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CFPB Engaged in Fair-Lending Actions Against Six Auto Lenders

WASHINGTON, D.C. — Auto Finance News reported earlier this month that the Consumer Financial Protection Bureau (CFPB) is engaged in fair-lending actions against six auto finance sources, including three banks and three nonbanks.

According to the media outlet’s source, the three banks will likely settle with the bureau. The names of the organizations were not revealed. To read the full article, click here.

A spokesperson for the CFPB declined to comment on the report.

Jeff Langer, assistant director of the CFPB’s Office of Installment and Liquidity Lending Markets, and Eric Reusch, program manager for the CFPB’s Office of Installment and Liquidity Markets, participated in a session this morning at this week’s Non-Prime Auto Financing Conference. Media, however, were asked to leave the room during the Q&A session, which was moderated by former CFPB official Rick Hackett, now a partner with Hudson Cook LLP.

In recent filings with the Securities and Exchange Commission, Fifth Third Bank, American Honda Finance Corp. and Toyota Motor Credit Corp. revealed that they have received requests for information regarding their activities in the indirect auto finance segment.

In its filing, Honda Financial Services stated that the CFPB and the U.S. Department of Justice have requested information about “whether discretionary pricing practices of dealers originating retail installment sale contracts raise fair lending issues for banks and finance companies that purchase the contracts from dealers.” Toyota made a similar claim in its filing with the SEC.

Honda’s captive finance company also revealed that it has received a subpoena from a state agency regarding information related to the state’s fair lending laws. Honda Financial Service and Toyota Motor Credit said in their filings that none of the agencies have alleged any wrongdoings.

“Although … the CFPB, the U.S. Department of Justice or state agency [have] alleged any wrongdoing on our part, we cannot predict the outcome of these inquiries,” Honda Financial Service’s stated in its filing.

In its filing, Toyota Motor Credit Corp. said: “At this time, we are uncertain whether we will be subject to regulatory actions, and given the preliminary state of this inquiry, we are unable to estimate the amount or range of potential loss in the event any such actions are taken.”

This past May, Fifth Third Bank revealed in its regulatory filing that the Department of Justice is investigating whether it auto lending segment engaged in discriminatory practices. “Any claim resulting from this investigation could include direct and indirect damages and civil money penalties,” the filing read, in part.”

This past December, the DOJ and CFPB reached the largest auto loan discrimination settlement in the federal government’s history. It resolved allegations that Ally Financial and Ally Bank engaged in discriminatory lending practices since April 2011. At issue was the finance source’s practice of allowing dealers to mark up interest rates on finance contracts, a policy the two regulators alleged caused 100,000 African-American, 125,000 Hispanics and 10,000 Asian/Pacific Islanders to pay Ally higher interest rates and white car buyers.

The settlement provided $80 million in compensation for victims of past discrimination and required Ally pay $18 million to the bureau’s Civil Penalty Fund. Ally must also refund discriminatory overcharges to borrowers for the next three years unless it significantly reduces disparities in unjustified interest rate markups.  

Last month, F&I and Showroom published an interview with Hackett, the CFPB’s former point man to the auto finance industry. While he decline to comment on the bureau’s consent order against Ally, he said he believed “Ally is not alone in the next steps it has to take,” referring to the settlement’s requirement that Ally improve its monitoring of dealer pricing practices.


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