Industry Groups Ask for Support for Senate Bill to Preserve Auto Loan Discounts for Consumers
S. 2663 IS ESSENTIAL TO KEEPING AUTO FINANCING COMPETITIVE, AFFORDABLE
TYSONS, Va. (July 20, 2016)--A broad coalition of business groups involved in the making, selling, servicing, financing and auctioning of vehicles urged Congress this week to support Senate legislation to preserve a consumer's ability to get discounted auto loans at the dealership.
In a letter to U.S. senators, the group of nine trade associations asked for help in passing S. 2663, the “Reforming CFPB Indirect Auto Financing Guidance Act.” The legislation, introduced by Sen. Jerry Moran (R-Kan.), would rescind the Consumer Financial Protection Bureau's 2013 auto finance guidance that could lead to limits on a consumer's ability to receive a discounted auto loan from a dealer.
“Access to affordable credit is essential to the vehicle industry and its customers, and the ability of a dealer to discount credit is often necessary to sell the vehicle,” the group wrote. “Since 2013, the CFPB has pressured finance sources to limit a dealer's ability to discount credit based on a deeply flawed method for measuring lender compliance with the Equal Credit Opportunity Act (ECOA). Industry stakeholders have tried, unsuccessfully, to work with the CFPB to preserve discounted auto loans by proposing a Department of Justice (DOJ) model that effectively manages fair credit risk while allowing discounts for legitimate business reasons.”
Like its House counterpart -- H.R. 1737, which passed on a bipartisan vote of 332-96, including 88 Democrats, on Nov. 18, 2015 -- S. 2663 would also require the CFPB to engage in an open and transparent process when issuing future auto finance guidance.
“The CFPB's attempt to eliminate the consumer-friendly practice of a dealer discounting credit has been sought not by rule, but by guidance and non-public enforcement actions,” the letter read. “This guidance was issued without any public comment, consultation with CFPB's sister agencies (including those that Congress authorized to regulate auto dealers), or transparency. Indeed, by the CFPB's own admission, the agency did not study the impact of its guidance on consumers.”
The letter also noted that S. 2663 would require the CFPB to follow an open process prior to issuing any new guidance related to indirect auto financing; and is purely a process bill, and therefore does not intrude on the CFPB's structure, jurisdiction, or authority, nor does it direct a result.
Additionally, the open and transparent process required by S. 2663 would provide a framework for the industry to adopt a DOJ fair credit model, which effectively meets the CFPB's stated objective of addressing fair lending risks without preventing consumer discounts for legitimate business reasons, the letter explained.
“When Congress created the CFPB, surely it did not intend the agency to use its power to stop vehicle retailers from offering consumers discounts,” the letter continued. “Keeping auto financing competitive is not only warranted, it is essential for the vehicle industry and its customers. That is why this legislation easily passed the House, and why the Senate should pass S. 2663.”
The letter was signed by: Peter Welch, President, National Automobile Dealers Association; Mitch Bainwol, President and CEO, Alliance of Automobile Manufacturers; Chris Stinebert, President and CEO, American Financial Services Association; Phil Ingrassia, President, National RV Dealers Association; Steve Jordan, CEO, National Independent Automobile Dealers Association; Frank Hugelmeyer, President, Recreation Vehicle Industry Association; Cody Lusk, President, American International Automobile Dealers Association; Frank Hackett, CEO, National Auto Auction Association; and Tim Buche, President and CEO, Motorcycle Industry Council.
Click here for the full text of the letter.