Sen. Elizabeth Warren (D-Mass.) complained about discrimination and other shady practices in auto finance, in a recent appearance with Director Richard Cordray of the Consumer Financial Protection Bureau.
“This is an area where you really see some aggressive abuses,” Warren said on Politico last week. “An auto dealer sells you a car, hands you a piece of paper that says they’re going to do the financing at 4%. Only days later, you discover down in the fine print that was a tentative interest rate, that in fact the real interest rate is going to be three times that,” she said.
Warren probably meant to describe a spot delivery where the dealer can’t secure financing and the customer is called back to sign a new contract, often at a higher rate. Regulators call this “yo-yo financing.”
She also said there’s “work to be done” in Congress, since back when she was the interim director setting up the CFPB, lawmakers carved out auto dealers from the CFPB’s jurisdiction.
“They carved out auto dealers. So you can’t get tricked on a credit card, on a payday loan — that’s one we’re working on — on home mortgages. But one group has an exception: when they hand out car loans,” Warren said.
Cordray was asked about the statistical method the CFPB uses to allege discrimination, which critics claim is inaccurate. He said in effect the CFPB uses the same method as everyone else in the industry. Cordray shifted the focus back on the alleged offenses: “The issue here is discrimination.”
