Legislation to trump CFPB overreach and preserve dealers ability to arrange car loan rates
After intense lobbying by NADA and other associations, the House Financial Services Committee passed a bill aimed at retaining dealersê ability to set interest rates on retail auto loans. The Bureau Guidance Transparency Act (HR 4811) aims to address problems created by the Consumer Financial Protection Bureauês auto lending guidance of March 2013.
The guidance warns lenders that dealer markup of indirect auto loans may lead to discrimination against African Americans and Hispanics. To avoid such discrimination, the CFPB advises lenders to impose controls on dealer markup of auto loans. The agency has recommended flat fees as a way to prevent discrimination, even unintended.
In a letter cosigned by five automotive and financial associations and sent to the members of the House committee, NADA wrote, The Bureau embarked on this new policy, by its own subsequent admission to Congress, without first studying what impact these policy changes would have on the auto finance market, or the marginally creditworthy. The cosigners are the Auto Alliance, the American Financial Services Association, the American International Automobile Dealers, the Recreation Vehicle Industry Association and the National RV Dealers Association.
The bill, which passed the committee on a bipartisan vote, requires greater transparency and opportunity for public participation before the CFPB issues guidance. Had the CFPB solicited public comment before issuing its auto finance guidance, NADAês letter continues, it would have learned that its new approach would likely: (1) raise credit costs for all consumers; (2) decrease access to credit, especially for the marginally creditworthy; and (3) not address the disparate impact problem it alleges. Disparate impact means that members of protected groups such as minorities may be charged higher interest rates and so could be unfairly discriminated against, even if the discrimination is unintended. HR 4811 requires the CFPB to conduct a public notice and comment period before issuing guidance. NADA urges dealers to contact their member of Congress to support the bill.Download Bulletin PDF