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JIM HENRY

Lots of chatter on CFPB and dealer reserve

Jim Henry is a special correspondent for Automotive News

The Consumer Financial Protection Bureau’s effort to cut dealer reserve is sparking a fair amount of online debate.

For instance, bloggers have reacted to a statement from dealer groups warning that reducing dealers’ ability to set customers’ final interest rates would cut competition among lenders. That, in turn, would raise prices for consumers.

The CFPB contends that dealer discretion creates the opportunity for discrimination.

Jeff Sovern, a law professor at St. John’s University in New York, said in a post on the Consumer Law & Policy Blog of the Public Citizen’s Consumer Justice Project that historically, industries often overestimate how much new regulation will increase consumer costs.

Chris Willis, an Atlanta-based attorney whose clients include banks in auto lending, exchanged online comments with Sovern. Willis, who works for the Ballard Spahr law firm, also writes articles for a blog called the CFPB Monitor.

Willis said an auto purchase has many other elements besides the interest rate. Depending on the down payment and the negotiated price of a car, a customer could pay a higher interest rate and still end up with a better deal than a customer who paid a lower rate, he said.

The exchange was cordial on both sides. Other bloggers weighed in, too. Willis called it “an interesting back-and-forth.”

No doubt, there will be a lot more on this topic.

You can reach Jim Henry at autonews@crain.com

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