JIM HENRY

Who distorted what? Wording of CFPB statement will get its own investigation

Jim Henry is a special correspondent for Automotive News.

The ombudsman’s office for the Consumer Financial Protection Bureau said it would conduct an independent review into complaints that the CFPB’s press releases don’t match the consent orders they describe -- something auto finance insiders have complained about bitterly but privately, for fear of provoking the bureau.

The complaint: that the press releases overhype the wrongdoing alleged in the consent orders.

Lenders review and sign consent orders before they are published. They include standard language in which lenders “neither admit nor deny” the allegations against them. But in some cases, lenders and their supporters have been shocked at the press release that is supposed to describe the same set of facts.

‘Distorted’

For example, the press release for a consent order involving First Investors Financial Services Group Inc. last August called the company “an auto finance company that distorted consumer credit records for years.”

In contrast, the consent order itself said the company was responsible for a vendor’s inaccurate reporting of customer data due to a faulty computer program -- even after First Investors Financial Services group knew it had a problem with the accuracy of customer data.

OK. Under the circumstances, that technical problem was no excuse. As CFPB Director Richard Cordray said in a press conference announcing the consent order, “using a flawed computer system does not get you off the hook.”

However, the consent order doesn’t say the company purposely “distorted” the data. The consent order cites inaccuracy, but it doesn’t even contain the word “distort.”

Discrimination?

Or consider an earlier example: a December 2013 consent order between Ally Financial and both the CFPB and the U.S. Department of Justice.

The regulators accused Ally of policies that allowed discrimination because the lender let dealerships determine the size of their dealer reserve. Dealer reserve is a small amount of interest a dealership adds to the lender’s buy rate, as compensation for helping arrange the loan. The CFPB says that opens the door to discrimination against minorities and others.

Compared with the dry legalese of the consent order, the language of the CFPB press release was much harsher. It accused Ally of “harming more than 235,000 minority borrowers.” The same day the press release and the consent order were published, Ally issued a statement denying that it tolerated discrimination.

‘Independent review’

In her annual report for the 2014 fiscal year, which ended Sept. 30, CFPB Ombudsman Wendy Kamenshine said that based on “individual complaints,” she would look into the situation.

The report, which was submitted Nov. 24, promised that, “In FY2015, the Ombudsman will conduct an independent review of consent orders and their corresponding CFPB press releases.”

You can reach Jim Henry at autonews@crain.com

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