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Cordray Seeks ‘Balance’ in Auto Loan Oversight
Posted By RVBusiness On November 13, 2013 @ 9:26 am In Breaking News | No Comments
Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), said he wants more “openness and transparency” for the agency’s oversight of auto lending, but added that the agency still has strong concerns about how dealerships arrange loans.
Automotive News reported that the remarks, made during a Senate hearing this afternoon, were Cordray’s most detailed public remarks on the subject, and showed an effort to strike a balance in the way the bureau regulates transactions in the auto market. The Recreation Vehicle Dealers Association (RVDA) is closely monitoring proceedings, as regulations would also affect third-party lending in the RV industry.
On the one hand, the agency wants to flex its muscle in the market to protect consumers from abusive loan practices. But it also wants to extend an olive branch to dealers and auto lenders, who say the CFPB is pushing them into changing their loan practices without showing the data to explain why.
Auto lending is a topic of “considerable sensitivity, it appears,” Cordray said during the hearing of the U.S. Senate Banking Committee.
“We’re going to make sure that we’re engaging with key stakeholders in that area,” he added. “I think that’s an area where I would agree with some of the criticism. I’d like to have a little more openness and transparency, and we’re going to provide that.”
The debate over the CFPB’s involvement in auto lending has simmered for months.
In a bulletin in March, the agency said it had detected bias in the auto lending market in the form of higher interest rates for women and racial minorities.
Dealers are exempt from direct supervision under the Dodd-Frank financial reform law that created the CFPB. But the agency has jurisdiction over auto lenders, and it has urged them to compensate dealers with flat fees rather than letting the dealers mark up interest rates.
This has drawn a backlash from dealers, some of whom have come to rely on the “dealer reserve” for profits as new-car margins have shrunk. They argue that the switch to flat fees would encourage dealers to seek out lenders that pay the highest flat rate and hurt car buyers by stopping dealers from offering a lower interest rate to make a sale.
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