Portman, Shaheen Lead Bipartisan Group of Senators in Pushing for CFPB Transparency Regarding New Policy Guidance That Could Harm Auto Dealers and Consumers
Senators Request Data & Better CFPB Process
Washington, D.C. – Today, U.S. Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH) led a bipartisan group of 22 Senators—11 Republicans and 11 Democrats—urging the Consumer Financial Protection Bureau (CFPB) to be more transparent about policy guidance it issued for indirect auto lending, which some suggest will curtail a pro-competitive financing service and may result in increased costs for consumers.
On March 21, 2013, the CFPB issued a controversial fair lending guidance bulletin that many have interpreted as pressuring lenders to eliminate or severely limit an auto dealer’s discretion to negotiate competitive financing for their customers, and instead to compensate auto dealers through a flat fee per transaction. The CFPB’s guidance bulletin, which did not go through a public rulemaking process, suggests that this change is necessary because allowing negotiation over a consumer’s interest rate creates a “significant risk” of discriminatory pricing disparities.
“Despite promising to be a data-driven agency, the CFPB has yet to provide full information about its recent policy guidance, which may place an unnecessary burden on our nation’s auto dealers and could raise consumer costs,” said Portman. “While I support the CFPB’s goal to ensure that consumers are not subject to unlawful discrimination, I am concerned about the Bureau’s lack of transparency and unwillingness to make public the basis for its policy decisions, especially those that could negatively impact competition and consumers.”
“I’m a strong supporter of the Consumer Financial Protection Bureau’s efforts to protect consumers, and to do that we need to make sure the Bureau’s efforts are done in a fair and transparent way that gives the public an opportunity to weigh in,” said Shaheen. “I’m concerned that the recent policy guidance from CFBP could restrict legitimate credit options and increase costs for many Americans looking to finance their cars.”
“Dealers are committed to ensuring a competitive marketplace for auto loans. The policy guidance issued by the CFPB threatens to undermine that goal by trying to eliminate competitive financing offered by auto dealership and driving up costs for consumers. We commend Senators Portman and Shaheen for demonstrating leadership and calling for greater transparency from the CFPB. The CFPB owes it to consumers to engage in a fair and transparent process whereby the analysis relating to this policy guidance, and others, is open and available for everyone to review,” said Dave Westcott, the National Automobile Dealers Association’s Chairman and a Burlington, N.C. Buick and GMC dealer.
In their letter, the bipartisan group of Senators seeks answers about the agency’s justification for its new guidance, stating, “Although the CFPB has alleged that ‘disparate impact’ discrimination is present in the indirect auto financing market, the Bureau has yet to explain its basis for this assertion. Nor has the Bureau released the complete statistical methodology it employs for determining whether disparate impact is present in an auto lender’s portfolio and the extent to which it has considered how the practical effect of its guidance will affect competition in the auto loan marketplace.”
The Senators call on the CFPB to provide all relevant data and note that the CFPB has failed to provide information requested by the House Financial Services Committee, stating, “Unfortunately, the Bureau has not provided complete responses to several of the questions presented by our House colleagues. Given your statements that the CFPB will operate as a ‘data-driven’ agency, we request that the data used to support the March 21 guidance be made public.”
Read the full letter here.