WASHINGTON — Thirty-five congressional Republicans warned the
Consumer Financial Protection Bureau (CFPB) in a letter sent last
Thursday that the auto finance reforms it seeks could weaken competition
and hurt a consumer’s ability to obtain the best financing terms.
also requested information on the CFPB’s use of the disparate impact
theory in its review of dealer participation programs auto finance
sources offer to dealers. In March, the CFPB issued guidance
that said finance sources could be held liable if it determines such
programs, which allow auto dealers to mark up the interest rates on
retail installment sales transactions in exchange for services rendered,
create a bias that causes minority groups to pay higher rates.
are all strongly opposed to any discrimination in lending,” the letter
stated. “However, it is highly concerning that the agency is issuing
such significant new directives without affording the public a proper
opportunity to comment on its methodology and analysis for determining
whether discrimination has occurred and without addressing the effect of
its directives on consumer financing and choice in the intensely
competitive auto lending market.
“To allow Congress to evaluate
the statistical model that the CFPB used to justify the new directives,
we request that the agency provide us with the full set of details
concerning its statistical disparate impact methodology.”
Last month, 13 Democrats
issued a similar letter to the bureau, requesting background
information “about the origination of and investigation into alleged
practices within the auto lending industry.” The letter asked that the
bureau to respond by June 7.
In the midst of this controversy, the
CFPB has also confirmed the departure of Assistant Director Rick
Hackett, who was hired in May 2011 to oversee installment lending
markets, including auto finance. He’s the fourth top bureau official to
depart this month. He was viewed as a key conduit between the bureau and
the auto finance industry.
“In my opinion, Rick Hackett
represented the best kind of regulator the auto financing industry could
hope for,” said Jack Tracey, executive director of the National
Automotive Finance (NAF) Association. “He systematically set about
gathering factual information about industry practices to identify and
target areas that needed regulatory attention. He strived to meet with
industry leaders to hear their views and gather data so that policy
could be focused and would not adversely affect the industry at large.
He attempted to identify problems and develop policy directed at the
problems and was concerned about any unintended consequences resulting
News of Hackett’s departure came 14 days after he made an appearance at the association’s 17th annual Non-Prime Auto Finance Conference, where he confirmed that supervisory investigation of auto finance sources are underway.
stay at the CFPB was too short for the industry to see the benefits of
this approach,” Tracey added. “Hopefully, his replacement will pick up
the flag and carry on the cause.”
To read the full letter, click here.