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November 25, 2015 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
House Committee Accuses CFPB of Improper Auto Lending Crackdown
Consumer Watchdog Pushed Discrimination Case on Vulnerable Firm: Report
Forecast: U.S. Light Vehicle Sales on Track for Record Year
Takata Saw and Hid Risk in Airbags in 2004, Former Workers Say
German Probe of VW Expands to Include Tax Evasion
GM Considering Contracting Out Cutaway Van Production
FCA's New College Program for Dealer Staff & Families
Top Stories
House Committee Accuses CFPB of Improper Auto Lending Crackdown

The Consumer Financial Protection Bureau took "misguided and deceptive" actions in extracting settlements from indirect auto lenders for possible discrimination against minorities, House Republicans said in a report issued Tuesday. The report, released by Republicans on the Financial Services Committee, accuses the CFPB of unfairly punishing the lenders for use of a common compensation practice that allows dealership partners to increase the wholesale rate on loans.

For years the CFPB has been using a theory called disparate impact to cite lenders for unintentional discrimination resulting from their agreements with dealerships, over which the CFPB has no jurisdiction. The CFPB relied on a "flawed" statistical methodology to further its policy aims and exceed its authority, the report said.

"As internal documents … reveal, the bureau's [Equal Credit Opportunity Act] enforcement actions have been misguided and deceptive," the report said. "The bureau ignores, for instance, the lack of congressional intent to provide for disparate impact liability under ECOA, just as it ignores the fact that indirect auto finance companies are not always subject to ECOA and have a strong business-justification defense."
  
Some industry trade groups immediately responded to the report, reiterating their concerns with the CFPB's method for determining disparate impact. Industry proponents have long argued that car costs overall will increase as a result of lowering or eliminating dealers' price discretion.

"The actions of the CFPB are forcing consumers to pay much more than they need to for auto financing, and this report only illustrates the lengths to which the CFPB has gone to hide that fact from consumers and block transparency in their policymaking," Peter Welch, president of the National Automobile Dealers Association, wrote in an email. "Frankly, consumers should be outraged."
Source: American Banker

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Consumer Watchdog Pushed Discrimination Case on Vulnerable Firm: Report

Republicans say Consumer Financial Protection Bureau targeted Ally on likelihood of settlement to gain restructuring approval

When federal regulators launched a crackdown on alleged discrimination in auto lending two years ago, they knew their methodology would be questioned. But they calculated they could secure a market-shaping settlement by going after a company unlikely to fight the charges because it needed to avoid a complaint to clinch government approval for a broader restructuring.

That is the conclusion of a report, based on internal documents and emails written by the staff of the Consumer Financial Protection Bureau, released Tuesday by congressional Republicans who have long criticized the discrimination probe. “Some of the claims being made in this case present issues…that would pose litigation risks…,” CFPB staff members wrote in one 2013 memo addressed to the bureau’s director, Richard Cordray, which was included in the report.

But such concerns, the officials said in the same 23-page document, would be offset by the likelihood of a settlement by the target company, Ally Financial Inc.  “Ally may have a powerful incentive to settle the entire matter quickly without engaging in protracted litigation,” the agency’s lawyers wrote, noting that the company’s failure to secure approval to become a holding company would force it to divest itself of key businesses, primarily its insurance subsidiaries.
Source: The Wall Street Journal

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Forecast: U.S. Light Vehicle Sales on Track for Record Year

A WardsAuto forecast calls for U.S. light-vehicle sales to reach an 18.4 million-unit seasonally adjusted annual rate in November, leading to the first 3-month streak of 18 million-plus results. The forecasted SAAR would be the highest monthly outcome since July 2005’s 20.6-million. The report calls for 1.33 million light vehicles to be delivered over 23 selling days in November.
Source: WardsAuto

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Takata Saw and Hid Risk in Airbags in 2004, Former Workers Say

Alarmed by a report a decade ago that one of its airbags had ruptured and spewed metal debris at a driver in Alabama, the Japanese manufacturer Takata secretly conducted tests on 50 airbags it retrieved from scrapyards, according to two former employees involved in the tests, one of whom was a senior member of its testing lab. The steel inflaters in two of the airbags cracked during the tests, a condition that can lead to rupture, the former employees said. The result was so startling that engineers began designing possible fixes in preparation for a recall, the former employees said.
Source: The New York Times

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German Probe of VW Expands to Include Tax Evasion

German prosecutors said Tuesday they have widened their investigation of Volkswagen to include suspicion of tax evasion after revelations that some of its cars were emitting more carbon dioxide than officially reported. Braunschweig prosecutor Birgit Seel told The Associated Press that the investigation was focused on five Volkswagen employees but would not release their names. The focus of the investigation is on tax breaks Volkswagen received for producing low-polluting cars that it might not have qualified for if the emissions had been correctly reported, Seel said.
Source: The Detroit News

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GM Considering Contracting Out Cutaway Van Production

General Motors Co. may be looking to move production of cutaway vans as early as late next year from its Wentzville Assembly Plant in Missouri to AM General, according to an internal message shared with workers in the plant Monday. Moving production of the cutaway vans is being studied to free up more production for the popular-selling Chevrolet Colorado and GMC Canyon midsize trucks, according to a source familiar with the review.
Source: The Detroit News

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FCA's New College Program for Dealer Staff & Families

On Monday, FCA US highlighted the national rollout of its Degrees@Work program and the newly developed Degrees@Work Family offering with Strayer University, designed to provide a no-cost, no-debt college degree to participating brand dealership employees and their immediate family members. Officials hope the expanded Degrees@Work program and the new Degrees@Work Family offering will enable FCA US dealerships to attract top talent, improve the skillset of existing employees, lessen the burden of paying for college for families and significantly increase employee retention.
Source: Auto Remarketing

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Quotable
"The actions of the CFPB are forcing consumers to pay much more than they need to for auto financing, and this report only illustrates the lengths to which the CFPB has gone to hide that fact from consumers and block transparency in their policymaking. Frankly, consumers should be outraged."

     -- NADA President Peter Welch, commenting on the report, Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending, issued by the House Committee on Financial Services, American Banker, Nov. 24

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