As the Consumer Financial Protection Bureau (CFPB) continues to expand the reach of its regulatory oversight, indirect auto lenders are increasingly becoming a target. In this industry segment, where financing between customer and lender is arranged and facilitated by a third-party dealer, regulators are focusing on dealer compensation models. Consumer credit discrimination under the Equal Credit Opportunity Act (ECOA), which in the view of the CFPB includes disparate impact on the basis of race, religion, gender and other characteristics, is especially in the regulators’ crosshairs. To minimize the potential for running afoul of consumer discrimination laws and to ensure compliance with new regulations, lenders should implement automated technology programs that provide greater access to data analytics and improved consistency in dealer compensation models.
