Auto lenders shouldn’t count on the U.S. Supreme Court to rescue the auto finance industry from the disparate impact theory, said Chris Willis, a partner with the Ballard Spahr LLP law firm.
The Consumer Financial Protection Bureau relies on the disparate impact theory to try and prove discrimination in auto loans.
“There’s a feeling in the industry that anything based on disparate impact is about to be wiped off the face of earth by what’s going on in the court system,” Willis said Tuesday at the Auto Finance Risk & Compliance Summit in San Diego.
That feeling is based on what the court may do in a closely watched housing discrimination case, with a decision due by the end of June.
However, even if the auto finance industry gets its wish in the housing case, there’s no way the CFPB would abandon the disparate impact theory in auto finance, Willis said.
Since late 2013, the CFPB has used the disparate impact theory to generate more than $150 million in consumer restitution and civil penalties, and force auto lenders to adopt strict monitoring of indirect loans originated at dealerships.
“If you had a tool that was that effective to curb behavior you don’t like, would you readily let it go? Or would you fight to keep it alive and keep using it?” Willis said. “I think it’s the latter.”
