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Senators Request Justification for the CFPB’s Indirect Auto Lending Bulletin

Robert E. Bostrom
Greenberg Traurig, LLP - New York Office

Peter L. Cockrell
Greenberg Traurig, LLP - McLean Office

Brett M. Kitt
Gil Rudolph
Greenberg Traurig, LLP - Washington Office

J. Scott Sheehan
Greenberg Traurig, LLP - Houston Office

November 7, 2013

Previously published on November 5, 2013

On October 30th, a bipartisan group of 22 Senators sent a letter to the CFPB1 challenging the basis for the Bureau’s Bulletin 2013-02 entitled “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act.”2 The letter notes that Bulletin 2013-02 is “widely interpreted as pressuring lenders to eliminate or severely limit an auto dealer’s discretion to negotiate competitive financing for their customers” as a means of preventing ECOA violations, and instead “encourage[s] lenders to compensate auto dealers through ‘a different mechanism ... such as a flat fee per transaction.’” Although the Senators assert their support for “eliminat[ing] any unlawful lending practice,” they question the disparate impact analysis that formed the basis of the bulletin’s conclusion that discrimination exists in the indirect financing market. The letter requests that the Bureau “explain its basis for this assertion” and “provide complete details concerning the statistical methodology it employs for determining whether disparate impact is present in an auto lender’s portfolio.” The letter also asks whether, prior to issuing Bulletin 2013-02, the Bureau considered the extent to which its guidance to adopt a flat fee compensation system for dealers would “affect the cost of credit for consumers, including those at the lower end of the credit spectrum.”

Notably, the letter demands that the Bureau explain a practice that has become its modus operandi as of late - its practice of discouraging industry conduct through the issuance of informal compliance bulletins rather than through the formal rulemaking process.

The House of Representatives issued a letter to the CFPB in August which requested similar information. The Senators’ letter notes that the Bureau did not respond fully to the House’s requests.

1 See the Senators’ Letter at http://www.portman.senate.gov/public/index.cfm/files/serve?File&under;id=ad73c8d1-39c6-4c4f-80da-c13c57013b12.
2 See CFPB Bulletin 2013-02 at http://files.consumerfinance.gov/f/201303&under;cfpb&under;march&under;-Auto-Finance-Bulletin.pdf.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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