Senator Warren’s F&I Claims Found False By Washington Post

We told you last week Massachusetts Democratic Senator Elizabeth Warren wants the government to come after dealers. When we say come after, we mean over regulate. Today, we want to follow-up on that story. As we reported previously, Senator Warren called for further dealership regulation on two fronts.

First, she wants to put the Consumer Financial Protection Bureau (CFPB) in charge of regulating dealership finance. Second, she wants to heavily regulate F&I by cutting out what she called “dealer markup.” In response to her outcry that she says is to help consumers, she caught the attention of Washington Post reporter, Glen Kessler.

Kessler’s article points out a figure that Warren used in her speech against current dealer finance operations, $26 billion, just isn’t correct. For one thing, she used data from 2009. She also used data from only the subprime auto loan market in 2009. As Kessler points out, Consumers for Responsible Lending (CRL), which published the report used 2009 subprime auto loan data, which comprised of one-fifth of the market in 09′ and applied it to the entire industry.

The survey CRL used for its report also only included one of the top 20 subprime auto lenders from that year. The report from the CRL used data from the National Automotive Finance Association. Their annual report in 09′ was subprime auto loan data, however, Kessler found the report used in 2011 by the CRL doesn’t use the same data as the NAF report. For example, the CRL report said the average “dealer mark up” that year was $780 for used autos. The NAF report said it was $280. For new cars that same year the CRL says it was $494, but he NAF report says that it was $477. The overall average given by the CRL report was $714, but the NAF report only lists $330 for the same year. Thus data from the wrong source attributed to the wrong market was also modified. Added all up that puts the amount of “dealer reserve” at $11.6 billion for 2009, not $26 billion.

The number in the billions, whether it’s $11.6 or $26 or something else was misused by Senator Warren as she claimed that it should be given back to the consumer. However, part of that calculation includes money paid to dealer for arranging auto loans. Thus the data is false, misattributed or misused in a speech. Senator Warren says she wants to help the consumer. The question is, how does elimination of dealership finance competition help the consumer?

What do you make of Senator Warren’s requests and NADA’s response? What would it mean for F&I employees and their families if the government sought to cut billions out of the financing side of the business? Finally, how do you think that dealers would fare if the CFPB is allowed to govern auto dealer lending?