Industry coalition calls for CFPB reform

A broad coalition of business groups involved in the making, selling, servicing, financing and auctioning of vehicles have come together to urge Congress to support Senate legislation to instigate reforms to the Consumer Financial Protection Bureau (CFPB) in order to preserve a consumer’s ability to get discounted auto loans at the dealership.

In a letter to US senators, the group of nine trade associations asked for help in passing S. 2663, the “Reforming CFPB Indirect Auto Financing Guidance Act.” The legislation, would rescind the CFPB’s 2013 auto finance guidance that could lead to limits on a consumer’s ability to receive a discounted auto loan from a dealer.

“Access to affordable credit is essential to the vehicle industry and its customers, and the ability of a dealer to discount credit is often necessary to sell the vehicle,” the group wrote. “Since 2013, the CFPB has pressured finance sources to limit a dealer’s ability to discount credit based on a deeply flawed method for measuring lender compliance with the Equal Credit Opportunity Act (ECOA).”

Like its House counterpart, which passed on a bipartisan vote of 332 to 96, S. 2663 would also require the CFPB to engage in an open and transparent process when issuing future auto finance guidance.“The CFPB’s attempt to eliminate the consumer-friendly practice of a dealer discounting credit has been sought not by rule, but by guidance and non-public enforcement actions,” the letter read. “This guidance was issued without any public comment, consultation with CFPB’s sister agencies (including those that Congress authorized to regulate auto dealers), or transparency.

The letter goes on: “Indeed, by the CFPB’s own admission, the agency did not study the impact of its guidance on consumers.”

Additionally, it argues the process required by S. 2663 would provide a framework for the industry to adopt a DOJ fair credit model, which effectively meets the CFPB’s stated objective of addressing fair lending risks without preventing consumer discounts for legitimate business reasons.

“When Congress created the CFPB, surely it did not intend the agency to use its power to stop vehicle retailers from offering consumers discounts,” the letter continued. “Keeping auto financing competitive is not only warranted, it is essential for the vehicle industry and its customers. That is why this legislation easily passed the House, and why the Senate should pass S. 2663.”

The letter was signed by representatives of the National Automobile Dealers Association; Alliance of Automobile Manufacturers; American Financial Services Association; National RV Dealers Association; National Independent Automobile Dealers Association; Recreation Vehicle Industry Association; American International Automobile Dealers Association; National Auto Auction Association; and Motorcycle Industry Council.