The chairman of the House Financial Services Committee recently gave the Consumer Financial Protection Bureau (CFPB) an ultimatum: furnish details on the methodology the agency uses to assess whether fair lending violations exist in indirect auto lending or risk a possible subpoena.
Last March, the CFPB issued a bulletin indicating that the agency has authority to pursue auto lenders whose policies harm consumers through unlawful discrimination. The bulletin encouraged lenders to revise policies that permit auto dealers to mark up interest rates when arranging financing for consumers.
“Lender policies that provide dealers with this type of discretion increase the risk of pricing disparities among consumers based on race, national origin and potentially other prohibited bases,” the CFPB said. “Research indicates that markup practices may lead to African Americans and Hispanics being charged higher markups than other, similarly situated, white consumers.”
Since then, lawmakers in both chambers and on both sides of the aisle have submitted repeated requests for information regarding how the CFPB determines whether such indirect auto lending practices have a disparate impact on certain populations. In a March 7 letter to CFPB Director Richard Cordray, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said the bureau’s responses to those congressional inquiries has been lacking.
Most recently, members of Hensarling’s staff met with bureau representatives to learn about the analysis underlying a CFPB enforcement action involving indirect auto lender Ally Financial Inc. However, the bureau was unwilling to answer specific questions, Hensarling said. The congressman’s staff followed up with written questions, and Hensarling said the bureau responded that it “does not plan to make the statistical analyses conducted in Ally public or otherwise release them.”
“The bureau’s continued refusal to provide any details related to its disparate impact regression analysis and associated methodologies stands in stark contrast to your explicit promise to at least 48 members of Congress to be open and transparent in the bureau’s review of indirect auto lending,” Hensarling told Cordray.
By refusing to disclose this information, the bureau has “deliberately deprived indirect auto lenders of any meaningful way to tailor their company’s lending practices and compliance systems so as to mitigate or eliminate the fair lending risk the bureau asserts to be present,” Hensarling said. He added that the bureau has “introduced unnecessary uncertainty” into the auto lending market, which he said will likely “detrimentally affect consumers’ access to affordable credit.”
Hensarling restated the questions lawmakers and his staff previously asked, and he set a response deadline of March 13.
“If the bureau persists in its refusal to provide this information by the March 13 deadline, the committee will have no choice but to consider invoking its compulsory process,” Hensarling said.
It’s unclear whether the CFPB responded to Hensarling’s request ahead of the deadline.
View Hensarling’s letter
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