Editor’s Note: The following is a column authored by Recreation Vehicle Dealers Association (RVDA) President Phil Ingrassia offering an update and on the maneuverings by the Consumer Financial Protection Bureau (CFPB) concerning dealer-arranged loans. The article appeared in the latest issue of RV Executive Today.
Last month, RVDA met with several groups trying to make sense of the Consumer Financial Protection Bureau (CFPB) guidance to lenders regarding dealer-arranged – or indirect – financing. In a nutshell, the CFPB has taken a series of actions that appear to be designed to change the way banks, finance companies, and credit unions compensate dealers for arranging vehicle loans. Dealers are exempt from regulation by the bureau, but lenders are subject to CFPB oversight.
The CFPB, while acknowledging that dealers should get compensated for arranging financing, has addressed policies that allow dealers to negotiate interest rates with consumers. The agency believes this negotiation process creates a “significant risk” of discrimination against certain groups of consumers. Instead, the CFPB wants finance sources to compensate dealers by paying them a flat fee per transaction.
The CFPB is attempting to bring about this change through a disputed theory of liability under the Equal Credit Opportunity Act (ECOA) known as “disparate impact.” This theory of liability does not involve intentional discrimination. It focuses on fixing lender policies that may result in certain groups of consumers paying more for financing than others.
If that seems like a stretch to you, you’re not alone. RVDA, NADA, and other groups believe the CFPB is trying to remedy a problem that doesn’t exist. As I write this column, the agency has not provided the industry or Congress any data showing a pattern of discriminatory lending.
Congress asks for information
Since the CFPB issued its guidance to lenders, more than 50 congressional leaders from both parties have questioned the agency about its decision-making process and the data collection the guidance is based on.
Rep. Spencer Bachus (R-Alabama) has asked for consumer data the CFPB cited to issue the guidance. Last month Sen. Mike Crapo (R-Idaho) requested that the Government Accountability Office (GAO) investigate what he called the “big data” collection effort being undertaken by the CFPB on consumer spending habits. So the agency is being pressed to provide answers.
Keep asking the questions
RVDA and its allies will keep demanding answers to fundamental questions and continue pointing out the facts.
There’s no indication the bureau has examined the effect changes in dealer- assisted financing could have on the cost or availability of credit for consumers. The indirect financing market is not broken. There has been no “market failure” that calls for change. In fact, the indirect financing model is competitive and efficient – and car, light truck, and RV sales are improving.
In the United States, we don’t (or shouldn’t) assume a problem is present, create a hidden process for measuring it, and advance a remedy without researching what impact the “fix” will have on those it is designed to help. We’re making it clear that dealers strongly oppose all forms of discrimination in the marketplace.
RVDA will continue to push for the CFPB to be transparent and provide the full details concerning the data, methodology, and research it’s relying on to support its guidance to lenders that could fundamentally alter the way RVs and other vehicles are financed in this country.