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Inside this issue
NADA to House: Repeal CFPBs Flawed Guidance on Auto Lending
CFPB Spurns Request for Internal Auto Loan Memo
Senate GOP Bill Would Hike Recall Fines to $105 Million
Ford Q2 Net soars 44% for Strongest Auto Profit in 15 Years
Fiat Chrysler Forced into Biggest Vehicle Buyback Ever
GM Plans $5B Vehicle Family for Emerging Markets
Mercedes Dealer Donates Full July Net Profits
Top Stories
NADA to House: Repeal CFPBs Flawed Guidance on Auto Lending

The National Automobile Dealers Association (NADA) today urged members of the U.S. House Financial Services Committee to pass H.R. 1737, a bill that would repeal the Consumer Financial Protection Bureau’s (CFPB) flawed 2013 guidance designed to pressure lending institutions into eliminating the availability of auto financing discounts for car buyers.

Currently 126 members of the House, which includes 70 Republicans and 55 Democrats, have cosponsored H.R. 1737, a bill introduced in April by Reps. Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.). The legislation is identical to legislation (H.R. 5403) that garnered 149 bipartisan cosponsors in the 113th Congress.

“As a matter of principle, consumers have the right to negotiate, the right to seek a better deal and the right to choose the loan that’s best for them – but the CFPB has been trying to take that right away,” said NADA President Peter Welch. “Reps. Guinta’s and Perlmutter’s bill will produce a more informed process by requiring the CFPB to study the consumer impact of its policy to eliminate consumer discounts in the showroom, and require public input, transparency and consultation with other affected government agencies.”

Rather than create new regulations, NADA, the National Association of Minority Auto Dealers (NAMAD) and the American International Automobile Dealers Association (AIADA) have issued a compliance program to dealers that would address fair credit risks in the automotive marketplace. The program is based on an existing U.S. Department of Justice model to address fair credit risk. This program is superior to the CFPB’s model, as the DOJ program addresses fair credit risk without decreasing competition and harming consumers.

“When you're paying $30,000 for a car and stretching to do it, consumers should have every possible financial advantage possible,” Welch added. “No government institution should deny that. That's not what Washington is supposed to do.”
Source: NADA

Editor’s note: The House Financial Services Committee is expected to start debate on consideration of the NADA-backed bill H.R. 1737 tomorrow, Wednesday July 29. Dealers are encouraged to contact Members of the Committee to urge a “yes” vote on H.R. 1737. Click here for the Committee list with cosponsors bolded. The committee vote may occur as early as tomorrow afternoon. Click here for NADA's issue brief. For more information go to www.nada.org/cfpb.

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CFPB Spurns Request for Internal Auto Loan Memo

The Consumer Financial Protection Bureau has denied a trade group's request for a document detailing internal agency discussions about pricing limits for Honda's partnering dealers. The National Automobile Dealers Association had filed a Freedom of Information Act request for an internal memorandum dealing with how the CFPB negotiated a proposed settlement with American Honda Finance Corp. The memo — obtained and reported on by American Banker last month — discussed the company's agreeing to lower a cap under which dealers can boost interest rates. A lower cap ultimately was part of the July 14 settlement, which addressed allegations that Honda's partnering dealerships discriminated against minorities.

But the NADA on Monday announced the agency had declined to release the document publicly, prompting concerns by the dealer group that the agency is not being fully transparent about its process. "The CFPB's response only suggests that they have even more to hide than first thought," NADA President Peter Welch said in a press release. According to the memo obtained by American Banker, CFPB officials said that American Honda's agreeing to lower the price discretion for dealers would lower the risk of disparities in loan rates between minority borrowers and white borrowers.

"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, who work in the CFPB's office of fair lending and equal opportunity, wrote in the June 16 memo to CFPB Director Richard Cordray laying out the terms of the proposed deal.

NADA said the statement reveals the CFPB is "seeking to exercise jurisdiction over auto dealers" by controlling the price discretion of indirect auto lenders even though the agency has no direct supervision authority over dealerships. Lawmakers have also raised question about how the CFPB has targeted indirect auto lenders. A House bill due to be considered by the Financial Services Committee on Tuesday would invalidate a March 2013 bulletin the bureau released with compliance guidelines for indirect car lenders.

"The CFPB appears to be way outside the swim lane Congress authorized it to swim in and an increasing number of Democrats and Republicans are justifiably concerned about the agency's secrecy and its actions," Welch said. The $24 million proposed settlement, which the CFPB announced along with the Department of Justice, included the same lower price caps mentioned in the memo. But in response to NADA's July 13 FOIA request, the bureau said the document was "privileged," the group said.

"Ultimately, both the [House's proposal] and NADA's FOIA request are about ensuring government transparency and accountability on behalf of consumers, who simply can't afford to be denied millions of dollars in potential savings without having a say in the matter," Welch said.

