CFPB Clamps Down On Auto Loan Discrimination
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UPDATED: May 8, 2013
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The Consumer Financial Protection Bureau (CFPB) is gearing up to tackle the problem of discrimination in auto loan lending. However, lenders and dealers counter that CFPB efforts are unwarranted.
In a March press release, the CFPB announced that it would be holding auto loan lenders accountable for illegal discriminatory markups. The regulatory organization believes that lenders open the door to discriminatory practices when they permit car dealers to set the retail interest rates on auto loans. Naturally, dealerships have built-in incentives to seek higher interest rates.
The CFPB intends to pursue auto lenders who charge minorities and protected groups higher interest rates, even if they do so unknowingly by accepting bids from auto loan financing dealerships.
“Consumers should not have to pay more for a car loan simply based on their face,” said CFPB Director Richard Cordray in the press release.
Countering these accusations and plans, the National Automobile Dealers Association (NADA) released a statement accusing the CFPB of proceeding into investigations without having researched the situation or working with other law enforcement and regulatory organizations.
David Westcott, NADA Chairman, told loans.org in an email that “The CFPB has not coordinated its enforcement actions with the Federal Trade Commission and the Federal Reserve Board, which are the agencies Congress entrusted to directly regulate dealers. In response, NADA has opened a dialogue with CFPB officials over the past month to advocate our position and gain clarity on theirs.”
Chairman Westcott also commented in the NADA press release that the CFPB’s involvement would damage the competitiveness within the auto loan industry. More so, he believes the CFPB has failed to work with dealers in order to reach a solution to the matter.
“The National Automobile Dealers Association (NADA) and the National Association of Minority Automobile Dealers (NAMAD) strongly oppose any form of discrimination in auto lending, and the CFPB guidance appropriately explains that unlawful discrimination has no place in the marketplace.”