Auto Dealers Face Puzzling Issues under CFPB Rulings


Auto Lending Guidelines Raise More Questions than Answers

Edi­to­r­ial Com­ment: The CFPB’s attempt to offer fair auto lend­ing to con­sumers has become a bump in the road to both sides of the issue, as some of the arti­cles pre­sented here do indicate:

As recently as last week, mem­bers of Con­gress sent a let­ter to the Con­sumer Finan­cial Pro­tec­tion Bureau (CFPB) indi­cat­ing that their rul­ings could hurt con­sumers more than pro­tect them, call­ing he auto lend­ing rul­ing “unrealistic.”

Auto lend­ing reforms sought by the Con­sumer Finan­cial Pro­tec­tion Bureau could hurt con­sumers, con­gres­sional Repub­li­cans warned today. In a let­ter sent to the bureau, Rep. Spencer Bachus of Alabama and 34 other U.S. House Repub­li­cans said that pay­ing deal­er­ships a flat fee for every auto loan rather than a cut of the inter­est rate — which the bureau says is needed to curb bias — would raise bor­row­ing costs or shut poorer buy­ers out of the new-car mar­ket. “The con­trols strike us as oner­ous and unre­al­is­tic,” the let­ter said, “and restrict­ing con­sumer choice is highly problematic.”

Are Repub­li­cans opposed to CFPB Direc­tor Richard Cor­dray? Oh no, say some — they’re opposed to his whole agency!

Mean­while, the CFPB’s lead­er­ship “brain drain” seems to be con­tin­u­ing, with Politico report­ing that Richard Hack­ett, the Bureau’s Assis­tant Direc­tor for install­ment and liq­uid­ity lend­ing mar­kets, is plan­ning to leave the CFPB later this sum­mer. Just two weeks ago the depar­tures of three top CFPB offi­cials to join the firm founded by for­mer CFPB Deputy Direc­tor Raj Date was reported.

Has the CFPB stepped beyond its char­ter? – asks Matt Doff­ing, who speaks for a group called CFPB Jour­nal, cre­ated by NFR Com­mu­ni­ca­tions, Inc., to help com­pli­ance offi­cers, pres­i­dents, direc­tors, attor­neys, admin­is­tra­tors and oth­ers who have respon­si­bil­ity for fed­eral reg­u­la­tory com­pli­ance within the var­i­ous banks. The CFPB Jour­nal edi­to­r­ial team cov­ers the Con­sumer Finan­cial Pro­tec­tion Bureau.

Not from the agency’s point of view: CFPB Direc­tor Richard Cor­dray spoke before The Exche­quer Club on the agency’s rule­mak­ing and super­vi­sory respon­si­bil­i­ties, say­ing one of the agency’s pur­poses is to “level the play­ing field between banks and non­banks under the con­sumer finan­cial laws,” and Cor­dray said the idea of unfair com­pe­ti­tion has a direct impact on the agency’s rulemaking.

“For busi­nesses that want to know how to com­ply with the law, and at times may care as much about the clar­ity of the law as about its sub­stance, the rule­mak­ing func­tion can serve to accom­plish this goal,” Cor­dray said. “But the rule­mak­ing project must take on a cer­tain form to do this effec­tively, putting a pre­mium on more spe­cific and com­pre­hen­sive rules.”

Cor­dray said that while many agen­cies are crit­i­cized for their lengthy and com­plex rules, “many busi­nesses pre­fer com­pre­hen­sive rules that answer more ques­tions up-front, leave less ter­rain uniden­ti­fied and uncer­tain and min­i­mize the prospect of pro­tracted and costly litigation.”