Despite escaping CFPB authority, dealer financing could face greater regulation
Jul 29, 2010 3:25 PM
As a result of intense dealer lobbying, the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed by President Obama on July 21, gives the CFPB authority to regulate only direct dealer lending. Most dealers act essentially as brokers, providing loans from third-party lenders, such as banks and credit unions. The lenders and loans themselves will be under CFPB authority.
The new law increases the speed under which the Federal Trade Commission (FTC) can pass new regulations in that area, shortening the agency's rulemaking process from an average of about seven years to about one. Those lengthy procedures have discouraged the FTC from rulemaking in the past.
Consumer groups, who had lobbied to give the CFPB jurisdiction over dealer-assisted financing, say the FTC's improved rulemaking power may mean that dealers face stronger and quicker regulation than had they been placed under CFPB jurisdiction. Consumer Reports has been actively engaged in the
debate and strongly supported the Bureau having full authority to regulate all aspects of auto lending.
The issue involves a variety of practices some dealers engage in when arranging for new and used car financing. Some of them already are illegal. (Read: "How to avoid hidden traps in dealer-financed auto loans.")
It remains to be seen how the FTC responds to its improved power. The agency has not said whether it plans new regulations involving dealer financing, although it has said that the protracted rulemaking process imposed on it by law has discouraged it from pursuing new regulations in other areas. It points out that it has long had the authority to pursue dealers under its general authority to fight deceptive acts and has done so.
The financial reform law also requires the FTC, Federal Reserve Board, and the CFPB's Office of Service Member Affairs to work together ensure that military service members and their families aren't victimized by car dealer financing abuses, especially by dealers located near military bases. Such abuses have been common, the Defense Department and military groups have said.
Going forward, Consumer Reports will work closely with the FTC to ensure that consumers are protected for deceptive and abusive auto lending practices.
—Anthony Giorgianni
Related:
Consumers Union advocates including car dealers in consumer financial protection bill
debate and strongly supported the Bureau having full authority to regulate all aspects of auto lending.
The issue involves a variety of practices some dealers engage in when arranging for new and used car financing. Some of them already are illegal. (Read: "How to avoid hidden traps in dealer-financed auto loans.")
It remains to be seen how the FTC responds to its improved power. The agency has not said whether it plans new regulations involving dealer financing, although it has said that the protracted rulemaking process imposed on it by law has discouraged it from pursuing new regulations in other areas. It points out that it has long had the authority to pursue dealers under its general authority to fight deceptive acts and has done so.
The financial reform law also requires the FTC, Federal Reserve Board, and the CFPB's Office of Service Member Affairs to work together ensure that military service members and their families aren't victimized by car dealer financing abuses, especially by dealers located near military bases. Such abuses have been common, the Defense Department and military groups have said.
Going forward, Consumer Reports will work closely with the FTC to ensure that consumers are protected for deceptive and abusive auto lending practices.
—Anthony Giorgianni
Related:
Consumers Union advocates including car dealers in consumer financial protection bill
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