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The Consumer Financial Protection Bureau wants to extend its oversight to large nonbank auto-finance companies to make sure they are not discriminating against consumers.
The CFPB announced today its proposed rule to expand its supervision to these companies, which would include the finance arms of auto manufacturers.
“Nonbank auto-finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level,” CFPB Director Richard Cordray said in a statement. “Today’s proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market.”
The move comes after the agency reported uncovering auto-lending discrimination against minorities by some large banks.
For example, last December the bureau and the Justice Department ordered Ally Financial Inc. and Ally Bank to pay $80 million in restitution to African Americans and other minorities. Regulators said Ally’s discriminatory pricing practices resulted in these borrowers paying higher interest rates on loans arranged through dealers. The CFPB said several other auto lenders will also be paying about $56 million to as many as 190,000 consumers harmed by the discriminatory practices.
According to the CFPB, it has the authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the agency, to supervise certain large nonbanks.
The bureau will seek public comment on the proposal to broaden its oversight to nonbank auto-finance companies that handle at least 10,000 loans or leases annually. About 38 companies, providing financing to 6.8 million consumers last year, fall into that category, it said.
The National Automobile Dealers Association, the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association said in a statement that they oppose discrimination and that the CFPB hasn’t disclosed the method it uses to determine that some consumers are treated differently.
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“There are legitimate, market-based reasons for disparities in interest rates — from monthly budget constraints, to the presence of more competitive offers, to inventory-reduction considerations — all of which are nondiscriminatory and all of which can be documented in the transaction,” the groups said.
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