Dealer Groups: Fifth Third Settlement Costs Consumers and Ignores Solution

CFPB cuts consumer discounts as much as one half, again rejects DOJ model that would ensure credit compliance and preserve discounts

WASHINGTON, D.C. (Sept. 29, 2015) - Leaders of the three major franchised auto dealership industry groups on Tuesday sharply criticized a settlement reached between the government and Fifth Third Bank over allegations of disparate-impact discrimination resulting from Fifth Third's policy of allowing dealers to offer consumers discounts on auto loans.

Under the terms of the consent order, dealers who work with Fifth Third Bank to help consumers obtain financing on new vehicles will now be significantly limited in their ability to get discounted rates at the dealership. As a result, consumers will lose as much as 1.25 percent of available savings on their loans.

"By cutting the discount zone so dramatically, the government has significantly reduced the amount of money consumers can save on auto financing at the dealership," said Bill Fox, Chairman of the National Automobile Dealers Association. "Between 70-80 percent of new-car buyers rely on dealerships to help them find competitive financing, and the fact is that most consumers get a better rate at the dealership because of the rate discounts that are only available at the dealership."

"Consumers have every right to continue benefiting from a system that saves them money every day, but bank-by-bank, percent-by-percent, the CFPB is taking those rights away, and without giving consumers any say in the matter," Fox added.

Monday's announced enforcement action is particularly egregious given the publication last week of private documents in which top officials at the Consumer Financial Protection Bureau admitted that the methodology they use to bring these enforcement actions systematically overestimates potential disparities in interest rates paid by minority and non-minority borrowers.

According to American Banker magazine, "in a series of private documents... CFPB officials repeatedly acknowledge its methodology could overcount the potential discrimination by firms, but say they prefer that to the alternative where bias is underestimated."

"We believe there is no room for discrimination in auto financing. That is why we strongly support the Fair Credit Compliance Program as viable solution to both protect consumers and provide fairness to dealers," said Damon Lester, President of the National Association of Minority Automobile Dealers (NAMAD), referring to the Fair Credit Compliance Program developed by NADA, NAMAD, and the American International Automobile Dealers Association (AIADA), and modeled after a program originally implemented by the Civil Rights Division of the Department of Justice. "While we appreciate the CFPB's commitment to rooting out discrimination, our approach, originally recommended by the DOJ, will be much more effective than the arbitrary nature in which the CFPB is currently proceeding."

"The CFPB's approach, which unnecessarily hamstrings consumers, is truly regrettable given that a viable solution to fair credit risk that preserves dealer discounts has been in front of them the whole time," said AIADA Chairman Bradley Hoffman. "An array of the industry's leading compliance attorneys have said that the NADA/NAMAD/AIADA Fair Credit Compliance Program is the best way to address fair credit risk while also preserving the dealer discounts that save consumers money. Right now, the only reason we can't have both is because of the CFPB, and I think consumers deserve better than what they're currently getting out of Washington, D.C."

-30 -