Tag Archive | "Consumer Financial Protection Bureau"

Comment Period Opens for CFPB’s New Rule


WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB)’s proposed rule that would give it supervisory authority over larger participants in the nonbank auto finance segment was published in the Federal Register on Oct. 8, kicking off a 60-day public comment period that ends on Dec. 8.

If adopted, the proposed rule would generally allow the CFPB to supervise nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year. The bureau has estimated that about 38 auto finance companies, which originate around 90% of nonbank auto loans and leases, would be subject to this oversight.

“Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been subject to any supervisory oversight at the federal level,” CFPB Director Richard Cordray said at an auto finance hearing on Sept. 18. “These companies have also played a significant role in the growth of subprime auto lending by making loans to consumers with lower credit scores. In this market, as in others, subprime borrowers may be more vulnerable to predatory practices, so direct oversight of their lending practices is essential.”

The CFPB began regulating the auto finance market in March 2013, when it issued a bulletin stating that lenders that offer auto loans through dealerships will be held responsible for discriminatory rate markups on retail installment sales contracts. The regulator has also expressed interest in the marketing of loans and leases, the accuracy of information given to credit bureaus, and the treatment of consumers during debt collection.

The proposed rule is the fifth in a series of rulemaking to define larger participants in consumer financial markets.

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Braskamp to be Keynote for P&A Leadership Summit and Industry Summit


Las Vegas — Organizers of the annual for P&A Leadership Summit announced that Steve Braskamp of Capital One Auto Finance will deliver the evening keynote address at this year’s event, which will be held Sept. 8–9, 2014, at Paris Las Vegas.

Braskamp is director of national sales and originations for Capital One, which is among the industry’s leading noncaptive finance companies. He will welcome P&A Leadership Summit and the Industry Summit attendees on the evening of Monday, Sept. 8 when he delivers the joint keynote address. The evening’s welcome reception will immediately follow.

Rick Hackett, former assistant director for the Consumer Financial Protection Bureau (CFPB), agreed to speak on Tuesday morning. Hackett was the CFPB’s point man to the automotive industry and supported the agency’s efforts to regulate dealer-arranged sales and financing.

“We are very lucky to have both of these gentleman speak at the P&A Leadership Summit this year. They are both industry veterans with significant expertise and experience in the finance and regulatory segments of the industry,” said David Trinder, advisory board chair and CEO, F&I Administration Solutions. “With all the current concerns and doubts about the initiatives of the CFPB, it will be interesting to hear the perspectives of both of these keynote speakers.”

Braskamp’s 15-year career at Capital One includes leadership positions in several consumer-lending segments. In his current role, he oversees a team of more than 900 associates that generates more than $17 billion in prime, nearprime and subprime auto contracts on an annual basis. Prior to joining the company, Braskamp worked in investment banking and management consulting.

The P&A Leadership Summit is a joint production between P&A and F&I and Showroom magazines. It is scheduled for Sept. 8-9 at the Paris Las Vegas Hotel. For more info, visit pa-leadershipsummit.com or contact Eric Gesualdo via email hidden; JavaScript is required or at (727)-940-5823.

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DOJ Investigating Fifth Third Bank’s Auto Lending Practices


CINCINNATI — Fifth Third Bank revealed in a regulatory filing last week that it is under investigation by the Department of Justice (DOJ) to determine whether it engaged in discriminatory practices related to auto lending.

According to the filing, the bank is cooperating with the investigation of its indirect automobile loan portfolio. “Any claim resulting from this investigation could include direct and indirect damages and civil money penalties,” the filing read, in part.

Last summer, the finance source notified dealers in a letter obtained by F&I and Showroom that it was monitoring how dealers mark up interest rates on retail installment sales contracts. The notice stated that Fifth Third Bank regularly reviews auto loans received from dealers to “ensure that dealer reserve (markup) is not applied disproportionately based on an applicant’s race.”

