Flat auto finance fees are anticompetitive, says NADA chairman
Dealer-assisted financing provides car buyers with the ability to get a discounted auto rate from the dealer, NADA Chairman Forrest McConnell said in a speech to the Automotive Press Association in Detroit last week. But the government is trying to take away a customerês right to get that discount.
The Consumer Financial Protection Bureau (CFPB)ês insistence on flat fees eliminates a customerês right to get a discount, McConnell told reporters. The current system works because it forces banks to compete and offer dealers low rates to get their business. Next, dealers have to discount those rates to beat the competition or meet a customerês budget. Both those factors drive down customersê rates.
But if the current system were changed to flat fees, McConnell said, Lenders will want to pay higher flats to get business. Dealers would have the incentive to choose the lender with the highest flat fees and that would drive up rates for customers.
As an alternative to flat fees, McConnell set forth NADAês program that sets a standard starting point for dealer reserve. A dealer who adopts the program could discount the finance rate when there is a legitimate business reason, such as helping a customer fit a monthly payment plan into his or her budget.
Last month, Reps. Ed Perlmutter (D-Colo.) and Marlin Stutzman (R-Ind.,) introduced H.R. 5403, a bipartisan bill to nullify the CFPBês auto lending guidance. So far, 60 Republicans and 40 Democrats have signed on as cosponsors.Download Bulletin PDF