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May 21, 2018

Relief From CFPB’s Auto Guidance May Be Short-Lived

By Dowse Bradwell "Brad" Rustin, IV, Craig Nazzaro, Elizabeth A. DeVos


In an article published on Friday, May 18 in Law360, Brad Rustin, Craig Nazzaro, and Elizabeth DeVos expand on the reverse of the Consumer Financial Protection Bureau’s (CFPB) 2013 guidance regarding fair lending and interest rates for indirect loans. Many industry leaders and advocacy groups pushed back, emphasizing that the 2013 guidance was outside the powers of the CFPB and viewed the guidance as a way to “regulate” auto dealers indirectly by regulating the funding sources the dealers utilize. The authors highlight that within the 2013 guidance, the CFPB states that an indirect auto lender is likely, in part, a creditor under the ECOA, emphasizing, “As a creditor under the ECOA, the indirect auto lender would be liable for the policies and procedures of auto dealers if the policies and procedures result in discrimination.” Subsequently, to combat this risk, the 2013 guidance requires financial institutions subject to CFPB jurisdiction, including indirect auto lenders, to follow specific steps outlined by the authors.

However, this reversal may not last long, as the authors detail. “A number of both consumer and lender advocates have opined that the only way to create a long-term solution for regulation and oversight that will allow lenders and market participants to approach their compliance and regulatory functions in a consistent and predictable manner is to restructure the CFPB into a nonpartisan entity.” So, until any restructuring occurs, the CFPB could potentially reword the 2013 guidance, resulting in a potentially short-lived decision.