No Surprise, Auto Finance High On CFPB Rule-Making Agenda

The Consumer Financial Protection Bureau reiterated its interest in creating new rules in several areas touching on auto finance including arbitration, debt collection, the regulation of “larger participant” non-banks, and credit reporting.

The CFPB submitted its Fall 2015 Rulemaking Agenda on Friday, listing “major current and long-term initiatives.”

The CFPB and the Federal Trade Commission have already acted against auto lenders for alleged violations in debt collection and credit reporting.

In a recent case, Tricolor Auto Acceptance LLC, the finance arm for a chain of buy-here, pay-here dealerships agreed to pay more than $82,000 to settle FTC charges that the lender violated the rules for furnishing accurate consumer data to credit reporting agencies. Since last year, between them the FTC and the CFPB have settled at least three other auto finance cases citing the so-called Furnisher Rule.

In debt collection, auto finance cases include Westlake Financial Services and its Wilshire Consumer Credit unit, which makes direct-to-consumer auto title loans. The companies reached a $48.3 million consent order with the CFPB on Sept. 30, to settle charges that debt collectors pressured borrowers with threats and employed phony caller ID numbers.

In terms of non-banks, such as captive finance companies, the CFPB already had enforcement jurisdiction. The bureau has already reached consent orders with non-banks. For instance American Honda Finance Corp. agreed to limit, but not eliminate, dealer reserve in July. What’s relatively new is that since Aug. 31, the CFPB has jurisdiction to regularly examine “larger participants” among non-banks, defined as lenders that make more than 10,000 loans and leases combined, annually.

In arbitration, the CFPB has signaled it is exploring making it easier for borrowers to file class-action lawsuits, by limiting arbitration clauses in contracts. Auto finance contracts commonly require borrowers to agree to binding arbitration.

The CFPB said in its agenda, “An important part of the CFPB’s mandate from Congress is to make rules governing consumer finance markets more effective and to create new rules when warranted.”