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MIAMI BEACH, Fla. — What do you pay for chicken at the grocery?
Texas auto dealer Robert Turner and Patrice Ficklin, fair lending director at the Consumer Financial Protection Bureau, used the price of chickens at the supermarket to explain their positions on auto loan pricing during a lively give-and-take following Ficklin’s speech at the annual National Association of Minority Automobile Dealers conference here.
As his dealer colleagues listened intently, Turner said every business buys goods at a wholesale price and sells them at a retail price. For example, grocery stores buy chickens for wholesale prices and then sell them at higher retail prices to cover overhead expenses, he said.
“Why should this industry be any different?” said Turner, in what became a lengthy soliloquy.
“All the dealers in the country provide a service. We spend millions of dollars to make sure that every consumer not only has the automobile they want to drive but also has the ability to keep that car rolling. It costs dealers millions of dollars to pay people.
Ficklin: Dealers should be compensated.
“We’re packaging deals, we’re trying to make things happen for consumers, we’re trying to put more deals together. The more deals we put on the road allow opportunity for more [vehicles] to be produced, which puts checks in more peoples’ pockets who are in the manufacturing business and the people who are in the business of putting parts together,” Turner said. “We keep America rolling. And we seem to get hit left and right for trying to do a good job of that.”
The crowd of dealers burst into applause.
Ficklin said the CFPB agrees that dealers provide a valuable service by matching consumers with financial services and should be compensated for the work they perform. She said the problem is the discriminatory outcomes that result.
“If you analyze the portfolios of many indirect lenders, what you do see is a disproportionate number of non-Hispanic whites walking away with what you call the wholesale rate” on their auto loans, said Ficklin, who is in charge of oversight and enforcement of fair lending laws.
“That says to me, that’s not a wholesale rate because a whole lot of white consumers are walking away with it,” she said.
“If you went into the grocery store and white folks got the chickens at the wholesale rate and black folks and Hispanic folks got the chickens at the retail rate, you would be concerned about that.”
Turner, who owns two Chevrolet dealerships and a Subaru store, launched into his comments by telling the CFPB official: “You guys have your view of what we do; I would hope at some point you’d talk to some of us and get our view of what we do.”
Education
He also told Ficklin that her agency should get more involved with educating consumers about credit, credit scores and economics in general.
She responded that the CFPB works with other agencies to develop and roll out financial education programs for children in elementary and middle school and programs for adults.
Turner later told Automotive News he doesn’t mind saying what other dealers are thinking but don’t want to say publicly.
“My daddy told me something years ago: If you see a good fight, get in it,” said Turner, who is a past chairman of the GM Minority Dealer Advisory Council.
He said much of what dealerships do in arranging financing for customers is due to many people not understanding the fundamentals of financing, such as what it takes to have good credit scores. That is mostly because economics is no longer taught in schools, he said.
If dealers are put into a position where they cannot make a fair profit, minorities will suffer the most because there will be fewer opportunities for them to get car loans, Turner said.
“We have to teach people how to have good credit,” he said. “Until we do that, they have to borrow money at whatever rate they have to.”
‘Greater understanding’
The CFPB, by law, has oversight over lenders but not dealers. The bureau, which celebrated its fifth anniversary last week, has gone after banks, captive finance companies and other indirect auto lenders that it said followed policies which led, even if inadvertently, to discriminatory lending.
Tuesday’s presentation was the second year in a row that Ficklin has addressed dealers at NAMAD’s annual conference.
Following her speech, Ficklin told Automotive News she attended the session because NAMAD’s leaders believe it’s important for her to hear dealers’ concerns about the CFPB directly from dealers and for dealers to hear about the CFPB directly from her.
She also noted that she has spoken directly with dealers in sessions sponsored by the National Automobile Dealers Association and the American Financial Services Association.
“I’m always happy, if my schedule allows, to come and be in dialogue,” she said.
“I learn whenever we have these types of exchanges, and I feel that I have an opportunity to create greater understanding of what we’re trying to do in addressing discrimination.”
Dealer, CFPB exec face off over loan pricing
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