House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) recently sent a letter to CFPB Director Richard Cordray expressing concern about the Bureau’s proposed regulation of nonbank auto lenders.
According to Hensarling, it would be “inappropriate” for the agency to regulate nonbank auto lenders until it clarifies the “rules of the road.” The letter echoes a concern shared by many House Republicans that the CFPB lacks transparency in its fair lending enforcement policies.
The Chairman further warned that regulating these lenders could make it more difficult and expensive for consumers to obtain auto loans. “Auto lenders need to be able to understand the legal rules of the road,” Hensarling wrote. “Continuing to deny these lenders the essential information with which to build compliance systems could make them less likely to extend financing to some borrowers, which could limit competition and make it harder or more expensive for Americans around the country to purchase an automobile.”
Hensarling’s letter comes on the heels of an announcement by the CFPB that it intends to expand its regulation of the auto loan industry. As we previously noted here, here, here, and here, the proposed rules would allow the CFPB to take a closer look at nonbank auto-lenders that make more than 10,000 loans a year to determine whether discrimination problems exist in that industry. The CFPB notes that more than 87 million U.S. consumers hold about $900 billion in auto loan debt.
Cordray contends that the CFPB’s proposed regulation will help “root out” discrimination in the auto lending industry. “Many people depend on auto financing to pay for the car they need to get to work,” Cordray said. “Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level.”
Follow the Consumer Financial Services Law Monitor for continued developments on the CFPB’s increased presence in the auto lender industry.