Members of Congress, NADA criticize CFPB actions
Itês been a busy couple of weeks for the Consumer Financial Protection Bureau. First, the agency took action against Fifth Third Bank for discriminatory auto loan pricing. The joint CFPB-Justice Department enforcement action requires Fifth Third to substantially reduce, or eliminate dealer discretion and to pay $18 million to harmed African-American and Hispanic borrowers.
Fifth Third is required to reduce dealer markup to 1.25 percent above the buy rate for auto loans of five years or less and 1 percent for longer loans. As a result, said NADA, consumers will lose as much as 1.25 percent of available savings on their loans.
By cutting the discount zone so dramatically, the government has significantly reduced the amount of money consumers can save on auto financing at the dealership, said NADA Chairman Bill Fox. Consumers have every right to continue benefiting from a system that saves them money every day, but bank by bank, percent by percent, the CFPB is taking those rights away, and without giving consumers any say in the matter.
As a tool for dealers, NADA, AIADA and the National Association of Minority Automobnile Dealers (NAMAD) have created the Fair Credit Compliance Program, modeled after a program originally implemented by the Civil Rights Division of the Justice Department.
The day after the Fifth Third enforcement action was announced, at a House Financial Services Committee hearing, members of both parties lit into the CFPB for restricting auto lenders. Committee members referenced media reports citing internal memos showing the agency knew its disparate impact theory could overestimate potential discrimination in auto lending (reported in the October 2 WANADA Bulletin). Rep. David Scott, an African-American Democrat from Georgia, said the CFPBês disparate impact methodology is downright insulting to African-Americans, reported American Banker. Other members of Congress joined Scott in castigating the agency for using lenders to go after dealers, which it does not have the jurisdiction to regulate, pointing out that the agencyês actions will result in higher prices for consumers.Download Bulletin PDF