Newsroom

November 01, 2013

Lawmakers question CFPB auto lender guidance

Nov. 4, 2013 – Twenty-two senators from both sides of the aisle wrote the CFPB with concerns similar to those aired by NAFCU about the bureau's guidance for indirect auto lenders and its repercussions.

The letter was in response to CFPB's March 21 guidance on complying with the fair lending provisions of the Equal Credit Opportunity Act. NAFCU in March also aired concerns about the CFPB's approach with respect to indirect lending arrangements, noting the bureau's guidance appears to put credit unions between auto dealers and the CFPB, which has no direct supervisory authority over auto dealers under the Dodd-Frank Act.

The lawmakers requested documentation on the statistical methodology for determining disparate impact, according to a story by the American Banker. They also sought information on the bureau's coordination with the Federal Reserve Board and Federal Trade Commission, and why the bureau issued a bulletin instead of a notice of proposed rulemaking, which would be subject to public comment.

The letter said, "Although the CFPB has alleged that 'disparate impact' discrimination is present in the indirect auto financing market, the bureau has yet to explain its basis for this assertion. Nor has the bureau released the complete statistical methodology it employs for determining whether disparate impact is present in an auto lender's portfolio and the extent to which it has considered how the practical effect of its guidance will affect competition in the auto loan marketplace."

In June, 35 Republican members of the House of Representatives wrote the CFPB with similar concerns, questioning whether the bureau's "onerous" requirements would impede consumer choice and requesting the studies upon which the guidance was based. An month before that letter, 13 Democratic members of the House Financial Services Committee wrote the CFPB asking for background information on the methodology used by the bureau to find fair lending violations.