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Inside this issue
House Financial Services Committee Chairman to CFPB on Indirect Auto Investigations: Slow Down. Pull Over. And Show Us Some ID.
Toll From GM Ignition Flaw Seen Rising as Victims Sought
NY Dealers Have Tesla Ban in Sights
VW, Toyota Poised to Make History
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Top Stories
House Financial Services Committee Chairman to CFPB on Indirect Auto Investigations: Slow Down. Pull Over. And Show Us Some ID.
By John L. Culhane, Jr.

Since last March, when the CFPB issued Bulletin No. 2013-02, its highly controversial release warning banks and finance companies that purchase motor vehicle installment sales contracts that, under existing law, any dealer finance charge participation may violate the Equal Credit Opportunity Act and Regulation B, numerous members of Congress have been unsuccessful in seeking clear and precise information from the CFPB as to how it determines that practices that are neutral on their face are nonetheless discriminatory. Obviously tiring of month after month of what he termed “a pattern of obfuscation” on the part of the CFPB, on Friday, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) sent a letter to CFPB Director Richard Cordray, with a copy to Mark Bialek, the Inspector General for the FRB and CFPB, threatening a Congressional subpoena unless, by March 13, the CFPB turns over detailed information regarding its methodology in general and the analysis it employed in connection with its first auto finance fair-lending enforcement action in particular.
More specifically, the letter seeks (1) the numerical thresholds at which the CFPB determines that there is a disparate impact for different groups of consumers, (2) the proxies it uses to determine a consumer’s background, (3) the factors it holds constant to ensure that any pricing differentials are attributable to a consumer’s background, (4) the controls it employs to confirm that those consumers being compared are similarly situated, (5) the potential explanatory variables put forth by the respondents in the enforcement action, (6) the reasons for asserting that the respondents failed to provide adequate evidence that those variables appropriately reflected legitimate business needs, and (7) the regression analysis model used in the enforcement action.
The issuance of a subpoena would require a majority vote on the part of the Committee, and is thus by no means a foregone conclusion, but should a subpoena be issued, the continued failure of the CFPB to respond could have significant and possibly even dramatic consequences, as Congress has three very different options to pursue in these circumstances. First, Congress may sue in federal court seeking a civil order mandating compliance. Second, Congress may also certify a contempt citation seeking criminal prosecution by the Department of Justice. And third, Congress may exercise its inherent power, upheld by the Supreme Court, but not used since 1935, to detain, imprison, and try anyone who fails to produce requested information.
Source: CFPB Monitor

Copyright © 2014 by Ballard Spahr LLP. Reprinted with permission. Content is general information only, not legal advice or legal opinion based on any specific facts or circumstances.

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Toll From GM Ignition Flaw Seen Rising as Victims Sought

The death toll related to an ignition flaw in eight small car models that General Motors Co. sold a decade ago is likely to climb, say lawyers and safety advocates. Automakers often make upward revisions to fatality figures related to recalls as they unearth fresh information, while attorneys are racing to line up plaintiffs seeking compensation for alleged wrongful deaths or injury. GM’s liabilities are also poised to rise as lawyers and safety advocates press the biggest U.S. automaker to pay restitution to victims even from before GM’s 2009 bankruptcy reorganization, which shielded the new GM from the old company’s liabilities. GM, which said it has identified 12 deaths in connection with the recall of 1.6 million Chevrolet, Opel, Pontiac and Saturn models, has said it continues to review data and information related to the recall.
Source: Bloomberg

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NY Dealers Have Tesla Ban in Sights

Memo to billionaire entrepreneur Elon Musk: The Empire State could be next. New York’s auto dealers are pressing state lawmakers to ban the direct sale of cars, a move made earlier this week by the Gov. Chris Christie administration in New Jersey. Car dealers in New York said they hope to ban Tesla’s direct-sales method as soon as this summer, sources told The Post. If it happens, New York will become the sixth state to ban or limit direct sales from Musk’s popular electric-car company, Tesla Motors. “My hope is that we are going to be the next state,” Mark Scheinberg, the president of the Greater New York Automobile Dealers Association (GNYADA) told The Post on Thursday. “I feel confident.”

In New York, the battle against direct car sales is being waged via a second front: the courts. GNYADA is also appealing a New York court ruling last April that tossed the group’s lawsuit against the New York Department of Motor Vehicles. The group accused the state DMV of breaking existing laws by giving Tesla approval to sell its own cars. The dealerships are open to compromise, said Bob Vancavage of the New York State Automobile Dealers Association — but Vancavage doesn’t think the outspoken billionaire Musk will give even an inch. “I think a lot of billionaires got there by being a certain way,” Vancavage said. “He’s not used to people saying no.”
Source: New York Post

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VW, Toyota Poised to Make History

No automaker has sold 10 million vehicles in a single year but it's very likely that both Toyota and Volkswagen will surpass that milestone in 2014. VW Group CEO Martin Winterkorn says there is a "good chance" his company will reach its goal of 10 million vehicle deliveries this year, which would be four years ahead of schedule. VW Group, which includes the VW, Audi and Lamborghini car brands as well as truckmakers Scania and MAN, sold 9.73 million vehicles last year. In January, Toyota predicted it would sell 10.32 million vehicles in 2014, an increase of 4 percent on its industry-leading 9.98 million vehicle sales in 2013. Toyota’s total includes global sales of the Toyota, Lexus and Scion brands, as well as volume from its Daihatsu minicar and Hino heavy truck subsidiaries.
Source: Automotive News

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"Cutting out the dealer won't lower the price of a vehicle because a factory-owned retail network would have to invest in the same physical assets and bear the same operating expenses as dealers."

    -- NADA, commenting on factory-direct sales, CBS MoneyWatch, March 13    


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