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WASHINGTON Republican lawmakers are calling on the Consumer Financial Protection Bureau to explain its rationale behind new fair lending guidelines for auto lenders.
June 21 -
The Consumer Financial Protection Bureau's focus on discrimination in the auto loan business will likely force the banks it targets to stop paying bonuses to car dealers that originate high-interest loans. Changing practices in the rest of the industry could prove tougher.
May 16 -
Consumer advocates believe the bounties banks pay to car dealers for steering customers to high-interest loans are abusive. But with a ban likely to spark a political backlash, the Consumer Financial Protection Bureau is instead seeking to prove the markups are discriminatory.
May 15
WASHINGTON Nearly two-dozen senators are seeking data the Consumer Financial Protection Bureau used as the basis for warning auto lenders they could be committing fair-lending violations.
In a bipartisan letter to the CFPB dated Wednesday, the 22 senators asked for details about what drove the agency to issue its controversial March bulletin to indirect auto lenders that contract with car dealerships. The notice sparked industry concern because it suggests a lender could be held responsible for a dealership's discriminatory practice such as a higher interest rate for a minority borrower even if the lender has no contact with the car buyer.
The letter, which followed a similar request made recently by House members, argued the bulletin puts pressure on "lenders to eliminate or severely limit an auto dealer's discretion to negotiate competitive financing for their customers."
While the senators said they supported the CFPB's efforts to "eliminate any unlawful lending practices," they questioned the agency's use of the highly controversial "disparate impact" policy for auto lenders. The policy means a lender can be accused of fair-lending violations even if its alleged mistreatment of a protected class is unintentional.
"Although the CFPB has alleged that 'disparate impact' discrimination is present in the indirect auto financing market, the bureau has yet to explain its basis for this assertion," the senators said. "Nor has the bureau released the complete statistical methodology it employs for determining whether disparate impact is present in an auto lender's portfolio and the extent to which it has considered how the practical effect of its guidance will affect competition in the auto loan marketplace."
The senators asked the CFPB to provide documentation on its statistical methodology for identifying disparate impact on an auto creditor's portfolio; its coordination with the Federal Reserve Board and Federal Trade Commission in developing the bulletin; and why the agency chose to release a bulletin rather than issue a notice of proposed rulemaking process that would be subject to public comment.
"Given your statements that the CFPB will operate as a transparent and data-driven agency, we request that the data used to support the March 21 guidance be made public," the letter stated. The CFPB was given 30 days to respond.
