BB&T enhances nondiscretionary dealer compensation program

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CFPB to Supervise Nonbank Auto Finance Companies

CFPB to Supervise Nonbank Auto Finance Companies

Today, the Consumer Financial Protection Bureau published its nonbank auto finance company "larger participant" rule and related examination procedures. The final rule allows the CFPB to supervise larger nonbank auto finance companies for the first time. The final rule, largely unchanged from the proposed rule, will take effect 60 days after it is published in the Federal Register.

The final rule extends the CFPB's supervision jurisdiction to any nonbank auto finance company that makes, acquires, or refinances 10,000 or more loans or leases in a year. These companies will be considered "larger participants" and the Bureau may oversee their activity to ensure they comply with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Act's prohibition on unfair, deceptive, or abusive acts or practices.
The Bureau estimates that it will now have authority to supervise about 34 of the largest nonbank auto finance companies and their affiliates that engage in auto financing. The companies together originate around 90 percent of nonbank auto loans and leases. The final rule also defines additional automobile leasing activities for coverage by certain consumer protections of the Dodd-Frank Act.

The CFPB's release suggests that the Bureau's examiners will be looking hard at marketing, credit bureau reporting, debt collection, and fair lending.

Disparate Impact Ruling Expected This Week

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U.S. Bank Monitoring F&I Product Pricing

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Auto Loan Pricing Could Lead to Enforcement

by Darren Waggoner

DEC 1, 2014 1:24pm ET

The pricing of auto loans through dealerships by Toyota Motor Credit Corp., the lending arm of Toyota Motors Corp., could lead to an enforcement action from U.S. authorities, the company said.

The possible action could force the company to reimburse borrowers or lead to a fine.
Ally Financial Inc. last December was forced to pay $98 million to resolve similar discriminatory loan pricing charges from the U.S. Department of Justice and the Consumer Financial Protection Bureau.
The Justice Department and CFPB last week sent a letter to Toyota Motor Credit, stating that its auto lending practices "resulted in discriminatory pricing of loans to certain borrowers in contravention of applicable laws," the company said in a filing with the U.S. Securities and Exchange Commission.

The Justice Department and the CFPB are prepared to bring an enforcement action, the filing said, unless Toyota Motor Credit agrees to a resolution with the agencies voluntarily, including possibly changing its loan pricing policies.

Toyota Motor Credit officials said the company would work with the agencies to reach a resolution.

In April, BMO Harris announced that it was switching to a flat-fee pricing structure, in a move that drew praise from the CFPB.
Discretionary markups are just one area in which auto lenders are facing scrutiny from regulators. The Justice Department, the SEC and the New York District Attorney's Office have all opened inquiries related to subprime auto lending.
Fifth Third Bancorp and Honda's finance arm have also disclosed receiving similar requests for information.