House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has written a letter to Consumer Financial Protection Bureau Director Richard Cordray criticizing the lack of transparency from the agency about its fair lending enforcement efforts concerning regulating auto lenders.
Hensarling warnted that regulating auto lenders could make it more expensive and complicated for consumers to get auto loans. It would not be fair, he wrote, for the CFPB to regulate nonbank auto lenders until it clarifies the legal "rules of the road."
Last week, the CFPB proposed bringing the financing units of the big automakers under federal supervision for the first time, a move that ultimately would let the agency examine the automakers' lending arms.
The CFPB currently regulates banks that offer auto loans but nonbank auto lenders so far have escaped regulation, according to the CFPB. The proposed rule would extend the CFPB's oversight of bank auto lenders to cover 38 auto finance companies that make, acquire or refinance 10,000 or more loans or leases a year. These firms provided financing to about 6.8 million consumers last year, according to the CFPB.
"Many people depend on auto financing to pay for the car they need to get to work," Cordray said. "Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level."
The CFPB new plans, officials said, would help put a halt to discrimination in the auto lending market - particularly against black, Hispanic and Asian drivers. The CFPB has grown concerned that some car buyers are being steered into expensive loans when they qualify for cheaper ones and being misled about the terms and benefits of add-on products.
Hensarling wrote that there are too many questions concerning the plan.
"Continuing to deny these lenders the essential information with which to build compliance systems could make them less likely to extend financing to some borrowers, which could limit competition and make it harder or more expensive for Americans around the country to purchase an automobile," he wrote.