The National Automobile Dealers Association minced no words this week when I asked for a comment on the Consumer Financial Protection Bureau’s new “Ask CFPB” consumer education Web site.
“The CFPB’s website unfortunately contains statements that are both distortive and contradict other statements that it has made,” Paul Metrey, NADA’s chief regulatory counsel for financial services, privacy and tax, wrote to me in an e-mail.
The CFPB site was announced last week. It includes a tip to consumers to ask dealerships what the buy rate is on their auto loan. The CFPB site says consumers “qualify” for their loan at the buy rate.
The Web site also suggests that consumers should offer to pay dealers the buy rate plus a flat fee rather than the buy rate plus any additional interest. The CFPB Web site doesn’t say so, but that additional interest is dealer reserve, the main way dealerships make money in F&I, along with selling F&I products.
Metrey says dealerships aren’t obliged to disclose the buy rate. He says the Federal Reserve Board ruled years ago that a customer’s final annual percentage rate -- which is always disclosed -- was more relevant for consumers to compare rates.
In earlier statements, the CFPB has said dealerships provide a valuable service when they arrange loans. Which is why, Metrey points out, “dealers should be compensated for this service and the Bureau should not use terminology that suggests that dealers are charging consumers more for financing than is otherwise available to them.”