Senators from both parties want answers on CFPBs probe into auto lending
A bipartisan group of 22 U.S. Senators sent a letter to the Consumer Financial Protection Bureau (CFPB) last week demanding answers about the agencys investigation of auto lending. A few days later, CFPB Director Richard Cordray wrote a response outlining the methods the bureau has used to determine possible bias by lenders. Significantly, he acknowledged that the CFPB has not studied the possibility that the guidance it issued in March could limit credit availability.
The senators letter said the March guidance was widely interpreted as pressuring lenders to eliminate or severely limit an auto dealers discretion to negotiate competitive financing for their customers, and instead encourage lenders to compensate auto dealers through a different mechanism such as a flat fee per transaction.
The CFPB said it issued the guidance because it was concerned that allowing negotiation over rates creates a risk of pricing disparities on the basis of race, national origin, and potentially other prohibited bases.
The senators letter asked the agency to provide details about the statistical methodology it used to determine possible bias. It also asked why there has been no chance for public comment and whether the bureau has done an analysis of how the adoption of flat fees would affect the cost of credit for consumers.
The CFPBs actions threaten to eliminate 17,000 price discounters from the auto finance marketplace without justification or transparency, said NADA Chairman David Westcott of U.S. dealers NADA represents in this matter with CFPB.
The lead senators signing the letter were Rob Portman (R-Ohio) and Jeanne Shaheen (D-N.H.). Im concerned that the recent policy guidance from CFPB could restrict legitimate credit options and increase costs for many Americans looking to finance their cars, said Senator Shaheen.Download Bulletin PDF