It's Halloween, time for our second annual look at the monsters under the F&I bed.
A year ago, I noted that while the Consumer Financial Protection Bureau had made some ominous noises, it had studiously avoided talking about auto loans. Still, dealers and lenders were worried. "There's nothing scarier than the unknown," I wrote.
This year we know a lot more about how the CFPB thinks the indirect auto lending model should change. But that knowledge hasn't made the CFPB less frightening to the industry.
In March, the CFPB told lenders they should find a way to eliminate dealer discretion in setting the dealer reserve -- the amount dealers are allowed to add to the interest rate on an auto loan as compensation for having arranged the loan. The bureau suggested that lenders should either monitor dealership lending practices much more closely or replace the dealer reserve with flat fees. That way, legally protected classes of borrowers, such as minorities or women, would pay the same fees as everyone else, the CFPB said.
Lenders and dealers complain there's still an element of the unknown to all this. The CFPB still hasn't discussed the details of the data it uses to identify the protected classes it's trying to protect. But the general outlines are clear, and the CFPB is clear it expects changes to be made.
So this year the CFPB is perhaps a bit less scary than a complete unknown. But it's still pretty darn threatening to the status quo.