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NADA Files Request to Make CFPB Memo Public

July 14, 2015

MCLEAN, Va. — The National Automobile Dealers Association filed a Freedom of Information Act request Monday, seeking to make a Consumer Financial Protection Bureau memo about limiting dealer discretion public. The NADA believes the inter-agency memo undermines the bureau’s long-standing claims that it is not targeting auto dealers through enforcement actions.

The memo was initially acquired by American Banker, which reported on June 30 that the CFPB plans to cite three major auto lenders — American Honda Finance Corp., Toyota Motor Credit Corp. and Nissan Motor Acceptance Corp. — for allegedly allowing their dealer partners to charge higher interest rates on auto loans to minority buyers. According to the news source, the CFPB will be offering the finance sources the chance to forgo civil penalties in exchange for cutting the price discretion that they offer dealers by roughly half.

“The significant limitation of dealer discretion, which in turn reduces fair lending risk, is one of the goals we have been seeking with respect to the indirect auto matters, and this settlement proposal attains that goal," Jeffrey S. Morrow, Jane M.E. Peterson and Rebecca J.K. Gelfond wrote in a June 16, 2015, memo to CFPB Director Richard Cordray about the proposed Honda settlement, according to American Banker.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which formed the CFPB, also specifically prohibits the bureau from regulating auto dealers. But since the regulator first issued a fair lending guidance in March 2013, industry experts have said that the CFPB’s targeting of dealer markup — the practice in which a dealer mark ups the interest rate on a retail installment sales contract as compensation for arranging financing — is an attempt by the agency to regulate dealers.

"If true, the statements made by senior CFPB officials in this memo directly contradict repeated statements, including testimony before Congress, from Director Cordray that he is aware and respectful of his Congressional mandate not to regulate dealers," said NADA President Peter Welch in a press release issued by the association. "Consumers benefit tremendously from dealer discounts, so they deserve to know if these discounts are in danger being unjustly and unfairly eliminated by overzealous Washington regulators."

The memo, as well as proposed consent orders against Honda and two other captive finance sources, appear to have been leaked to American Banker, as none of the documents referenced in the article are in the public domain.


  1. 1. Harold White [ July 15, 2015 @ 05:23PM ]

    Not sure why you are asking for permission to reveal an arm of the Govt's initiatives to remove a bargaing arm for the consumer to negotiate better deals for the purchase of vehicles. Look, Abama Plans are not always in the best interest of all Americans - so when one of his Arms is out of place, I would like to know. I like the ability to negotiate car deals that are in my best interest. I also would like to know when my Gov't is trying to short change me, as is the case here.

  2. 2. William V. Fowler [ July 25, 2015 @ 12:26PM ]

    There is a method to get around all this by simply setting up a loan approval and decisioning process that automatically picks multiple lenders to finance a loan decision for each individual credit application, the vehicle their buying and the terms. If it is done automatically through a computer program with multiple financing sources making an automatic decision, the CFPB would have no grounds for their claim. I have built such a decision engine and it is ready to eliminate this problem.

    This decisioning engine has many additional features. Contact me by e-mail. Or go to LinkedIn Website

  3. 3. Dean Callesen [ July 25, 2015 @ 03:09PM ]

    Another more direct solution is to report the reason for deviation to max FO markup (likely do to non disparate reasons) and report that data to the lender as part of the deal. We've developed the tool and can deploy in approximately 70% of franchise dealers. Open Dealer Exchange is a joint venture between Reynolds & Reynolds and CDK Global, formally ADP Dealer Services. Contact Dean at for more info.


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