“There’s a battle outside and it is ragin’” is a line from one of my favorite Bob Dylan tunes, “The Times They Are A-Changin’.” Well, there certainly was a battle raging last month when Consumer Financial Protection Bureau (CFPB) Director Richard Cordray went before the House Committee on Financial Services to deliver his semi-annual report on the bureau’s activities.
We all know the CFPB has been flexing its muscles of late, turning up the heat on dealer F&I practices. So what’s its play?
Let’s go back to 2010, when the National Automobile Dealers Association came storming off of the battlefield beating its chest after successfully lobbying for the dealer exemption in the CFPB-creating Dodd-Frank Act. The industry breathed a sigh of relief.
But by 2013, finance sources and dealers began to realize the CFPB was stepping outside of the Dodd-Frank’s guidelines by targeting auto loans originated through the indirect channel. The strategy was simple: Regulate dealer practices by going after the lenders operating in that channel.
So, is the CFPB making an end run around the spirit of the law without Congressional approval? Well, by asserting that finance sources risk violating the Equal Credit Opportunity Act (ECOA) by allowing dealers to increase interest rates on finance contracts and share in the profit of those markups, the CFPB is claiming enforcement authority.
Read the whole article here on F&I and Showroom.