Senator Elizabeth Warren set her sights on auto finance — particularly dealers — during a speech at the Levy Institute’s 24th Annual Hyman P. Minsky Conference Wednesday.
Warren compared the landscape of the auto finance market to that of the pre-recession mortgage market, “with good actors and bad actors mixed together,” she said in her prepared remarks.
“The market is now thick with loose underwriting standards, predatory and discriminatory lending practices, and increasing repossessions.” she continued.
The Democratic Senator from Massachusetts also referenced a January study from the Center for Responsible Lending, entitled Reckless Driving’: Implications of Recent Subprime Auto Finance Growth, that found auto dealer markups cost consumers $26 billion a year.
“Auto dealers got a specific exemption from CFPB oversight, and it is no coincidence that auto loans are now the most troubled consumer financial product,” Warren said. “Congress should give the CFPB the authority it needs to supervise car loans – and keep that $26 billion a year in the pockets of consumers where it belongs.”
Senator Warren is perhaps best known for her role in the creation of the Consumer Financial Protection Bureau, which she praised as a “tough cop on the beat” during her speech.
Members of the Republican Party have been critical of the CFBP and the bureau’s director, Richard Cordray, recently, calling for him to be replaced with a “bipartisan, five-member commission appointed by the president,” in March.
Warren, however, defended the need for a regulatory presence in finance during her speech, and said that without basic government regulation, financial markets don’t work.
“Right now the Republicans are pushing an anti-market agenda,” she said. “They are trying to hamstring the CFPB by slashing its funding, reducing its jurisdiction, and restricting its enforcement authority – steps that would undermine the market by taking financial cops off the beat. With no cops, companies could out-compete one another not by creating value, but by cheating their customers.”
Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.