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Dealers lobby lawmakers to reform CFPB auto lending guidance

September 12, 2014
America’s new-car dealers convened on Capitol Hill last week to urge their congressmen to cosponsor House Resolution 5403, introduced Sept. 8 to the House Financial Services Committee.
The bipartisan bill seeks to nullify the Consumer Financial Protection Bureau’s flawed guidance on auto lending and requires more transparency and accountability from the agency on future guidance.
"The CFPB’s actions will likely raise the cost of credit for car buyers," said NADA Chairman Forrest McConnell. "The CFPB is attempting to change the $905 billion auto loan market and limit market competition without prior public comment and without analyzing the impact of its guidance on consumers."
The new bill, "Reforming CFPB Indirect Auto Financing Guidance Act," would allow the agency to reissue its guidance under a more transparent process. The measure, sponsored by Reps. Marlin Stutzman, R-Ind., and Ed Perlmutter, D-Colo.), is a narrower version of H.R. 4811, the Bureau Guidance Transparency Act, which calls on the CFPB to provide for a notice and comment period before issuing guidance. 
The latter bill was reported out of the House Financial Services Committee in June by a bipartisan vote of 35-24.
"A majority of car buyers choose to finance their purchases through indirect financing at dealerships, which is always optional," added McConnell, a Honda and Acura dealer from Montgomery, Ala. "Dealers often discount these interest rates to earn their customers’ business."
In March 2013, the CFPB issued guidance that threatens to eliminate the flexibility of new-car dealerships to discount the interest rate offered to consumers to finance vehicle purchases. The CFPB claims that negotiated interest rates between dealers and their customers create a significant risk of unintentional "disparate impact" discrimination. However, there are a variety of legitimate business-related factors that can affect finance rates, such as beating a competing rate.
"H.R. 5403 is needed because it requires the CFPB to follow a transparent process when issuing auto finance guidance," McConnell said. "The bill would rescind the 2013 auto finance guidance and require public participation for future guidance before it is issued."
Thirteen congressmen have signed on as cosponsors of H.R. 5403. The NADA is urging dealers to contact their representatives and ask them to join as cosponsors.
Several area dealers attended the NADA Washington Conference Sept. 9-10, including CATA Chairman Colin Wickstrom and director John Alfirevich, chairman of the CATA board’s CATPAC/DEAC Committee; Metro Chicago NADA Director Mark Scarpelli; and NADA At-Large East Director Desmond Roberts.