On February 12, the U.S. Chamber of Commerce sent a letter to CFPB Director Richard Cordray outlining three specific areas in which the Chamber is “seriously concerned that the bureau is not working toward clear, evenly applied, economically sound standards.” Those areas are auto lending, the definition of “abusive” acts or practices and legal liability for the actions of service providers. The entire 16-page letter can be read here.
The Chamber questioned the CFPB’s recent actions in the auto lending market. Although Dodd-Frank specifically exempted dealerships engaged in indirect auto financing from the CFPB’s jurisdiction, the Chamber claims that the CFPB “is seeking to regulate the practices of auto dealers—over whom it has no jurisdiction—by holding liable the banks and other financial institutions that provide auto loans.” The liability stems from the typical method of compensating dealers for their role in bringing together lenders and auto purchasers. That amount is typically set by the dealer and paid by the consumer. The Chamber fears that the CFPB plans to use data associated with those fees to prove disparate-impact discrimination by the banks and financial institutions. According to the Chamber, by suggesting this policy, “the bureau has created enormous uncertainty in the auto finance market, threatening to raise the cost of credit and drive the industry to untested business models that could be harmful to consumers.”
The Chamber also took exception to the CFPB’s lack of guidance on the meaning of the term “abusive” as it appears in Dodd-Frank. So far, the CFPB has continued to use the vague statutory definition, leaving financial institutions with no set principles to put in place to avoid CFPB scrutiny in the future. “We respectfully request that the CFPB issue formal guidelines in this area,” reads the letter. The “abusive” term triggers CFPB action.
Finally, “[t]he bureau has created unnecessary ambiguity regarding the scope of a financial services company’s liability for the actions of a service provider,” the Chamber writes. With no statutory guidance on the issue, the Chamber is urging the CFPB to begin the process of writing a rule that clearly spells out the parameters and extent of such liability. In the absence of a clear rule, the Chamber said that it would be unfair to impose any liability. “If the bureau identifies areas in which it wants to fundamentally alter the rules, it should take the time to write new standards rather than rely on one-off enforcement and press release warnings,” the Chamber wrote in its letter.