Finance groups urge CFPB to review auto finance guidance

Finance groups urge CFPB to review auto finance guidance

Five financial services organizations have sent a letter to the Consumer Financial Protection Bureau urging an adjustment to its auto financing enforcement policy in light of an independent study that casts substantial doubt on the governmentês analysis. The action was applauded by NADA, AIADA and the National Association of Minority Automobile Dealers (NAMAD).

Two years ago, the CFPB issued guidance urging lenders to change the way they compensate dealers for arranging financing for their customers because of a risk of –disparate impact” or racial discrimination, even if unintended, in the loans issued. The American Financial Services Association (AFSA) then commissioned a study by Charles River Associates (CRA), which was published last November.

The study found that the CFPBês methodology resulted in overestimations of minorities in the population by as much as 41 percent. That means the methodology may create the appearance of prohibited differential pricing where none exists, the letter said.

–The Associations request that the Bureau conduct a thorough review of the CRA study, provide a public response to its findings and recommendations, and correct any bias in its testing methodology, before pursuing further dealer markup discrimination claims through supervisory or enforcement action,” the letter continues.

Among other points, the financial groups asked the CFPB to create economic controls to adjust for business factors such as new, used, trade-in, options, insurance and warranties.

–Discrimination in the market simply cannot be tolerated,” said NADA President Peter Welch. –However, in light of the rigorous peer review that has cast significant doubt on the CFPBês findings, the Bureau should change course or at least hit the pause button and address these new concerns.”

In addition to the AFSA, the associations that signed the letter were the American Bankers Association, Consumer Bankers Association, Financial Services Roundtable and U.S. Chamber of Commerce.