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September 25, 2015 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
The Inside Story of the CFPB's Battle Over Auto Lending
EPA to Change Diesel Tests to Thwart VW-Like Cheating
VW Dealers Say Ousting U.S. Chief Would Be `Catastrophic'
Volkswagen to Name Porsche’s Matthias Müller as New CEO
Commentary: 17 Million Reasons Why Auto Sales Will Remain Healthy
Big 3 Credit Rating Agencies May Downgrade VW
GM’s Barra Says Focus is Unwavering
Top Stories
The Inside Story of the CFPB's Battle Over Auto Lending

The Consumer Financial Protection Bureau has struggled internally with how to end potential discrimination in auto lending, including debating whether it should cite a large lender in the hope of effectively ending the ability of partnering dealers to mark up loans with all lenders. In a series of internal documents reviewed by American Banker, agency officials wrestle with the practice of dealer markup, in which the dealership typically keeps the difference between the rate set by the lender and the one agreed to by the borrower as its compensation. On multiple occasions, CFPB officials suggested to forgo rulemaking and instead use a few high-profile enforcement actions against large auto lenders to do away with dealer discretion, thereby significantly curbing potential discrimination.

Such a plan of attack lends support to what the industry has long feared: that the CFPB's efforts to cite auto lenders for unintentional discrimination was really a means to control competitive price negotiations between lenders and dealers. Auto lenders and dealerships argue that the CFPB's acute focus on dealer markup, a common facet in the industry, won't end discrimination and will likely raise overall auto financing costs for consumers.
Source: American Banker

Editor's note: This article highlights the need for the transparency that "public notice and comment" would provide if H.R. 1737 were enacted. That process, combined with the NADA-NAMAD-AIADA Fair Credit Compliance Policy & Program (based on a Justice Department approach), would identify the most effective tools to address fair credit concerns without increasing the cost of auto financing for consumers.  

In July, the House Financial Services Committee passed NADA-backed H.R. 1737 to rescind the CFPB’s flawed auto finance guidance that would limit or eliminate a customer’s ability to receive a discounted auto loan in the showroom. The bill, which passed by a bipartisan committee vote of 47-10, has increased momentum with 134 cosponsors (77 Republicans and 57 Democrats). H.R. 1737 will likely come up for a full House vote this fall. Dealers should contact their Democratic House members and ask them to cosponsor H.R. 1737, and support H.R. 1737 when it comes to the floor for a vote. Click here for a list of cosponsors. Click here for NADA's issue brief and visit www.nada.org/cfpb for more information.

To learn how consumers save with dealer-assisted financing, click here.
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EPA to Change Diesel Tests to Thwart VW-Like Cheating

The U.S. Environmental Protection Agency plans sweeping changes to the way it tests for diesel emissions after getting duped by clandestine software in Volkswagen cars for seven years. Chris Grundler, head of the EPA's office of transportation and air quality, indicated the agency would add on-road testing to its regimen. VW's sophisticated software allowed its cars to pass tests in the lab and then spew pollution into the atmosphere while on the highway. The revelations meant unwanted scrutiny for the EPA. Its testing procedures have been criticized for being predictable and outdated, making it relatively easy for VW to cheat. What's more, the EPA did not initially uncover the problem; researchers at West Virginia University did, using on-road testing. Grundler says the changes are designed to detect software and other methods automakers might use to rig a test.
Source: Associated Press
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VW Dealers Say Ousting U.S. Chief Would Be `Catastrophic'

Volkswagen AG’s U.S. dealer council vowed “unconditional support” for Michael Horn, head of the automaker’s operations in the market, saying his removal would be “catastrophic.” Horn has been mentioned as one of the executives who might lose his job, after Chief Executive Officer Martin Winterkorn resigned Wednesday in the wake of the German automaker’s admission that it rigged U.S. emissions tests. The admission caused VW to pull cars from dealer lots. “We have been suffering from an outdated product cycle, overpriced product and a deteriorating relationship between the dealer body and Volkswagen for a number of years,” VW’s National Dealer Advisory Council said in a statement Thursday. “That all changed when Michael Horn was made CEO of Volkswagen of North America in January of 2014.”
Source: Bloomberg

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Volkswagen to Name Porsche’s Matthias Müller as New CEO

Management change comes in wake of emissions-test scandal

Volkswagen AG is poised to name Porsche chief Matthias Müller to run the entire company and is demanding resignations from several of the company’s top engineers to confront an emissions-cheating scandal that has spread from the U.S. to Europe. The moves come a day after Chief Executive Martin Winterkorn resigned over a crisis that has cost the company nearly a third of its market value. Mr. Müller’s promotion is expected to be appointed at a meeting of Volkswagen’s supervisory board on Friday, people familiar with the situation said. Mr. Müller, 62 years old, faces the task of steering Europe’s largest auto maker through a maze of investigations and litigation that is likely to trouble the company for years.
Source: The Wall Street Journal

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Commentary: 17 Million Reasons Why Auto Sales Will Remain Healthy

If you want to gauge the economic health of the country, look no further than the retail-auto industry as an economic indicator. The seasonally adjusted annual rate (SAAR) for August soared to 17.8 million-the highest pace since July 2005 and the strongest month in the industry's six-year recovery since the recession. NADA predicts sales of nearly 17.2 million new cars and light trucks this year. And the used-vehicle market is improving as well. New-car dealerships will retail a combined 31 million new and used vehicles this year, an increase of 3.3 percent from 2014. Particular factors have lined up to make it possible for consumers to make purchases, including steady employment growth, low gasoline prices and favorable financing rates on auto loans that will continue. Click here for the full commentary.
Source: NADA
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Big 3 Credit Rating Agencies May Downgrade VW

The three major credit ratings agencies warned they may downgrade Volkswagen AG’s debt because of massive costs expected from the crisis over the automaker’s diesel emissions crisis, as 29 state attorneys general announced they are reviewing the issue. Standard & Poor’s and Moody’s Investor Services on Thursday revised their outlooks on VW to negative. On Wednesday, Fitch warned it may downgrade VW.
Source: The Detroit News
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GM’s Barra Says Focus is Unwavering

Ignition-switch crisis largely over, auto maker is pursuing key performance goals

General Motors Co. Chief Executive Mary Barra said on Thursday the company continues to act with urgency even after resolving major facets of a safety crisis, and said her focus is steadfast on improving profit margins, not chasing market share. Ms. Barra, meeting this week with top managers at a test facility near GM’s headquarters, said the nation’s largest auto maker emerged from recent trials with a fresh eye on improving its performance in certain markets and countries rather than trying to be all things to all people. GM for decades aimed to be the most ubiquitous auto company in the world, leveraging a large stable of brands and manufacturing operations across the globe.
Source: The Wall Street Journal
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"Franchised dealerships are vital American businesses that support individual communities and the nation as a whole. Dealers employ more than 1 million people, providing well-paying jobs that cannot be outsourced."

    -- NADA Chairman Bill Fox, in a commentary on auto sales and the health of the U.S. economy, Sept. 2015

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