Response to CFPB Bulletin 2013-02
Subject: Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act
Arlington, TX (March 22, 2013) – The National Independent Automobile Dealers Association (NIADA) and its members condemn any discriminatory practice against auto buying consumers regardless of its form and recognize that unfair lending practices are currently actionable under the Equal Credit Opportunity Act. Although the Consumer Protection Financial Bureau (CFPB) has issued this guidance in an apparent warning to indirect lenders, the existence of discriminatory conduct in the indirect auto lending sector has yet to be verified and the methodology by which the problem was determined is still largely unknown.
Indirect-lenders underwrite financial transactions daily to the benefit of their consumers, dealer partners and the industry. Consumers have benefited from dealer-assisted financing (indirect auto lending) both through the convenience of having credit availability at the point of sale and through the reduced costs of credit through competitive choices. Though this guidance document does not expressly prohibit indirect auto lending, any limitation placed thereon will only negatively affect the consumer’s ability to access competitive automotive financing.
NIADA recognizes the CFPB’s desire to ensure anti-discriminatory lending practices in the auto sector and supports the premise of this effort. However, the CFPB has fallen short in justifying this guidance with any empirical data or evidence beyond anything more than a theoretical supposition based on their supervisory experience. The CFPB supposes that discrimination exists in dealer-assisted financing not as the result of intentional misconduct, but through an unknown statistical analysis of past transactions that has not been publicly made available. To suggest that significant risks of lending discrimination against automotive consumers exists simply because of dealer incentives and discretion is simply unfounded.
NIADA stands engaged to work with the CFPB, Federal Trade Commission, the Federal Reserve Board or any federal agency that provides oversight to indirect lenders and to further understand the foundation on which the CFPB’s position is based that would lead them to conclude that any disparate impact exists in dealer-assisted financing.
About NIADA
The National Independent Automobile Dealers Association (NIADA), has represented the used motor vehicle industry since 1946. NIADA assists its members in becoming more successful and is the industry’s legislative representative for protecting dealer and consumer interests. The association consistently generates valuable industry education and information, along with services and benefits designed to prepare members for an ever-changing marketplace. As a consumer-friendly association, automotive consumer information can be found at autoconsumer.tv.
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