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September 29, 2015 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
Dealer Groups: Fifth Third Settlement Costs Consumers and Ignores Solution
Volkswagen Plans to Refit Diesel Vehicles Affected by Emissions Scandal
Mueller Will Strengthen VW Brand's Independence
Barra Wants to End GM's 'Dog Ate My Homework' Culture
GM Has 4 in the Running for Car of the Year Semifinals
Top Stories
Dealer Groups: Fifth Third Settlement Costs Consumers and Ignores Solution

CFPB cuts consumer discounts as much as one half, again rejects DOJ model that would ensure credit compliance and preserve discounts

Leaders of the three major franchised auto dealership industry groups on Tuesday sharply criticized a settlement reached between the government and Fifth Third Bank over allegations of disparate-impact discrimination resulting from Fifth Third's policy of allowing dealers to offer consumers discounts on auto loans.

Under the terms of the consent order, dealers who work with Fifth Third Bank to help consumers obtain financing on new vehicles will now be significantly limited in their ability to get discounted rates at the dealership. As a result, consumers will lose as much as 1.25 percent of available savings on their loans.

"By cutting the discount zone so dramatically, the government has significantly reduced the amount of money consumers can save on auto financing at the dealership," said Bill Fox, Chairman of the National Automobile Dealers Association. "Between 70-80 percent of new-car buyers rely on dealerships to help them find competitive financing, and the fact is that most consumers get a better rate at the dealership because of the rate discounts that are only available at the dealership."

"Consumers have every right to continue benefiting from a system that saves them money every day, but bank-by-bank, percent-by-percent, the CFPB is taking those rights away, and without giving consumers any say in the matter," Fox added.

Monday's announced enforcement action is particularly egregious given the publication last week of private documents in which top officials at the Consumer Financial Protection Bureau admitted that the methodology they use to bring these enforcement actions systematically overestimates potential disparities in interest rates paid by minority and non-minority borrowers.

According to American Banker magazine, "in a series of private documents... CFPB officials repeatedly acknowledge its methodology could overcount the potential discrimination by firms, but say they prefer that to the alternative where bias is underestimated."

"We believe there is no room for discrimination in auto financing. That is why we strongly support the Fair Credit Compliance Program as viable solution to both protect consumers and provide fairness to dealers," said Damon Lester, President of the National Association of Minority Automobile Dealers (NAMAD), referring to the Fair Credit Compliance Program developed by NADA, NAMAD, and the American International Automobile Dealers Association (AIADA), and modeled after a program originally implemented by the Civil Rights Division of the Department of Justice. "While we appreciate the CFPB's commitment to rooting out discrimination, our approach, originally recommended by the DOJ, will be much more effective than the arbitrary nature in which the CFPB is currently proceeding."

"The CFPB's approach, which unnecessarily hamstrings consumers, is truly regrettable given that a viable solution to fair credit risk that preserves dealer discounts has been in front of them the whole time," said AIADA Chairman Bradley Hoffman. "An array of the industry's leading compliance attorneys have said that the NADA/NAMAD/AIADA Fair Credit Compliance Program is the best way to address fair credit risk while also preserving the dealer discounts that save consumers money. Right now, the only reason we can't have both is because of the CFPB, and I think consumers deserve better than what they're currently getting out of Washington, D.C."
Source: NADA/NAMAD/AIADA

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Volkswagen Plans to Refit Diesel Vehicles Affected by Emissions Scandal

Volkswagen Group plans to recall up to 11 million vehicles globally as it tries to address the scandal over its admission that it cheated U.S. diesel emissions tests. VW [Tuesday] said it is working on technical steps to refit diesel cars that contained illegal emission-control software. The automaker did not say how the planned refit would make cars with the "cheat" software comply with regulations, or how this might affect vehicles' fuel efficiency, which is an important consideration for customers.
Source: Reuters
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Mueller Will Strengthen VW Brand's Independence

Volkswagen Group will strengthen the decision-making power of its main VW brand, CEO Matthias Mueller said, sticking to a decentralization strategy his immediate predecessor was working on before leaving in an emissions-testing scandal last week. VW brand "will in future be just as independent from the central corporation as Audi or Porsche," the luxury divisions that are the carmaker's biggest earnings contributors, Mueller told executives in a speech Monday.
Source: Bloomberg
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Barra Wants to End GM's 'Dog Ate My Homework' Culture

About a year ago, Mary Barra gathered General Motors’ top 300 executives at the company’s test track west of Detroit. The CEO asked them to suggest one thing they would change about GM’s notoriously stifling culture. They gave her five, such as more candor and more accountability. Perhaps most important was instilling the “tenacity to win,” Barra said in an interview. That’s proving Barra’s top challenge so far as she pushes the company to switch from survivor mode -- a bankruptcy and safety recall -- to winning in the marketplace.
Source: Bloomberg
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GM Has 4 in the Running for Car of the Year Semifinals

General Motors Co. has four cars in the running for the 2016 North American Car & Truck of the Year, according to a list of semifinalists that has been released. American Honda Motor Co. Inc. has three vehicles in the running on the short list, while Toyota Motor Corp., Nissan Motor Co. Ltd., Mazda Motor Corp. and Kia Motors Corp. each have two. GM’s new 2016 Cadillac CT6, the 2016 Chevrolet Volt, 2016 Chevrolet Malibu and 2016 Chevrolet Camaro are semi-finalists for North American Car of the Year.
Source: The Detroit News
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Quotable
"By cutting the discount zone so dramatically, the government has significantly reduced the amount of money consumers can save on auto financing at the dealership. Between 70-80 percent of new-car buyers rely on dealerships to help them find competitive financing, and the fact is that most consumers get a better rate at the dealership because of the rate discounts that are only available at the dealership."

    -- NADA Chairman Bill Fox, commenting on recent Fifth Third and CFPB settlement on auto loans, NADA, Sept. 29

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