JIM HENRY

CFPB's roster of lender probes grows

Jim Henry is a special correspondent for Automotive News.Jim Henry is a special correspondent for Automotive News.
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Editor's note: An earlier version of this blog misquoted Ally CEO Michael Carpenter on the company's CFPB notice. He said, "Our lawyers disagree with that."

Ally Financial Inc. is just the latest auto lender to acknowledge the Consumer Financial Protection Bureau is investigating it with an eye toward enforcing the CFPB's interpretation of anti-discrimination laws.

"In connection with these investigations, the staff of the CFPB has recently advised us that they believe we have an obligation to prevent independent automotive dealers with which we do business from engaging in certain retail financing practices that the CFPB staff believes violate the anti-discrimination provisions of the Equal Credit Opportunity Act, and that they believe we have failed to fulfill this obligation," Ally said in a quarterly report filed Tuesday, Nov. 5, with the Securities and Exchange Commission.

That legalese likely refers to the practice of allowing dealerships discretion within limits to set the dealer reserve. The dealer reserve is the amount dealerships are allowed to add to the interest rate on an auto loan as compensation for acting as a middleman in the finance transaction. The CFPB announced earlier this year it sees dealerships' discretion as an opportunity for discrimination.

In June, Toyota Motor Credit Corp. said in a similar filing the CFPB had requested information regarding its "discretionary pricing practices." In an August filing, American Honda Finance Corp. said it had been contacted by the CFPB too.

Other lenders have filed similar reports. In a conference call for investors and analysts to review its third-quarter earnings, Ally CEO Michael Carpenter didn't have much to say about the CFPB notice, but he did say this much: "Our lawyers disagree with that."

You can reach Jim Henry at autonews@crain.com.

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