The chairman of the Senate Banking Committee today accused Director Richard Cordray of the Consumer Financial Protection Bureau of using lenders as a “back-door” way to regulate dealerships, even though Congress cut most dealerships out of the CFPB’s jurisdiction.
That’s a familiar charge. But in a hearing today Sen. Richard Shelby (R-Alabama) cited yesterday’s consent order where American Honda Finance Corp. settled discrimination charges by the CFPB and the U.S. Department of Justice by agreeing to lower ceilings on dealer markup and to pay $24 million in restitution to minority borrowers.
The order mandates “the significant limitation of dealers’ discretion” to mark up customer interest rates, Shelby said. “Considering auto dealers were explicitly exempted … can this be seen as anything but a back-door attempt to regulate auto dealers?”
When Congress set up the CFPB in 2010, dealers successfully lobbied to be excluded from the definition of “lenders” the new bureau would regulate, with the exception of buy-here, pay-here dealers.
Cordray was before the committee today to deliver the CFPB’s semiannual report. He replied that he thinks it was “illogical” to exclude dealers, but he insisted the CFPB is observing the “line” drawn by Congress. He said, “We are simply looking to enforce the law and do it accurately and appropriately.”
