CFPB looking to further regulate dealers
Wednesday, June 12, 2013
Posted by: Michael Geatz
The Dodd-Frank financial reform law, which
passed Congress in 2010, authorized the creation of the Consumer Finance Protection Bureau, and now the CFPB wants to regulate the banks that make consumer loans, the dealers that
refer them, and the service providers that broker them.
The CFPB has been tasked by the Dodd-Frank law
with, among other things, enforcing the Equal Credit Opportunity Act,
which prohibits lending practices that discriminate against borrowers based on
criteria such as gender or ethnicity.
The Marine Retailers Association of the Americas
worked closely with the National Automobile Dealers Association and Robert
Fisher, a New York City lawyer, to exempt marine, RV, and auto dealers from the
jurisdiction of the CFPB when the Dodd-Frank legislation was in the
House-Senate conference. The Bureau has
since been lobbying Congress asking why it allowed this exemption. The Bureau clearly wants to further regulate
boat dealers in the same way as it does when it regulates financial
institutions. When asked during the
lobby campaign, Rep. Frank (D-MA) said there was no intent to include dealers
because dealers were not the cause of the financial meltdown in 2008.
understands some lending institutions have already told dealers that the Bureau
can enforce fair lending laws to prohibit intentional and unintentional lending
discrimination. Banks now suggest that they want to pass the additional
compliance costs on to the consumer through higher interest rates or by placing
limits on their financing programs.
These additional costs would be charged because the CFPB believes there
is discrimination in the lending process.
That is the angle it appears to be using to regulate dealers, since dealers are
clearly exempt from regulatory compliance under Dodd-Frank.
may also look at other changes to consumer financing by either exiting the
indirect marine lending business in favor of a direct-to-consumer model.
is closely watching these developments and is working to retain the dealer exemption to reduce the cost of
compliance to Dodd-Frank but also wants to retain direct and indirect financing
models at low competitive rates to encourage boat sales.
It is becoming clear that the CFPB
wants to eliminate the indirect dealer/broker participation programs and
regulate dealers by making indirect financing models cumbersome and costly for
consumers, dealers, and banks or by placing banks in the position of overseeing
the actions of dealers.
The entire issue has become more complicated
by a recent Obama Administration executive order that says agencies cannot discuss rules and regulations
with interested parties or groups that may be impacted by a rule during the
drafting stage and not until a rule has been published in the Federal