CFPB outlines auto finance plans

While the Consumer Financial Protection Bureau focused supervisory and enforcement activity last year on mortgage lending, small business lending and student loan servicing, it hasn’t forgotten about the auto finance industry, according to the agency’s 2018 Fair Lending Report to Congress.

The CFPB intends to zero in on “whether there is discrimination in policies and practices governing auto servicing, including the use of models that predict recovery outcomes,” the report said.

The bureau also intends to scrutinize the Equal Credit Opportunity Act’s disparate impact doctrine. An initial reexamination came about in response to a 2018 resolution by Congress that disapproved of former CFPB Director Richard Cordray’s 2013 guidance on indirect auto lending, which limited the ability of auto dealers to offer auto loans to their customers.

In addition, the bureau has encouraged innovations that would “be implemented in a consumer-friendly way to help serve populations currently underserved by the mainstream credit system through alternative credit,” wrote Patrice Alexander Ficklin, director of the CFPB’s office of fair lending and equal opportunity. The CFPB estimates that nearly 45 million Americans are credit invisible, thereby causing consumers to run into roadblocks when attempting to access credit.

Finally, the report highlighted two auto finance settlements that were completed last year as a result of 2015 enforcement actions. Fifth Third Bank mailed checks totaling $12 million to participating African-American and Hispanic borrowers that had been overcharged for their auto loans. Similarly, American Honda Finance Corp. shelled out $24 million to African-American, Hispanic and Asian or Pacific Islander borrowers whom the captive had overcharged for auto loans.

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