A CFPB spokesman said the agency has no further comment about its response to NADA's request.
Source: American Banker
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Senate GOP Bill Would Hike Recall Fines to $105 Million

The Senate’s top Republican introduced legislation to triple the maximum fines for delayed auto recalls to $105 million, up from the current $35 million. Sen. Majority Leader Mitch McConnell, R-Ky., unveiled a revised six-year highway bill Sunday that dramatically hikes fines for delaying recalls. The text was published Monday.

On Friday, Transportation Secretary Anthony Foxx said he wants Congress to add new auto safety provisions to a six-year highway re-authorization bill under debate. Foxx said he is still urging Congress to grant NHTSA sweeping authority to get unsafe vehicles off the road and force dealers to repair recalled used vehicles before selling them. Federal law only requires recalled new cars to be repaired before being sold. The Detroit News reported this week that talks have been ongoing about adding used cars to the bill, but no agreement has been reached. “We think that’s a loophole that needs to be closed,” Foxx said.

The National Automobile Dealers Association and other dealer groups on Monday sent a letter to Congress urging them not to include used car car provisions,saying it would diminish used car values and force dealers to ground vehicles for months awaiting parts.
Source: The Detroit News

Editor's note: The latest substitute for the Senate transportation bill does not include the Blumenthal used car amendment. However, negotiations continue behind closed doors. As the Senate starts to wrap up work on the bill in the next couple of days, NADA remains vigilant on this important issue. Dealers should continue to urge a "No" vote on the controversial Blumenthal amendment, explaining that it would instantly diminish the value of millions of customer trade-ins while not guaranteeing that a single recalled vehicle gets fixed.

Contact information for the Senate offices is available at www.senate.gov. Click here for NADA's issue brief on vehicle recall legislation and click here for talking points opposing the Blumenthal amendment.
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Ford Q2 Net soars 44% for Strongest Auto Profit in 15 Years

Ford Motor Co. said its second-quarter net income increased 44 percent from a year earlier to $1.9 billion, marking the best quarterly profit from its automotive business since 2000. The automaker posted a record quarterly profit in North America, despite lackluster sales in the U.S., as the redesigned F-150 and other vehicles commanded higher prices. Revenue declined 0.3 percent globally, but operating margins rose to 7.2 percent, from 6.6 percent a year ago. Ford said revenue rose 10 percent in North America and that margins there could end the year in the upper end of the 8.5 percent to 9.5 percent range it previously projected. The performance significantly beat analyst estimates. Ford’s after-tax profit was equal to 47 cents a share -- the consensus on Wall Street was 37 cents.
Source: Automotive News

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Fiat Chrysler Forced into Biggest Vehicle Buyback Ever

NHTSA Administrator Mark Rosekind said Fiat Chrysler Automobiles must offer buybacks for nearly 200,000 recalled Ram pickups and Dodge SUVs because the company failed to offer an effective repair. The National Highway Traffic Safety Administration said Monday it imposed the largest vehicle buyback program in its history on Fiat Chrysler Automobiles because the automaker failed to come up with an adequate remedy to fix nearly 200,000 pickup trucks and SUVs it recalled in 2013. The buyback program is one component of a 37-page consent order that also includes the largest ever civil penalty imposed by the agency. The $105 million in civil penalties and the buyback program are the outcome of NHTSA's investigation into FCA's lax repair and recall completion rates for 23 separate recalls covering more than 11 million vehicles. It applies mostly to Ram trucks and Dodge SUVs made between 2008 and 2012 that were part of three separate recalls announced in 2013.
Source: Detroit Free Press
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GM Plans $5B Vehicle Family for Emerging Markets

General Motors is planning to spend $5 billion over the next several years to develop a new range of technology-rich small cars, based on a common architecture, that will be built and sold under the Chevrolet name in China, Brazil, India, Mexico and other emerging markets. GM, which is co-developing the architecture and engines with Chinese partner SAIC Motor Corp., aims to have the first of the cars in production by 2019 and expects the program eventually to account for sales of more than two million vehicles a year, GM President Dan Ammann said.
Source: Automotive News
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Mercedes Dealer Donates Full July Net Profits

Mercedes-Benz of The Woodlands, a Texas dealer near Houston that opened earlier this year, has announced that it plans to donate 100 percent of its new profits from the month of July to the Johnny Mac Soldiers Fund and the Texas Children’s Hospital. All net profits from vehicle sales, service visits and other transactions conducted at the dealership in July will go to support the two organizations. “As a local and privately owned business we can support our community in ways that big companies simply cannot,” said Joe Agresti, the dealership’s president. “We believe we have a social responsibility to lead local business leaders in supporting the local community.”
Source: Auto Remarketing
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Quotable
"As a matter of principle, consumers have the right to negotiate, the right to seek a better deal and the right to choose the loan that’s best for them – but the CFPB has been trying to take that right away."

   
-- NADA President Peter Welch, commenting on H.R. 1737 to repeal the CFPB's flawed 2013 guidance designed to pressure lending institutions into eliminating the availability of auto financing discounts for car buyers, NADA, July 28

 

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