CFPB Seeks to Penalize Toyota

The Consumer Financial Protection Bureau (CFPB) is making headlines once again. They are taking aim at another auto lending business. In December of 2013, they fined Ally bank $98 million dollars for alleged discriminatory automotive lending practices. Fast forward one year and this government organization is going after Toyota. A securities filing on November 25th by Toyota Motor Credit Co. indicated that they had received a letter explaining the dissatisfaction on the part of the CFPB with their auto lending practices. Part of the letter, according to TMCC reads, “(your) practices resulted in discriminatory pricing of loans to certain borrowers in contravention of applicable laws, and informing us that they are prepared to initiate an enforcement proceeding unless we agree to a voluntary resolution satisfactory to them.”

The CFPB reportedly is seeking monetary penalties, as well as requiring the lending arm of Toyota to change their auto lending practices. History has shown that the CFPB gets what it wants. The Ally bank case stated previously was not without controversy. Ally was forced to pay tens of millions of dollars in fines to the CFPB, however, some industry insiders and experts felt that the methodology employed by the CFPB was questionable. American’s consumer watchdog (CFPB) found that for 235,000 loans, there was a disparate impact for the borrower to the tune of $200-300 dollars over the course of the entire loan. We turned to Paul Metrey, Chief Regulatory Council of Financial Services, Privacy and Tax for the National Automobile Dealers Association. In an interview he said, “this is not a theory of intentional discrimination that they’re pursuing. They’re not saying that it involves what’s known in the law as disparate treatment. They’re saying it involves disparate impact. That’s proved not by hidden cameras or mystery shoppers. It’s proved by statisticians. The statisticians will look at past transactions to try to figure out if one group paid more than another.”

Will it even matter that many don’t approve of the methodology used by the CFPB? What can be done to regulate a group that hasn’t seemed accountable to anyone in their short history? Toyota is the second automotive lending group that will likely pay fines and face penalties, who’s next? Do you trust the government to regulate automotive lending? Does this extra regulation concern you as a dealer?