Mulvaney to Steer CFPB Regulation Away From Dealers

The Consumer Financial Protection Bureau will no longer instruct auto lenders on how to govern dealership practices, Acting Director Mick Mulvaney said during a speech Tuesday at the  American Bankers Association conference.

The comments were in line with previous statements Mulvaney made in regards to “not pushing the envelope,” but in this speech he took went a step further to specifically call out how the CFPB under former Director Richard Cordray targeted dealerships, according to reports. While the CFPB does not have authority to regulate dealerships, the regulator has used its power over lenders to make the financial institutions themselves police their dealer partners.

“We are going to do what the law says, but not what the law doesn’t say,” Mulvaney said in reference to Dodd Frank’s restrictions on regulating dealers. “We are going to look at those, we are going to follow those and we’re going to abide by those [limitations].”

Chief among the policies that affect dealerships is the CFPB’s bulletin on dealer markup. The policy encourages lenders to lower caps on how much dealers can increase the interest rate on loans above what the lender has approved. The rule was designed to limit racial discrimination during the finance process.  

Earlier this month, the Senate passed a bill that would eliminate this guidance and prevent the bureau from making future rules regarding this policy. A vote in the house is expected to reach the floor by early May.

It’s unclear what practical effect Mulvaney’s comments have on the auto finance space. In December 2016 — prior to Mulvaney taking the reins — head of the now defanged Fair Lending office Patrice Ficklin was already signaling a reprioritization away from auto-lending issues.

“Because the Consumer Bureau is responsible for overseeing so many products and so many lenders, we re-prioritize our work from time to time, to make sure that we are focused on the areas of greatest risk to consumers,” Ficklin wrote in a blog post at the time. “For example, we have examined over a dozen of the nation’s largest auto lenders and achieved important market awareness and movement, and we believe that a wide range of supervisory compliance solutions tailored to each lender will work to secure and advance our progress in protecting consumers.”

Still, dealers and lenders alike are eager to see the CFPB’s dealer markup rules eliminated through legislation.

“We’re mostly on flat [rates] with our captives,” said Jesse Hord, chief executive of Keeler Motor Car Company in Albany, NY. “I think we’ll see some dramatic change in the market,” if the dealer markup rules are eliminated.  

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