Press Releases

CFPB Preparing to Cite Three Captives, American Banker Reports

July 01, 2015

WASHINGTON — According to proposed consent orders acquired by American Banker, the Consumer Financial Protection Bureau (CFPB) is preparing to make its next move in auto finance as soon as July. The regulator is expected to cite three major auto lenders for allegedly allowing their dealer partners to charge higher interest rates on auto loans to minority buyers.

If approved, the consent orders would require American Honda Finance Corp., Toyota Motor Credit Corp. and Nissan Motor Acceptance Corp. to pay remuneration to affected consumers. But according to the news source, the regulator is also offering the captives the chance to forgo civil penalties in exchange for cutting the price discretion that they offer dealers by roughly half.

A spokesperson for Toyota Financial Services, however, said that is not likely to happen. “Toyota Financial Services currently has no plans to change our pricing model,” he noted.

The CFPB has been targeting dealer discretion since it issued a fair lending guidance in March 2013. It claimed policies that allow dealers to mark up interest rates on retail installment sales contracts result in minorities paying higher rates. In late 2014, the CFPB and the Department of Justice began notifying lenders —including Toyota Motor Credit and American Honda Finance — that they could face enforcement actions related to these policies.

“As we have previously disclosed, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) are conducting a joint inquiry into the indirect auto lending practices of Toyota Financial Services and other auto finance providers,” Toyota’s spokesperson told F&I and Showroom. “Because our discussions with the agencies are ongoing, it would be inappropriate to comment beyond noting that we look forward to continuing to work with them in pursuit of an outcome that serves the best interests of consumers while preserving auto finance providers’ ability to compete.”

Since issuing its guidance on dealer participation, the CFPB has recommended that auto finance sources adopt a flat-fee compensation model. But organizations like the National Automobile Dealers Association (NADA) have argued that the flat-fee compensation model will not eliminate dealer pricing discretion, since dealers would still exercise discretion in selecting the finance source to which they would sell a contract.

"If what was reported by American Banker is accurate, this is indeed a very sad day for consumers," the NADA said in a statement. "By denying millions of consumers the right to negotiate a better deal for themselves when they finance the purchase of a new vehicle, these types of enforcement actions will bring only economic harm to the very people that the CFPB was mandated by Congress to protect."

The association noted that the CFPB is facing rising opposition in H.R. 1737, a bill that would force the bureau to be more transparent in its dealings with the auto finance market. A committee action on the bill is expected soon.

"As the CFPB continues to attempt to alter the marketplace without any opportunity for public input or any consideration of the costs it will impose on consumers, the momentum behind H.R. 1737 will only increase," the NADA noted.


  1. 1. William V. Fowler [ July 01, 2015 @ 11:48AM ]

    The shoe has finally dropped and auto dealers and their financing associates have less than 50 days to start originating auto loans in a compliant manner. Many will say what is a compliant manner? Go to my LinkedIn web link for more info:

    Actually a compliant manner starts at first contact all the way through the sale and financing until the moment the wheels cross the curb. The dealer has to keep a record of every contact, every lead the customer responded to, all conversation and transaction they engage into with the customer are they will be non-compliant. Sounds complicate but thank God there are systems and programs already built that will help dealers and their financing sources comply. All the dealer has to do is to contact me and I will demo several programs they can use to bring their office and staff in compliance.

  2. 2. a dealer [ July 02, 2015 @ 11:57AM ]

    Peddle your wares somewhere else.

  3. 3. a dealer too! [ July 02, 2015 @ 12:13PM ]

    @ William Fowler... "Thank God"???.. God has nothing to do with this, you forgot about the separation of church and state... this is state.
    "The Shoe Has Finally Dropped"... What is that supposed to mean??? Are we dealers to be regulated into providing the same financing rate to a 650 credit score that we provide to a 750. Only a bureaucrat would make sense out of that, you know the same ones that did their best to allow every American the opportunity to own a home regardless of their credit score. That worked for about a year until the "new homeowners" quit paying and the entire credit market melted down. The best action a government can do to ensure that everyone gets a fair deal is stay out of the way and let the free market work.

  4. 4. a finance guy [ July 02, 2015 @ 05:22PM ]

    I've done finance for over 20 years now, can someone please tell the CFPB to sit in a few F&I offices for maybe 30 days. Then just maybe they will see and even understand that they are wrong.

  5. 5. Ted [ July 06, 2015 @ 06:12AM ]

    Would love to see Toyota, Honda and Nissan stand up and crush the CFPB.
    This is just Government Extortion!

  6. 6. howell clark [ July 13, 2015 @ 01:52PM ]

    lets see some social dogooders got laws passed to set up this socialist oriented little bureau and now their offspring are running it because they serve no other useful function in society. the end results will be no money to buy for folks with less than stellar records. its already started with the banks. ms clinton is already playing demigod promising more rules to beat down those evil corporations and banks that prey on her people. they won't be happy until we are all equal riding public transit . nothing wrong with public transit if it supports itself.


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