To address auto loan pricing discrimination concerns, a task force [appointed by the CFPB director to recommend improvements to federal consumer finance law has] advocated federal endorsement of industry-backed Fair Credit Compliance Programs.
The National Automobile Dealers Association and the National Association of Minority Automobile Dealers jointly submitted the NADA Fair Credit Compliance Program for the task force’s consideration in June.
[Adopting this recommendation] “would end this whole concern about whether or not dealers are pricing minorities in an unfair or discriminatory way,” Jean Noonan, Hudson Cook partner and task force member, told Automotive News. “If I could choose one recommendation that the bureau and the [Federal Reserve Board] would adopt, certainly for auto, that would be
my top one.”
Source: Automotive News
CFPB Taskforce Promotes Adoption of NADA Fair Credit Program
In January 2020 Consumer Financial Protection Bureau Director Kathy Kraninger appointed a taskforce on Federal Consumer Financial Law comprising five senior financial services experts to explore and make recommendations on ways to improve consumer protection in the marketplace. After extensive stakeholder input, analysis, and deliberation, the taskforce yesterday unanimously issued a comprehensive report that sets forth a sweeping set of recommendations to protect consumers. The report includes several recommendations that NADA and the National Association of Minority Automobile Dealers (NAMAD) jointly submitted to the taskforce last June. Most notably, the recommendations urge the CFPB and the Federal Reserve Board to establish that “good faith implementation of the [NADA/NAMAD/AIADA] Fair Credit Compliance Program or comparable program constitutes one method of preventing discrimination in pricing offered by retail sellers.” This recommendation, coupled with the American Bar Association’s similar recommendation last August, represents the latest in a growing number of calls from diverse groups for government to recognize a dealer’s faithful adoption of the optional NADA/NAMAD/AIADA Fair Credit Compliance Program as a safe harbor against pricing discrimination claims.
Among other recommendations specific to auto dealers, the taskforce recommended that (i) the CFPB not attempt to address concerns about credit discrimination by auto dealers indirectly through enforcement actions against dealer finance sources, but rather enter into a memorandum of understanding with the Federal Trade Commission that recognizes FTC oversight over dealers in this area and (ii) to streamline the adverse action notices consumers receive when their applications for credit are rejected, dealers not be required to issue such notices when each third-party finance source that rejected the consumer’s application issues to the consumer its own adverse action notice.
We applaud the CFPB for initiating this effort and the taskforce for providing recommendations that, if adopted, would further promote consumers’ fair, efficient and affordable access to credit.
NADA Chairman, Regulatory Affairs Committee