http://www.autonews.com/apps/pbcsi.dll/storyimage/CA/20160407/RETAIL07/160409823/AR/0/AR-160409823.jpg
Cordray: The majority of relief made through the CFPB’s enforcement actions have revolved around “cases where one or more of the claims involved deception — lying to customers or prospective customers.”
Consumer Financial Protection Bureau Director Richard Cordray defended the bureau’s use of regulation by enforcement to senators on the Committee on Banking, Housing and Urban Affairs, during the bureau’s semi-annual report to Congress hearing on April 7.
Senators pressed Cordray on the agency’s using enforcement, rather than rulemaking, to set an auto-lending standard, but he maintained that regulation by enforcement is the bureau’s best option. The CFPB has issued enforcements against major auto lenders — including Ally Financial, Fifth Third Bank, American Honda Finance Corp., and Toyota Financial Services — that limits the lenders’ ability to adjust dealers’ retail margins on auto loans.
The bureau did so without making a rule.
“What concerns me is that the rulemaking is an entire process that requires a level of transparency and gets input. There’s a cost-benefit analysis,” said Sen. Pat Toomey, R-R.I. “My worry is that if we’re using enforcement instead of rulemaking, we’re going to miss those pieces.”
‘Deception’
To that, Cordray said the majority of relief made through the CFPB’s enforcement actions revolved around “cases where one or more of the claims involved deception — lying to customers or prospective customers.”
He noted a pattern in the series of consent orders and suggested that if other lenders had practices similar to Ally, Honda Finance, Toyota Financial or Fifth Third, they should “stop doing what they’re doing. Signaling the marketplace very clearly around each enforcement action is an important thing.
“It is compliance malpractice for other institutions not to look carefully at our orders in these cases,” he said, “and not to think, ‘Am I doing the same thing? Am I violating the law? And therefore should I clean that up?’”
He added, “That’s a basic of consistent law enforcement. People can call it regulation by enforcement. I call it good, solid law enforcement.”
‘A nice slogan’
Sen. Mike Rounds, R-S.D., said he was concerned that the auto lenders, who did not admit guilt even though they agreed to change lending standards based on CFPB requests, made a business decision to settle the lawsuit with minimal expense. Cordray, however, continued to defend his stance on regulation by enforcement. He said one option is to do research and adopt a rule. “But another way is to investigate facts of individual circumstances, and if you find an actual violation of law, clean it up. That’s what we do all the time by enforcement.”
He called regulation by enforcement “a nice slogan people like” and said that somehow it’s become “a bad thing.”
Sen. Joe Donnelly, D-Ind., said that many dealers in his state are concerned about the CFPB’s oversight.
The CFPB was “kind of leery about talking with auto dealers” initially, Cordray said, because the bureau has no jurisdiction over dealers and didn’t want to “cross that line.”
‘We respect that line’
But, Cordray added, the CFPB is willing to take dealer input, “as long as they understand that we respect that line.”
He said he understands dealers’ interest and concern, but “if we find problems in auto lending programs, we have to deal with them.”
Sen. Jerry Moran, R-Kan., said that the 2013 auto financing bulletin has led to a “more adversarial” relationship between the regulator and the auto industry.
He introduced Senate bill 2663, which he said is identical to House bill 1737. The bill would limit the bureau’s 2013 auto lending guidance. The House bill passed with a 332-96 vote.
“I would encourage my colleagues to join me in accomplishing that legislation,” Moran said. It’s an opportunity not only “to eliminate the guidance,” he said. “It’s an opportunity to improve the process.”
CFPB's Cordray defends regulation by enforcement
No comments:
Post a Comment