As we previously discussed here, on September 18 the Consumer Financial Protection Bureau conducted a field hearing in Indianapolis. Aside from opening remarks from CFPB Director Richard Cordray himself, the hearing also consisted of a panel discussion of industry participants (including representatives from the NADA, the Consumer Bankers’ Association, and the American Financial Services Association) and consumer advocates (including representatives from the Center for Responsible Lending, the NAACP, and Indiana Legal Aid). After the industry participants spoke, the floor was opened to public comment.
The remarks from CFPB personnel did not shed significant light on either of the CFPB’s recent announcements: the larger participant-proposed rulemaking for auto lenders or the recently published white paper on the CFPB’s disparate impact proxy methodology. One of the industry participants remarked that they had not received copies of either document prior to the hearing and thus could not fully develop positions on them.
One consistent refrain from industry participants during the hearing related to the disconnect between the industry and the CFPB on the conclusions to be drawn from alleged portfolio-level disparate impact. Participants stressed that compliance efforts focused on so-called retailer-level discrimination should address any actual purported discrimination or other fair lending concerns, and expressed frustration with the CFPB’s continued stance that even with such compliance efforts, portfolio-level disparities must still be resolved. If retailer-level compliance is not sufficient, this also raises the question of what lenders with portfolio-level disparities can do to remediate them if working at the retailer level is not sufficient.
Several participants at the hearing, including Mr. Cordray, proffered flat-rate pricing as a solution to portfolio-level disparities. Industry participants, however, countered that flat rates not only are unworkable in a competitive market, but also would result in higher credit costs due to lessened competition