The notice, however, was distributed a few months after the Consumer Financial Protection Bureau (CFPB) warned finance source that they would be held responsible for unlawful, discriminatory pricing on the part of their dealers.

Both the CFPB and the DOJ have been examining whether a dealer’s ability to mark up the interest rate on finance contracts has a disproportionate impact on women and minorities.

In addition to the investigation of its auto loan portfolio, Fifth Third is also facing a civil investigation by the DOJ and the Office of the Inspector General for the Department of Housing and Urban Development regarding compliance with requirements related to certain Federal Housing Agency-insured loans originated by its affiliates.

Fifth Third Bank declined to comment on the DOJ’s investigation.

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Senator Introduces Two CFPB Reform Bills


Washington D.C. — U.S. Senator Deb Fischer (R.-Neb) introduced two bills aimed at restructuring the Consumer Financial Protection Bureau (CFPB). The Consumer Financial Protection Commission Act of 2014 (SB 2213) would replace the agency’s single director position with a five-member, bipartisan commission. Fischer’s second bill, the CFPB Improvement Act of 2014 (SB 2212), would change the requirement for the Financial Stability Oversight Council (FSOC) to overturn CFPB regulations.

“The CFPB has an enormous amount of influence impacting all sectors of our economy and every consumer nationwide,” Fischer said. “Decisions governing such a powerful agency should reflect input from all sides, rather than placing broad regulatory authority in the hands of a single, unelected official with little oversight from Congress.

“Similarly, the approval process for regulations issued by the CFPB requires changes to strengthen oversight. These two bills reform the CFPB’s and FSOC’s structure to ensure greater accountability and enable the agency to more effectively carry out its mission of consumer protection,” she continued.

Under the Consumer Financial Protection Commission Act of 2014, each member of the commission would be appointed by the President and confirmed by the Senate. Commissioners would each serve staggered five-year terms, and no more than three commissioners could be from the same political party. If approved, the legislation would not take effect until the end of current CFPB Director Richard Cordray’s term.

Currently, two-thirds of the FSOC’s 10 voting members are required to overturn CFPB regulations. The proposed CFPB Improvement Act of 2014 would change the two-thirds requirement to a simple majority. It would also exclude the director of the CFPB from such a vote, removing any individual bias.

The reforms included in Senator Fischer’s bills were recently passed by the House of Representatives as part of H.R. 3193, legislation sponsored by Rep. Sean Duffy (R-Wis.).

“I commend Senator Fischer for her efforts in the Senate to hold the CFPB accountable to the standards of transparency that they promised the American people but have yet to deliver,” Duffy said. “This is a dangerously powerful and unaccountable agency that must be reined in. I will continue my efforts in the House and am glad to have a strong ally in the Senate.”

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Former CFPB Official to Deliver Keynote Address at Industry Summit 2014


Torance, Calif. — Rick Hackett, the Consumer Financial Protection Bureau (CFPB)’s former point man in the auto finance industry, will deliver a keynote address at Industry Summit 2014 on Tuesday, Sept. 9, at 9 am.

Hackett spent 31 years practicing law before the CFPB selected him in 2011 as assistant director to lead its Office of Installment and Liquidity Lending Markets in its research, markets and regulations division. And until his departure this past August, he helped to chart the bureau’s course into the auto finance industry and co-led the bureau’s strategy team for examination and investigation of finance sources offering dealer participation programs.

In March, Hackett officially joined Hudson Cook LLP as a partner at the firm’s Portland, Maine, office, where his practice will focus on all aspects of state and federal regulation of financial products and services.

“Rick has been on a speaking tour of sorts this year, delivering speeches at conferences geared toward auto finance sources,” said Gregory Arroyo, editor of F&I and Showroom magazine. “Industry Summit will be the former regulator’s first event geared toward dealers, so we’re very excited to have him.”

