Auto Dealers, Lenders Keeping an Eye on CFPB Again

LAS VEGAS – The federal Consumer Financial Protection Bureau has become more assertive again, with auto lenders and their associations keeping a close watch on the agency’s activities.

Among new CFPB Director Rohit Chopra’s concerns is the rising cost of vehicles. That’s primarily caused by an inventory shortage, which in turn is caused by a global microchip shortage.

The inventory dearth has led to some auto dealers charging thousands of dollars above MSRP for popular vehicles. That’s captured the CFPB’s attention, says Celia Winslow, a senior vice president for the American Financial Services Assn.

“The CFPB wants to lower vehicle prices, but it has no control over dealers, so it is focusing on auto lending,” she says at AFSA’s annual Vehicle Finance Conference here held in conjunction with the National Automobile Dealers Assn. annual convention.

For auto lenders, such added scrutiny potentially includes fees, repossessions, loan-to-value ratios (the amount financed in relation to the price of a vehicle) and interest rates, she tells Wards.     

In a presentation on federal matters relating to auto lending, Winslow (pictured, below left) tells conference attendees that lenders who for whatever reason may opt to challenge the bureau on a particular matter that becomes untenable to them have no other option than to sue.

celia winslow

Yet, she notes the Biden Admin. overall is not particularly focused on auto lending. It has other matters to deal with, including Russia’s war on Ukraine, inflation, COVID and the upcoming Congressional elections, Winslow says.

But for lenders keeping an eye on Washington regulatory doings “the CFPB is where it is happening,” she says.   

The bureau, formed in 2011, is a product of the Dodd-Frank Act that Congress created following the subprime finance industry meltdown of that time.

From the get-go, auto lenders and dealers fretted about the CFPB because progressive Elizabeth Warren, before becoming a U.S. senator, played a big role in shaping the bureau’s creation and served as its first director on an acting basis.

Warren adamantly opposed the practice of dealers adding a percentage point or points to indirect auto loans,.. Dealers saw it as just compensation because they were bringing lenders and borrowers together and doing the preliminary work on loan applications. Warren saw it as a rip-off.

Her critics viewed her as polarizing. President Obama, facing Republican pressure, opted not to make her the first CFPB director.

That job instead went to Richard Cordray, a former Ohio attorney general. Under his leadership, the bureau cited alleged disparate lending that unintentionally was racially and ethnically biased.

Many lenders and their associations, including the AFSA, questioned the accuracy of a CFPB disparate-lending analysis that used zip codes and people’s last names to conclude that biased lending was occurring.

For a while back then, dealers and lenders viewed the CFPB as nearly an existential threat.   

But then Kathy Kraniger became director under the Trump Admin. President Trump was no fan of the CFPB. During Kraniger’s tenure, the bureau became less crusading and more lender-friendly. Cordray had resigned in 2017, accusing Trump of undermining him and the bureau.  

President Biden named Chopra to the bureau’s directorship in October. He is in stark contrast to Kraniger.

Chopra is more a determined crusader than even Cordray was, Winslow says. “He is more active.”

He is a particular opponent of payday lending practices, which don’t affect auto lenders and dealers. Nonetheless, Winslow says he is someone those two groups should watch.

Steve Finlay is a retired Wards senior editor. He can be reached at [email protected].