Round V of the Indirect Auto Lending Standoff: Congress vs. the CFPB


The battle of wills rages on between the United States House of Representatives’ Committee on Financial Services (the “Financial Services Committee”) and the Consumer Financial Protection Bureau (“CFPB”) on the topic of discrimination in indirect auto lending. The CFPB has taken the position that the lending institutions who offer auto loans through dealerships may be liable for violations of fair lending laws when the dealer is given discretion to set the dealer reserve on loans and that somehow results in what the CFPB believes to be a “disparate impact” on minorities.

In addition to what appears to be an ambition to indirectly regulate auto dealers by pressuring lenders, one of the many causes for concern arising out of the CFPB’s stated position on indirect auto lending is the CFPB’s refusal to provide any transparency as to the methodology it uses to determine whether any fair lending violation has occurred.

In May of 2013, thirteen members of the Financial Services Committee wrote a letter to the CFPB requesting specific information about the CFPB’s methodologies. In response, the CFPB stated that it was committed to being transparent, yet refused to provide specific answers.
Over the following year, three additional requests for information have been sent by the Financial Services Committee and members of the United States’ Senate and House of Representatives. Each time, the CFPB refused to provide specific answers, stating that the agency viewed discrimination on a case-by-case basis, such that it could not provide the specific methodology information used by the agency.

Because the CFPB took this position, when the CFPB resolved an enforcement action against Ally Financial, Inc. and Ally Bank in December 2013, the Financial Services Committee again requested the methodologies used in that particular case. However, the CFPB once again refused to disclose the requested information.

Just last month, the Chairman of the Financial Services Committee wrote yet another letter demanding specific answers. The letter notes that the CFPB’s “pattern of obfuscation” has “deliberately deprived indirect auto lenders of any meaningful way to tailor their company’s lending practices and compliance systems.” The letter goes on to demand a full response from the CFPB by March 13, 2013 or else the Financial Services Committee may invoke its compulsory process to obtain the information. At present, it appears the CFPB has not provided a response. Stay tuned for round VI.