Dealers already don’t like the Consumer Financial Protection Bureau. But they might like the CFPB less after last week.
According to a Forbes report late last week, the CFPB is advising consumers to shop for a loan before going into dealerships at a bank or credit union, saying it will force the dealer and lender partners to try to do better than that rate. The advisory appears as though it has deeper ramifications for dealers.
The CFPB appears to be operating well within its charter in offering this advisory, which is intended to protect consumers and make sure they get the best credit options.
In the political sense, though, it seems like dealerships (and their lender partners) could take this to be an incendiary move by the CFPB. Dealers view the CFPB, which does not have jurisdiction over their practices, as using end-arounds to regulate them, and this advisory “smells” like regulatory oversight.
Ultimately, this move probably will not affect dealerships all that much. Financial inertia says that consumers not used to shopping for a loan before heading to a lot will not do so just on the urging of a Washington, D.C., agency. And even those who do, in fact, come in with pre-approved loans will likely find themselves given a better offer by the dealer’s finance partners.
Still, the move taken by the CFPB last week seems like more than just a piece of commonsense advice to consumers – it appears like it is at least partially driven by a desire to remove some financing discretion from auto dealerships.