CFPB To Regulate Non-Bank Auto Lenders In U.S.

The CFPB wants more oversight over auto lending, and that’s exactly what they are going to get. The organization has issued a new rule that says they will have regulatory authority over 34 automotive lending institutions. Why do they get to just make new rules and have authority over automotive lending? Because they said they get to do this and are not accountable to congress and thus the people for their budget or policies.

The organization issued a release back on June 10 letting the automotive lending world know that they will now have regulatory authority over those 34 organizations, which comprise 91 percent of the United States non-bank automotive lending activity. Among those automaker lending arms under the newly self-appointed supervision of the CFPB are the lending arms of Toyota, Volkswagen, Honda, Nissan and General Motors. The regulation by the CFPB over those lending arms will go into effect in August.

In a statement, Richard Cordray, the Director of the CFPB said, “Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life, Today’s rule will help ensure that larger auto finance companies treat consumers fairly.” The method that the CFPB has chosen in the past to ensure that companies are treated fairly is fining them tens of millions of dollars. In December 2013, the CFPB fined Ally Bank a combined $98 million as part of a settlement for inadvertent discrimination in a 235,000 of their auto loans.

How do you think that automakers are taking this news? If you’re Toyota Financial, you’re not buying into demands to change. Essentially, the rule would mean in part that the lending arm of automakers would face regulations and even limits on the reserve that the dealer could work with on auto loans. In an interview with Automotive News, Toyota Financial said in a statement that they “currently (have) no plans to change our pricing model. We look forward to continuing to work with [regulators] in pursuit of an outcome that serves the best interests of consumers while preserving auto finance providers’ ability to compete.”

What is your opinion of the regulation on the part of the CFPB? Do you feel that automotive lending regulation is going to help consumers stay out of heavy debt and be able to by more vehicles in the long run, or does it represent the government coming into private business and chipping away at profits?