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NADA: CFPB’s Actions Detrimental to Consumers

March 26, 2013

MCLEAN, Va. — Last Thursday, the National Automobile Dealers Association (NADA) and the National Association of Minority Automobile Dealers (NAMAD) issued statements denouncing the Consumer Financial Protection Bureau (CFPB)’s recent actions against lending institutions and dealer participation programs.

The trade groups claimed the bulletin the CFPB issued last week “attempts to force auto finance sources into changing the way they compensate dealers without any indication that the bureau has examined the effect this change could have on the cost of credit for consumers.”

The bulletin, which applies to all indirect auto lenders within the agency’s jurisdiction, said lenders that offer auto loans through dealerships will be held responsible for unlawful, discriminatory pricing. The CFPB issued the bulletin following a report that the agency alerted several banking institutions that they could face lawsuits under the Equal Credit Opportunity Act (ECOA).

According to reports, the CFPB is targeting bank policies which allow auto dealers to mark up the interest rates on retail installment sale transactions in exchange for services rendered. The bureau alleges these policies have caused a disparate impact and caused members of minority groups to pay higher rates. 

“The NADA and the 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,” the statement from NADA read. “However, it is relying on a theory of discrimination that is based on a statistical analysis of past transactions — not intentional conduct — and the CFPB has not provided any information about how it is conducting its analysis.

“Without such basic information as how the CFPB is identifying different groups of consumers, how it is controlling for factors that can affect finance rates but are unrelated to the consumer’s background, and what constitutes a finding of disparate impact, one can have little confidence that the CFPB is conducting its analysis in a statistically-reliable manner.”

On March 1, Ally Financial confirmed in its filing with the Securities and Exchange Commission (SEC) that it is one of the finance sources warned by the CFPB that it could face lawsuits under the ECOA. “The CFPB has recently advised us that they are investigating certain [parts] of our retail financing practices,” read the filing. “It is possible that this could result in actions against us.”

The CFPB’s attempt to eliminate the dealer’s ability to discount the APR will weaken the ability of consumers to secure financing at the lowest possible cost, according to the NADA. “Consumers overwhelmingly choose optional dealer-assisted financing because it’s convenient and competitive,” the statement read. “This anti-competitive approach is not in the interests of consumers and should not be accomplished through guidance and enforcement actions that lack transparency, the opportunity for public comment, and the benefits of a data driven analysis into the effects they would have on consumers and the automobile financing marketplace.”

In 2011, the Federal Trade Commission hosted three roundtables to discuss perceived issues within the automotive retail business. The roundtables brought together industry reps, attorneys and consumer advocates. To illustrate the benefits of dealer participation, the NADA presented an analysis of new-vehicle loans originated between 2008 and 2010.

Using date collected by the Federal Reserve Board and transaction data collected by J.D. Power and Associates, the association showed that consumers who chose the indirect channel vs. direct saved, on average, $635.40 in 2008. In 2009, the average savings climbed to $779.40, then again to $1,162.20 in 2010. In total, dealers helped consumers save $21 billion on new-vehicle financing during that period.

The NADA suggested in its statement issued last Thursday that the CFPB’s approach should not be completed without full participation of the Federal Reserve Board and the Federal Trade Commission.

“Regrettably, no one is well served by such an opaque process,” stated the NADA. “While the NADA and the NAMAD stand ready to work with all of the federal agencies with responsibilities in this area, the NADA and the NAMAD encourage the CFPB to approach this issue in a more considered, transparent and coordinated manner.”


  1. 1. Chris [ March 26, 2013 @ 11:55AM ]

    Finally!!!! Somebody steps up and calls out this BS. Thank you NADA for publicly stating what we all have been thinking since this story came out. I know how much money I've been able to save my customers the past couple years, and it doesn't matter what race, sex, or anything else they are, they ALL get treated the same!

  2. 2. parm [ March 26, 2013 @ 12:36PM ]

    Finally.... Payment packing can be stopped. Dealers have been screwing the public for years. They have proven they cannot be trusted. So, now they get penalized. About time.

  3. 3. Andy [ March 26, 2013 @ 01:26PM ]

    This has nothing to do with payment "packing" The fact that NADA has called them out is encouraging but they key point here is they have supplkied no data as to how they drew this conclusion. Good for NADA to hold their feet to the fire!!

  4. 4. Bill [ March 26, 2013 @ 07:31PM ]

    The CFPB have NO clue about how dealerships take care of the customer, how this will as well impact the economics for both the dealerships and the customers. Simply put, customers receive what the qualify for and dealerships negotiate their findings with the customer. In addition, there is no doubt customers ate VERY well educated nowadays as the Internet gives them ALL the resources to ensure they are being treated fairly. Last, average mark up on a rate may be 1%. Can someone tell us how that is considered disparate impact! Please?!?!?!

  5. 5. adam [ March 26, 2013 @ 08:17PM ]

    the CFPB has no business trying to regulate the auto business, they should zoom in on credit card companies if they really want to protect consumers. All new laws are complete bull****, WE HAVE ENOUGH RED TAPE..

  6. 6. Greg Artman [ March 27, 2013 @ 02:46AM ]

    This is just another way the goverment is trying to justify its existance. The Red Flag policy for example. One of my clients had a triagulated hit to a Red Flag alert. She followed the policy and called the reporting hotline. They had no idea as what to do. No help and no direction period. This is just another example of this lame administrations overeaching boundries. Good job NADA!

  7. 7. TX F&I [ March 27, 2013 @ 04:24PM ]

    The last time I checked credit applications did not have a box to check for ethnicity, sex, sexual orientation etc. Banks to not care about those things, and the last time I checked the only color dealers cared about was green. You try and maximize your opportunity for every deal, regardless of race, creed, or culture. With everything from customer menus, to credit score disclosure notices, to all the information out there on interest rates, car prices, trade values etc this the most transparent this industry has EVER been.

    The CFPB is basically saying minorities are apparently unable to look out for themselves so they need the government to take care of them, which is insulting. Going along with the same so called "logic" of the CFPB they should also look at the pricing of the vehicles, aftermarket products, trade values, etc for the privileged white people vs the minorities the dealers are "obviously" out to take advantage of. After all if they are truly out to "get" minorities why would they just stop at rate? Just another example of this administrations blatant anti capitalism / anti business attitude and trying to cater to their electorate. It seem's everyone forgets that customers have the right to use the most powerful word out there..."no".

  8. 8. Nik [ March 27, 2013 @ 06:19PM ]

    "Mister Customer, Where do you bank? Why don't you find out what the what kind of financing you can obtain on your own, then let me go about beating it. You see I finance millions of dollars worth of vehicles every month so I usually can get lower rates than you can on your own. I get paid to do it so if I can make a few bucks by saving you even more it seems like a win win" I say it every day just like that and I've never had a complaint.

  9. 9. Mark Niksick [ September 14, 2013 @ 12:55PM ]



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CFPB: Lenders Are Responsible for Discriminatory Markups

In a bulletin issued today, the CFPB warned banking institutions that they could be on the hook for discriminatory markups imposed by dealers. The bureau’s notice also contains guidance on how finance sources should address fair lending risk.