Heightened scrutiny of potentially discriminatory auto lending practices by the Consumer Financial Protection Bureau (CFPB) will likely raise lender regulatory costs this year, according to Fitch Ratings.
The CFPB started investigating the auto finance industry last year concerning allegations that it may be discriminating against consumers based on race and violating the antidiscrimination provisions of the Equal Credit Opportunity Act (ECOA).
A March 2013 CFPB bulletin clarified that the agency has authority to pursue auto lenders whose policies harm consumers through unlawful discrimination. The bulletin explained how ECOA applies to indirect auto lending, an arrangement whereby a third-party lender provides an auto dealer with an interest rate that the lender will accept for a given consumer.