Worried about the CFPB? Stay calm

Everyone stay calm.

That's David Westcott's message to finance and insurance professionals, even though the chairman of the National Automobile Dealers Association admits he is very concerned.

Westcott and many dealership F&I managers worry about how the probes by the Consumer Financial Protection Bureau and the Department of Justice into potential patterns of discrimination in lending could impact car dealerships.

While most dealerships are exempt from the bureau's oversight, it has jurisdiction over buy-here, pay-here dealerships and auto lenders. Any restrictions it places on lenders could impact a dealer's third-party financing model.

The bureau's director, Richard Cordray, has said dealers deserve "fair compensation" for handling finance transactions, but has objected to the potential for discrimination, even if it's accidental, in the setting of the dealer reserve.

Eventually, the bureau's scrutiny could affect how much finance reserve a dealer can earn -- if any.

Still, Westcott isn't ready to hit the panic button.

"We'll keep having communications with the CFPB and talk about the topic and get some transparency from them as well," Westcott says. "In the last two weeks we've had a couple conversations and in the next two weeks we'll have some more meetings with them. They're receptive to that."

Westcott says NADA's discussions with the bureau won't center on the possible smaller finance reserve or how that would impact a dealer's business. Instead, NADA will emphasize how consumers benefit from dealer-assisted financing.

"It offers the consumer an opportunity to negotiate and get better rates," Westcott says. "Are we concerned about the CFPB's notifications to banks? Certainly. But we're most concerned about limiting the access to credit to consumers and their ability to get lower rates."

Westcott says dealers don't need more regulation because the Federal Trade Commission regulates their business, and the FTC has "determined our program is fine."

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