JIM HENRY

Regulation forecast calls for rain, former CFPB exec says

Jim Henry is a special correspondent for Automotive News.

LAS VEGAS -- Rick Hackett, a former assistant director for the Consumer Financial Protection Bureau who was the bureau’s liaison to the auto finance industry, predicted the bureau would probably unveil a long-awaited rule next week, defining which nonbanks fall under the CFPB’s jurisdiction.

“Supervision is coming, and soon,” Hackett said Tuesday at the Industry Summit here. He said he was acting as a meteorologist, trying to forecast the CFPB’s actions, which are expected to be revealed Sept. 18 during a field hearing on auto finance in Indianapolis. The CFPB has used such occasions in the past to make policy announcements.

In March, Hackett joined the Portland, Maine, office of law firm Hudson Cook, based in Hanover, Md., which specializes in consumer finance law for auto dealers and auto lenders. At the CFPB, he was assistant director for the Office of Installment and Liquidity Lending Markets.

“My 95 percent prediction is that it is going to rain supervision in Indianapolis a week from Thursday,” he said. “It’s going to be raining on finance companies and not raining on dealerships -- at least, not directly.”

It’s only going to “rain” on dealerships indirectly because franchised, new-car dealers are exempt from the CFPB’s jurisdiction. But lenders aren’t, so the CFPB has acted via lenders to try to affect dealerships.

The CFPB already supervises “very large” banks, thrifts and credit unions, defined as those with assets of more than $10 billion. For the purposes of enforcing the Equal Credit Opportunity Act, the Federal Reserve supervises banks below that threshold.

Among nonbanks -- such as captive finance companies -- the CFPB also has jurisdiction over “larger participants,” but the bureau hasn’t precisely defined what that measurement means. That definition could come next week.

Hackett said it’s unclear how the CFPB will measure the size of a lender -- for instance, by the volume of originations, either in dollars or in the number of contracts, or by the size of a lender’s portfolio.

He said his guesstimate is that the CFPB’s definition of “larger participants” would cover the top 50 to 100 auto finance originators. That doesn’t mean other lenders won’t be regulated; it just means they won’t be regulated by the CFPB.

“If you don’t like the weather, don’t shoot the weatherman,” Hackett said. “Just shoot him if he’s wrong.”

Even if he’s no meteorologist, at least Hackett felt free to speak up. When he was with the CFPB, he once read from a script at an auto finance conference and refused to answer questions.

You can reach Jim Henry at autonews@crain.com

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