureau will continue on the course it has started on in auto loans. That means close scrutiny of the practices of lenders, who have been told to monitor dealer practices as credit arrangers. The CFPB says it is concerned about the potential for discrimination against minority buyers. Some industry observers predict dealer reserve, to target the regulatory scrutiny, will survive; others say it wont. At a minimum, it is likely to be limited.
Dealership trainer and former F&I manager Jim Ziegler, who has spoken at many NADA conferences and blogs for Wards Auto, predicts that dealer reserve may disappear, but dealer profits will be unaffected. Despite many efforts by the auto industry over the years to self-regulate and reduce dealer markup of car buyer credit, Ziegler says the problem remains that it is negotiable and at the F&I managers discretion, albeit within the lenders guidelines. Consumers with better negotiating skills can usually leverage a better interest rate, Ziegler concluded.
The CFPB has also indicated it expects greater disclosures in the sale of F&I products, like GAP insurance and extended service contracts. Even before Cordrays confirmation, Automotive News reported more requests for staff training by dealers. All dealers should have an Equal Credit Opportunity policy, training on that policy, and a chain of command that regularly checks compliance, an attorney for Wolters-Kluwer Financial Services told AN.Download Bulletin PDF