BB&T Dealer Finance, one of at least two major auto lenders to launch a flat-fee dealer compensation model after a CFPB crackdown on finance reserve, will end its flat-fee program in March in favor of a traditional retail pricing plan.
BB&T Dealer Finance, a unit of BB&T Dealer Financial Services in Greensboro, N.C., began offering dealers a flat fee for arranging auto loans in 2015.
The Consumer Financial Protection Bureau has said that dealerships' discretion to vary the amount of finance reserve they take on deals has resulted in minorities being charged higher interest rates for auto loans than nonminority borrowers with similar credit, even if no discrimination was intended. The bureau has urged auto lenders to switch to flat fees to eliminate the risk of discrimination.
BB&T's new program will include a maximum finance reserve rate spread of 2 percentage points on loans up to 75 months and a maximum finance reserve amount of $5,000, spokesman Brian Davis told Automotive News last week.
After the switch to flat fees, BB&T's volume decreased, he said. In the fourth quarter, BB&T's auto loan balance fell about 6 percent from the year-earlier period to $13.4 billion.