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NADA urges House to repeal CFPB guidance on auto lending

July 31, 2015
The National Automobile Dealers Association on July 28 urged members of the U.S. House Financial Services Committee to pass House Resolution 1737, legislation that would repeal the Consumer Financial Protection Bureau’s 2013 guidance designed to pressure lending institutions into eliminating the availability of auto financing discounts for car buyers.
One day later, the bill passed the House committee by a bipartisan vote of 47-10 (34 Republicans and 13 Democrats).
Currently, 126 members of the House — 70 Republicans and 55 Democrats — have cosponsored H.R. 1737, a bill introduced in April by Reps. Frank Guinta, R-N.H., and Ed Perlmutter, D-Colo. The legislation is identical to a bill that garnered 149 bipartisan cosponsors in the 2013-2014 congressional session but did not advance.
The bill would rescind the CFPB’s 2013 guidance to auto lenders, require public input and cost impacts of future guidance, require transparency in the process and require the agency to work in consultation with other government agencies that Congress vested with regulatory authority.
"As a matter of principle, consumers have the right to negotiate, the right to seek a better deal and the right to choose the loan that’s best for them. But the CFPB has been trying to take that right away," said NADA President Peter Welch. "Reps. Guinta’s and Perlmutter’s bill will produce a more informed process by requiring the CFPB to study the consumer impact of its policy to eliminate consumer discounts in the showroom, and require public input, transparency and consultation with other affected government agencies."
The CFPB in 2013 issued guidance urging auto lenders to move away from discountable compensation for auto dealers who arrange credit for their customers, and instead compensate dealers with non-negotiable payments like flat fees. If enacted by lenders, the policy would mean that consumers would no longer be able to negotiate a lower rate on credit with their dealer in the purchase. For millions of consumers this would reduce access to lower interest rates on their auto loans.
Rather than create new regulations, the NADA, the National Association of Minority Auto Dealers, and the American International Automobile Dealers Association issued a compliance program for dealers to address fair credit risks in the automotive marketplace. The program is based on an existing U.S. Department of Justice model to address fair credit risk. The NADA asserts that its program is superior to the CFPB’s model, as the DOJ program addresses fair credit risk without decreasing competition and harming consumers.
"When you’re paying $30,000 for a car and stretching to do it, consumers should have every financial advantage possible," said Welch. "No government institution should deny that. That’s not what Washington is supposed to do."