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.”