The American Financial Services Association (AFSA), a consumer credit industry trade association, released a study this month that took issue with the Consumer Financial Protection Bureau’s method of measuring discrimination in the automotive lending business.
The study, which was carried out by Charles River Associates and based on over eight million vehicle finance contracts issued in 2012 and 2013, concluded that the CFPB has been using an unreliable estimating method to find discrepancies in lender compensation to dealers based on minority status.
The CFPB’s methodology estimates race and ethnicity based on a loan applicant’s name and census data, to determine whether minority groups are hurt by auto lending practices.
The AFSA study compared the CFPB’s methodology against a population with known race and ethnicity and found that the CFPB’s method of estimating often misidentified car buying groups as minorities. As a result, according to AFSA, the CFPB overestimates disparities in reimbursement between dealerships based on customers’ minority status.
The AFSA study also concluded that the CFPB’s methodology failed to account for legitimate factors that may cause disparities in dealership compensation.
The CFPB responded, saying that it will carefully review the AFSA study.