In deciding to nominate Federal Trade Commission member Rohit Chopra to oversee the Consumer Financial Protection Bureau, President Joe Biden tapped a vocal advocate of regulation by enforcement.
Chopra's appointment as head of the federal watchdog comes at a particularly sensitive time for the auto industry, where subprime customers face heightened scrutiny when applying for auto loans and are all but vanishing from the new-vehicle market.
As an FTC commissioner, Chopra has been an outspoken critic of how some dealerships are compensated for arranging customer financing.
Chopra aired his views on indirect auto lending as part of a particularly egregious case of unfair and abusive practices the FTC pursued against New York dealership Bronx Honda.
The retailer agreed last May to pay $1.5 million to settle a gamut of FTC charges, from deceptive advertising to double-charging consumers taxes on vehicle purchases.
In particular, allegations that management knowingly discriminated against African American and Hispanic car buyers, who, as far back as 2010, were charged "statistically significant" higher markups than similarly situated white customers, were particularly heinous. According to the FTC, "The defendants told employees that these groups should be targeted due to their limited education, and not to attempt the same practices with non-Hispanic white consumers," the agency said in a statement.
In his remarks on the Bronx Honda case, Chopra chided the FTC for not following the lead of Congress in establishing more protections for consumers and against auto lending abuses, particularly members of the military: "Given the many unscrupulous actors that target military families, the FTC's rule-making authority is a particularly useful tool," he said. "Nevertheless, the agency has not even solicited comment or otherwise initiated a rule-making process to combat these harms."
Additionally, Chopra cites other areas pertinent to auto finance the FTC could exact rule-making to mitigate: "fake recall notices, yo-yo financing schemes, deceptive advertising, GPS trackers and kill switches, and add-on products" such as finance and insurance products.
The term of current CFPB Director Kathy Kraninger, appointed by President Donald Trump, officially ends in 2023, though Chopra's nomination suggests her time at the helm won't last much longer. As the light blue wave sweeps across the White House and Congress, dealerships should keep a close eye on compliance concerns in the finance office.