NADA Testifies at CFPB Hearing on Auto Finance


INDIANAPOLIS (Sept. 18, 2014) - Paul D. Metrey, chief regulatory counsel for the National Automobile Dealers Association, testified during a panel session at the Consumer Financial Protection Bureau's field hearing on auto finance.

The hearing, held in Indianapolis on Sept. 18, included opening remarks from CFPB Director Richard Cordray and testimony from consumer groups, industry representatives and members of the public.

Metrey provided the following testimony:

"As we have stated on numerous occasions and will continue to state emphatically, the National Automobile Dealers Association strongly opposes discrimination in any form and fully supports the efforts of the CFPB, the Department of Justice, the Federal Trade Commission, and other federal agencies to eliminate it from the marketplace.

"Our commitment to this goal extends well beyond these statements. In January of this year, NADA - along with the American International Automobile Dealers Association and the National Association of Minority Automobile Dealers - released to each organization's members the NADA Fair Credit Compliance Policy & Program. This publication provides a comprehensive framework that a dealer can adopt to ensure its pricing of consumer credit fully addresses fair credit risks while preserving the overwhelming consumer benefits that result when the dealer has the flexibility to discount its rates to earn its customers' business.

"Our program fully adopts - and indeed adds to - the very well thought out fair credit risk mitigation model that the Department of Justice developed in 2007 to resolve fair credit cases involving two auto dealerships.

"Of course, the NADA Program, as with any compliance mechanism that is designed to address fair credit risks at the retail level, can only be effective if finance sources are encouraged - not discouraged - to incorporate such a program into their Compliance Management Systems. However, regrettably, this is not happening today. And a central reason it is not happening is because the CFPB has insisted that it is not sufficient for a finance source to implement a compliance program that is entirely effective at safeguarding against the possibility of credit discrimination at the retail level if - in the aggregate - there remains an apparent pricing disparity at the portfolio level.

"The Bureau's position is regrettable for two reasons. First, it serves no public policy purpose. Indirect vehicle financing transactions consist solely of secondary market sales from retailers who are independent of the finance source and who, as with other retailers, establish their retail margins based on local cost and competition considerations. If these businesses price consumer credit in a consistent manner for all of their customers, regardless of their background, then any aggregate pricing disparity that exists at the portfolio level as a result of these different retail margins reflects nothing more than a fully functional and competitive marketplace. It does not reflect an injury to consumers.

"Second, by maintaining that retail level compliance mechanisms fail to address finance source responsibilities at the portfolio level, the Bureau is missing a golden opportunity to encourage the adoption of programs that address fair credit risks where consumers obtain their financing - which is the retail level.

"Despite these concerns, our collective focus moving forward should be on solutions. This is why NADA created its fair credit compliance program, and this is also why we remain hopeful that the Bureau, in coordination with the federal agencies that Congress entrusted with oversight over dealers, will work with key stakeholders to identify an approach to fair credit compliance that is both meaningful and viable … and that preserves robust competition in the marketplace."

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