NADA was instrumental in getting franchised auto dealerships exempted from the bureau's jurisdiction, Westcott said, but "it's come back another way" at dealers.
The bureau is pressuring auto lenders to alter the indirect lending model practiced by dealerships.
Under the indirect model, a dealership acts as a middleman between a consumer and a lender. As compensation for that role, the dealership tacks on a bit of interest to the auto loan -- usually less than 1 percent on average, according to NADA -- called dealer reserve.
Dealerships' discretion in setting the customer's final interest rate is an issue for the bureau. In March, the bureau warned lenders it would hold them liable for dealership decisions in setting interest rates if those decisions resulted in legally protected classes of borrowers, such as minorities, paying higher interest rates, even if no discrimination was intended.
As a remedy, the bureau suggested that lenders switch to paying dealerships flat fees for arranging loans instead of allowing them to add to the lenders' interest rate, called the buy rate, on the loan.
But NADA President Peter Welch told Automotive News that switching to flat fees would turn the indirect lending model on its head.
"When a lender wants to increase its portfolio, what do they do? They lower the buy rate," Welch said. He said dealerships also cut dealer reserve to get more business.
"If you go to flat rates, everybody is the same -- Ford Credit, you name it, everybody. Now if I'm a bank and I want to raise my portfolio, I'm going to increase my flat fee," he said.
"You've taken a market that naturally, competitively, served to lower rates, and ... we think that now that's all upside down. Why would they want to take 17,000 price discounters out of the market?"