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Inside this issue
Senate Banking Puts CFPB and Cordray in the Crosshairs
In Dealer-Reserve Debate, CFPB, NADA and American Honda Finance Strive to Move Ball
NADA Files Request to Make CFPB Memo Public
Strong Truck Prices Contribute to More 'Stable' Used-Car Depreciation
Passion, Luck Turned Car Washer into Dealership Owner
Top Stories
Senate Banking Puts CFPB and Cordray in the Crosshairs

Call for reform, oversight and restructuring for unfettered regulator

The director of the Consumer Financial Protection Bureau appeared before the Senate Banking Committee on Wednesday for his twice-a-year legislative grilling, where lawmakers raised ongoing concerns about the bureau’s massive data collection, its management, its lack of oversight and its overspending. Chairman Richard Shelby, R-Ala., noted that the CFPB has grown to over 1,450 employees and it has recently expanded enforcement actions to cover telecom companies and broadened its authority over the auto finance industry. “These actions, like others undertaken by the bureau since its formation, have not been without controversy. Many would say that some of them go beyond what Congress envisioned in Dodd-Frank,” Shelby said in prepared remarks. “In addition to concerns with recent regulatory actions, issues remain with the Bureau’s lack of accountability.”
Source: HousingWire.com

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In Dealer-Reserve Debate, CFPB, NADA and American Honda Finance Strive to Move Ball

Last month, American Banker reported that the Consumer Financial Protection Bureau had cited the finance arms of Toyota, Honda and Nissan for discriminatory auto-lending practices. What happened since then is very telling about the state of the dispute over dealer-arranged auto loans. On Tuesday, the Department of Justice said American Honda Finance Corp. agreed to pay up to $25 million to settle U.S. claims that minority borrowers were overcharged for auto loans. A day earlier, the National Automobile Dealers Association launched a push to find out how the CFPB’s moves could affect dealers. NADA filed a Freedom of Information Act request for access to an internal bureau memo that may shed light on the agency’s goals regarding dealer reserve.

The CFPB has previously said that it wants lenders to switch to nondiscretionary compensation for dealers, such as a flat fee or a fixed percent of the amount financed, to eliminate discrimination. But this may be the first time that the CFPB has flat-out stated in writing that its goal is essentially to control dealers’ compensation.

The American Banker report quoted a memo sent by three agency officials to CFPB Director Richard Cordray describing how proposed settlements with the finance arms of Honda, Toyota and Nissan would advance the limiting of dealer discretion. “The significant limitation of dealer discretion, which in turn reduces fair lending risk, is one of the goals we have been seeking with respect to the indirect auto matters, and this settlement proposal attains that goal,” Jeffrey S. Morrow, Jane M.E. Peterson and Rebecca J.K. Gelfond wrote in a June 16 memo to Cordray about the proposed settlements, according to American Banker.

The CFPB has jurisdiction over lenders, not dealers. The goal mentioned in the memo makes it seem as if the agency wants to regulate dealers through lenders. “The Bureau’s actions have caused many, including both Republican and Democratic members of Congress, to question whether the CFPB has attempted to skirt its jurisdictional boundary in an effort to regulate dealers,” NADA said in a statement. In March, Cordray told Congress that he is aware and respectful of the fact that the CFPB cannot regulate dealers.
Source: Automotive News


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NADA Files Request to Make CFPB Memo Public

The National Automobile Dealers Association filed a Freedom of Information Act request Monday, seeking to make a Consumer Financial Protection Bureau memo about limiting dealer discretion public. The NADA believes the inter-agency memo undermines the bureau’s long-standing claims that it is not targeting auto dealers through enforcement actions. The memo was initially acquired by American Banker, which reported on June 30 that the CFPB plans to cite three major auto lenders — American Honda Finance Corp., Toyota Motor Credit Corp. and Nissan Motor Acceptance Corp. — for allegedly allowing their dealer partners to charge higher interest rates on auto loans to minority buyers. According to the news source, the CFPB will be offering the finance sources the chance to forgo civil penalties in exchange for cutting the price discretion that they offer dealers by roughly half.
Source: Auto Dealer Monthly

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Strong Truck Prices Contribute to More 'Stable' Used-Car Depreciation

Not surprisingly, used-vehicle depreciation slowed a bit last month, after May’s market correction stemming from tax season highs. And with relatively stable depreciation predicted for the rest of 2015, NADA Used Car Guide explained that strong prices for trucks are making up for weaker rates in among the car segments. According to the latest Guidelines report from NADA Used Car Guide, prices of pre-owned vehicles up to eight years in age dropped by 2.5 percent in June, compared to the 3.2-percent decline see during the same month last year.
Source: Auto Remarketing

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Passion, Luck Turned Car Washer into Dealership Owner

In a twist of fate, Sam Slaughter started washing cars as a teenager at a dealership he now owns. "I got a summer job at Sellers Pontiac, and I fell in love with the retail car business," said Slaughter, now-52. "I went to the University of Michigan, ended up working for GM. But I always had this dream to get in the retail car business." So at 30, he called his former boss, Bob Sellers, and asked him if he could buy him lunch and seek his advice on how to get his own car dealership. The lunch, Slaughter said, turned into a four-hour meeting, and Sellers later offered Slaughter a job.
Source: Detroit Free Press 

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Quotable
"... this may be the first time that the CFPB has flat-out stated in writing that its goal is essentially to control dealers' compensation."

    -- Hannah Lutz, finance and insurance reporter with Automotive News stated in a blog, July 15. (The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, prohibits the bureau from regulating dealers.)

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