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CFPB to Release White Paper on Proxy Methodology

June 19, 2014

WASHINGTON, D.C. — In a hearing before the House Financial Services Committee on Wednesday, Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), announced that the agency will issue a white paper on how it uses the proxy method to determine the presence of discrimination in the indirect auto lending market. 

The white paper is expected to be released later this summer, Cordray said during the bureau’s semi-annual report to the committee. He also noted that the bureau discussed at length in a recent webinar with the Federal Reserve its use of U.S. Census data and the Bayesian Improved Surname Geocoding (BISG) proxy method to determine whether minorities are paying higher rates for auto loans.

“… we and the Federal Reserve largely agree on the methodology presented to [the] industry,” Cordray said.

“We are working on a whitepaper on the proxy methodology in particular that we expect to have out later this summer,” he added. “We are continuing to try to respond on this issue.”

The National Automobile Dealers Association (NADA), however, was not satisfied by the bureau’s proposal. Following the hearing, the association responded to Cordray’s announcement. Officials said that while the association would welcome details regarding the auto lending guidance the bureau issued last March, it does not believe the white paper will answer all of the industry’s questions.

According to the guidance, lenders will be held responsible for discriminatory pricing resulting from policies that allow dealers to mark up interest rates as compensation for services rendered. The guidance is currently being threatened by H.R. 4811, a measure passed by the House Financial Services Committee this month and is now awaiting a vote by the full House of Representatives. If approved by Congress, the measure could rescind the bureau’s guidance.

“… Cordray only offered to provide information on one aspect of its analysis, the proxy methodology,” read a statement from the NADA, in part. “Since this would leave many unanswered questions regarding other critical aspects of the analysis, including how the bureau ensures that it is only comparing similarly situated customers, it reinforces the need for the Bureau Guidance Transparency Act, H.R. 4811, to increase CFPB transparency.”


  1. 1. Larry Laskowski [ June 20, 2014 @ 07:28AM ]

    Really, it takes months to produce a whitepaper on CFPB methods currently in use?

  2. 2. T. Umpy [ June 20, 2014 @ 08:12AM ]

    Since when are laws and "guidance" issued and fines levied based on "methodology". I thought for any enforcement in our justice system FACTS had to be presented and proven. If we reinvent our system to base itself on "methodology", who knows where that will lead. This whole issue is a load of bs and wasting everyones time and money.

  3. 3. David E [ June 20, 2014 @ 10:59AM ]

    The CFPB is a total joke. They havae no facts to base their findings on and rely on bullying to enforce their ideology on others. Just look at their internal reviews. EVERYONE receives a performance rating of excellent so that no one feels discriminated. LOL.

  4. 4. Sherm S [ June 21, 2014 @ 09:33AM ]

    Richard Cordray is a typical liberal gunning for any profit-producing enterprise in the name of "social justice." He was appointed by the obama administration -- what does that tell you about his motivation? NO GOOD will come of this for dealers or for the public. It's just another shakedown method for socialist wealth transfer.

  5. 5. Pete [ June 28, 2014 @ 10:32AM ]

    Coming from the Powersports Business (spent several years on the car side), we already can't mark-up any rates. The only exception is with Honda Finance, but how much are you going to make holding 2 pts on a cbr600?...$250 bucks? It really threw me for a loop, and I had to polish my skills after realizing I'm only making money on product, not rate.

    Tha being said, I don't think Cordray or anyone in the CFPB spent any time with any dealers. It seems they just jumped on a bandwagon of dealer bashing and ended up in the situation we have now.

  6. 6. Pete [ June 28, 2014 @ 10:35AM ]

    Additionally, I spent several years working at banks as a strategy and risk analyst. The very first part of your presentation/work, is an explanation of your methodology for pulling your data, the formulas your used, the data set you are going to utilize, etc. But they need a few months to make it up AFTER the "analysis" was completed. That's backasswards.


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