LAS VEGAS -- Auto lenders are reacting to the Consumer Financial Protection Bureau's scrutiny of the dealer reserve by sending reminders -- some not so subtle -- to the front lines of the battle.
Most of the letters delivered to dealers are generic reminders to comply with the Equal Credit Opportunity Act. But in some cases, the letters have questioned whether the loans the dealership has arranged for consumers could have put the lender at risk for charges of discrimination.
"I've seen some of those letters," said David Westcott, chairman of the National Automobile Dealers Association. "Some of them were nicer than others."
During an F&I conference speech here this week, Westcott defended the practice of dealer reserve, which the CFPB claims can lead to discrimination. He also criticized flat fees, the CFPB's method of choice for lenders to compensate dealers.
During a question-and-answer session after the speech, NADA General Counsel Andy Koblenz said dealerships that get the more pointed kind of letter should consult with their attorneys. He said dealerships shouldn't hesitate to question the basis for any accusations of discrimination. He said dealerships should pose the same questions to lenders that NADA has for the CFPB.
"You need to keep asking these questions," Koblenz said. "What's your methodology? Have you studied the market impact of what you propose? Does what you propose really address the problem?"
Westcott said his impression is that there have been few cases in which lenders sent harsh letters to dealers. However, he said, most dealers by now have probably gotten the more generic kind. "I can speak in generalities," he said. "Most dealers have received letters."