In the May edition of F&I and Showroom magazine, Arroyo goes one-on-one with the former regulator, an interview that should serve as a preview of Hackett’s address at this year’s conference. And as Arroyo discovered, the former CFPB attorney continues to defend the agency’s scrutiny of dealer participation programs. The interview also offered some clues as to how the CFPB will approach F&I product sales.

“I can’t reveal too much at this point, but I did get the feeling that if it were up to Rick, he’d still be at the bureau,” Arroyo noted. “With recent headlines regarding the bureau’s management practices, I thought I’d be hearing from a disgruntled former employee. That was not the case. Instead, I heard from a former regulator who still believes the bureau has a strong case against certain aspects of the indirect financing model.”

Hackett’s responsibilities at the CFPB included advising all divisions of the bureau with respect to market information and policy issues in the installment and specialty lending areas, including auto finance, student lending and payday lending. Before joining the bureau, he served as a partner and leader of the Banking and Financial Services Group at Pierce Atwood LLP in Boston and Portland, Maine.

Industry Summit 2014 is scheduled for Sept. 8-10 at the Paris Las Vegas Hotel. The annual event includes the new Dealer Sales & Technology track, as well as the F&I, Special Finance, Used Vehicle and P&A Leadership tracks. For more information, visit www.industrysummit.com.

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Industry Groups Question Study on Discrimination in Auto Lending


Durham, N.C. — The Center for Responsible Lending (CRL) released findings that show negotiation does not help African American and Latino car buyers secure better interest rates on auto loans. However, industry associations such as the American Financial Services Association (AFSA) and the National Automobile Dealers Association (NADA) discounted the study, claiming it lacks data to support its claims.

According to the study, 39% of Latinos and 32% of African Americans reported making attempts to negotiate their interest rate, compared to only 22% of white respondents — yet minority buyers received higher interest rates. The report, “Non-Negotiable: Negotiation Doesn’t Help African Americans and Latinos on Dealer-Financed Car Loans,” is based on a telephone survey of 946 consumers conducted in October 2012.

“The CRL report is based on a sample size of less than 900 borrowers self-reporting that they purchased a vehicle at a dealership in the last six years,” said Chris Stinebert, president and CEO, AFSA, in a statement, who noted that 86 of the 946 car buyers polled received loans from buy-here, pay-here dealerships. “In 2013, 15.6 million new and nearly 42 million used vehicles were sold in the United States, hardly making this a representative sample. The report author even notes that ‘using self-reported survey data has limitations compared to loan-level data derived from the records of individual transactions.’”

The AFSA will be conducting its own study over the next several months, examining loan-level data of millions of loans, Stinebert noted. The intent of the study is to evaluate the indirect lending model and analyze the costs and benefits of alternatives.

The CRL study was discussed at the Consumer Financial Protection Bureau (CFPB)’s first public forum on auto lending. It was held in November at the bureau’s headquarters in Washington, D.C. Chris Kukla, senior counsel for government affairs at the CRL, said the study would show that disparities do exist in the auto lending market, and that those disparities are not mitigated by shopping around or negotiation, something CFPB officials have been claiming since the bureau issued a fair lending bulletin in March.

However, CFPB officials have also stated that the bureau is relying on data collection techniques employed by its sister agencies like the Department of Justice, an approach designed to allow finance sources to replicate it on their own.

“The CFPB repeatedly stated — even as recently as our Vehicle Finance Conference last week — that the bureau is only interested in data-driven studies,” Stinebert said. “The CRL study certainly does not fall into that category.”

The NADA also issued a statement that questions the results of the CRL study. “The phone survey responses are consumer opinions, not statistically valid data,” read the statement. “For example, the report relies on participants to recall details such as ‘trade-in allowance’ and ‘down payment’ for transactions that occurred as long ago as ‘six years.’ If the survey participant didn’t recall the answer, the survey accepted ‘their best guess.’”

“If anything, CRL’s report shows that if all consumers lose their right to negotiate for lower monthly payments, minorities would disproportionally pay the price.”

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