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CFPB To Expand Oversight of Auto Lending by “leveling the playing field” | DrivingSales News

CFPB To Expand Oversight of Auto Lending by “leveling the playing field”

September 18, 2014 0 Comments

The consumer financial protection bureau is making headlines once again. This time because of their decision to expand their oversight of automotive lending. The announcement of the increased oversight occurred on September 17th. The CFPB was created as part of the Dodd-Frank Wall Street Reform Act of 2010. In the act, the CFPB was given supervisory and monitoring authority over numerous financial organizations, however, car dealers were exempted. That was then. Now, the CFPB is seeking to keep tabs on the lending practices in the auto industry.

In the words of CFPB Director Richard Cordray, the agency is hoping to take action to help all lenders, though regulation. He said, “Today we are announcing a proposal to extend our supervisory oversight to larger nonbank auto lenders, including these ‘captive’ lenders. This proposal is needed to level the playing field for banks and nonbanks in the auto lending market. “

Under the expanded oversight in that “level playing field,” the CFPB will be able to examine the lending arms of Ford, Toyota and Honda. The CFPB would like to supervise nonbank auto finance companies that enter into or acquire 10,000 or more “loans, leases, and/or loan refinances per year.” It’s not really a matter of what they would like to do; they will have this additional lending oversight. That jurisdiction will give them the ability to have oversight on 90 percent of the nonbank auto finance market. That percentage of the market comes out to about $6.8 million customers per year.

The concern that the CFPB has is customers are either being discriminated against or treated unfairly. This could be treatment before or after credit is issued. In the published report of Mr. Cordray’s remarks, it’s clear there is a concern about lenders treating customers poorly though misleading tactics. The CFPB wants to be able to come after an auto lender that it feels is engaging in bad business practices.

This is a hot-button issue. Last year, the CFPB fined Ally Bank $98 million dollars for allegations of discriminatory lending practices. Their methods for reaching their conclusions were never fully explained to congress. Is the regulation needed or is the government stepping into private business with unnecessary oversight?

About the Author:

The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.

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