Washington is Cracking Down on Car Dealerships
The Consumer Financial Protection Bureau (CFPB) has been going through some rough times lately. Seeing as this agency is viewed as only a barely-accountable regulator, though, there aren’t many folks shedding tears for the CFPB. First, the federal appeals court went ahead and allowed a constitutional challenge to the CFPB. After that, the House Financial Services Committee voted – by a landslide 47 to 10 – to put the stops on the bureau’s heavy handed attacks on businesses in the United States.
For a few years now, the CFPB has been waging war on car dealers by putting pressure on the banks that provide those dealers with auto loans. Those loans are then offered to auto buyers. The CFPB’s activists don’t seem to like that there are some consumers paying higher loan rates than others, and they have claimed that racial discrimination is the reason for these variances.
However, since the bureau does not seem able to provide any hard evidence to back up these claims, they have simply engaged in a guessing game to figure out which customers are white and which ones are black; all based upon the consumers’ last names and addresses. The CFPB regulators have demanded that banks provide them with settlements if it appears that white bank customers are getting a better deal than those consumers that they guess happen to be black. It all comes down to a cash grab; with the CFPB imposing fines and forcing banks to limit dealer discretion when they offer different loan rates.
It has long been known that banks set the terms with regards to loans they are willing to purchase. The dealer, then, decides whether or not to charge a higher rate and to make a little extra profit, or even no profit at all in order to close car sales. The final decision is made when the car buyer decides what they are willing to pay for automobiles and how much financing fees they are willing to pay out each month, along with how anxious the car dealers are to move their inventories.
The CFPB apparently cannot stand this type of very common financial wheeling and dealing. Back in March of 2013, they released a bulletin that codified the CFPB’s policy with regards to dealer discretion. All of this, even when the Dodd Frank bill spells out the fact that the bureau is not allowed to make regulations that would affect car dealers.
The activists that run the CFPB – a noted darling of the Obama administration and Elizabeth Warren – are not so much concerned with staying legal so much as they are in penalizing businesses. They passed on the normal procedures that happen when federal rules are created, and skipped right to warning car lenders that if they allowed dealers to exercise loan discretion that the banks would be at risk of violating the law of the land.
This has all added up to elected officials getting outright angry; even Democrats. According to Representative Ed Perlmutter – a Democrat from Colorado, “A formal policy change should be done through the rule-making process.
This bill is now on its way to the House floor, and would require the CFPB to publish its data online prior to imposing any new rules on the auto financing industry. It would additionally force the agency to study up on the costs associated with such consumer guidance. The CFPB is no stranger to controversy. It is promising, however, to find that elected officials from both sides of the aisle are finally fed up and forcing the bureau to be held accountable for its overly zealous tactics.