The U.S. Chamber of Commerce has sent a detailed letter, dated February 12, 2004, addressed to Director Cordray of the Consumer Finance Protection Bureau (CFPB) in which it expresses its disapproval of the CFPB’s approach of “regulation by enforcement settlement combined with issuance of brief guidance statements” in lieu of utilizing a formal rulemaking process whereby public input must be solicited and considered. In its letter, the Chamber stresses that where the CFPB wants to fundamentally alter the rules, it should “take the time to write new standards rather than rely on one-off enforcement and press release ‘warnings’ to other regulated companies.” The Chamber specifically complains about the CFPB’s efforts to change business practices in the indirect automobile lending industry.

To the extent that the CFPB does not wish to engage in rulemaking, the Chamber requests that the CFPB write what would amount to a clear compliance handbook for auto lenders, which contains “detailed, practical guidance” and provides “clear and understandable standards” to regulated businesses “to ensure that they are complying with the law.” As the Chamber explains, many companies faced with regulatory uncertainty are simply abandoning certain areas of lending, resulting in “fewer choices, less competition and higher costs for consumers.”

The Chamber points out three areas where the CFPB’s approach thus far has led to substantial regulatory uncertainty and adverse consequences that impact both businesses and consumers:

• the test for disparate impact liability in the context of indirect auto lending;
• the definition of “abusive” acts or practices; and
• the standard for companies’ liability for the actions of service providers.

The CFPB’s activity in the indirect lending area has been particularly aggressive, and coordinated with other federal regulators as well as with the U.S. Department of Justice.

Without clear and certain legal standards to follow, the Chamber argues that it is impossible for companies to implement effective compliance management systems to ensure that their companies comply with the law and relevant standards. It remains to be seen, however, whether the increasing pressure being put upon the CFPB to establish clearer and more definitive standards with regard to auto finance will result in regulatory action or at the very least, clearer and specific guidance to the industry.