The Federal Financial Forum

Stutzman decries ‘unaccountability’

It took two years for the U.S. Senate to confirm Richard Cordray as the nation’s consumer protection chief. Now, the House is trying to eliminate his job.

The House Financial Services Committee voted recently to reorganize leadership of the Consumer Financial Protection Bureau from a director to a five-member bipartisan commission.

The panel also passed legislation that would subject the CFPB to congressional oversight as a stand-alone agency instead of a Federal Reserve bureau; have the bureau disclose financial information it collects on consumers; and prevent the bureau from collecting such data without consumers’ knowledge and consent.

The National Automotive Financing Association, a trade group for nonprime auto lenders, has launched its certification program for auto lender employees who monitor compliance of dealerships and others with state and federal regulations.

The association tied the new Consumer Credit Compliance Certification training course directly to new requirements from the Consumer Financial Protection Bureau.

The CFPB said this year it expects lenders to have a “compliance management system” that, among other things, closely monitors finance contracts originated at dealerships to make sure legally protected classes, including minorities, pay the same amount of dealer reserve as everyone else.

The Consumer Financial Protection Bureau and U.S. auto dealers appear to have a framework for defusing a squabble over loan discrimination.

There were plenty of fireworks at a Nov. 12 Senate Banking Committee hearing and a Nov. 14 agency forum, with auto dealers and lenders protesting the circumstances under which the CFPB plans to regulate the sector.

But all sides showed they are starting to listen to one another. That’s an improvement. Since the agency issued a bulletin in March citing indications of discrimination in auto lending, the discourse has seemed more like shouting than communicating.

‘Opponents of the “disparate impact” theory, which the Consumer Financial Protection Bureau is employing to prove discrimination in auto finance, were hoping the theory would get its day in court next month before the U.S. Supreme Court — and lose.

But the town council of Mount Holly, N.J., voted last week to settle a housing discrimination lawsuit that would have tested the disparate impact theory, and specifically whether discrimination has to be intentional to be actionable.

WASHINGTON, Nov. 15, 2013

I would like to address Director Cordray’s statement that the CFPB has a “proven statistical methodology” to measure alleged patterns of discrimination in the financing of auto purchases.

It appears that the CFPB has borrowed the statistical method it is using is from the healthcare community who also uses proxy measures to determine ethnic participation at healthcare facilities.  The technology of choice is Bayesian analysis.