Editorial Automotive News: CFPB, lenders, dealers are talking, and that’s progress

November 25, 2013

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.

It’s unsurprising that a new federal agency would quickly address a field as large as auto finance. And if car buyers are indeed paying more for credit for no reason other than their race, national origin or gender, that must be corrected.

But selling autos is a complex business, as the CFPB is learning. It’s encouraging that the CFPB’s Eric Reusch acknowledged several possible replacements for the “dealer reserve” system the agency objects to. That’s progress. More is needed.

The CFPB must be transparent about its rules and its methods. As businesspeople, dealers can adjust to new rules if clearly stated and evenhandedly enforced. And the agency needs to share the full methodology and statistics it used to reach its preliminary findings so lenders and dealers can respond.  ( Editor’s Note: Please see http://www.thecre.com/insurance/?p=1182 )

The CFPB, dealers and lenders have started informal negotiations. We applaud that initiative and encourage further efforts to ensure fair and equitable auto lending without excessive enforcement activity.

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