CFPB, Justice probe lending at auto manufacturers

CFPB and the Justice Department are reportedly looking into the lending operations of some major auto manufacturers for possible discrimination in lending.

Bloomberg reported that Toyota Motor Credit Corp., American Honda Finance Corp. and possibly up to five other auto lenders affiliated with manufacturers have had requests from CFPB and Justice for information about pricing practices and data that may be related to borrowers’ racial backgrounds.

In related activity, the bureau this March issued Bulletin 2013-02 on the potential for pricing disparities on the basis of race, national origin and possibly other prohibited factors by dealers that facilitate funding for consumers’ auto purchases through indirect lenders. It cautioned lenders that they may be liable under the legal doctrines of both disparate treatment and disparate impact if there are disparities within the indirect lender’s portfolio, the bulletin says – citing the Equal Credit Opportunity Act.

CFPB has direct enforcement and examination authority over depository institutions with more than $10 billion in assets, including the four largest credit unions.

“NAFCU strongly supports fair lending, but the CFPB should not use credit unions as a pass-through to non-regulated auto lenders,” said NAFCU Regulatory Affairs Counsel PJ Hoffman.

NAFCU has aired concerns in the past with CFPB’s approach to indirect lending arrangements, noting the bureau’s guidance appears to put credit unions between auto dealers and the CFPB, which has no direct supervisory authority over auto dealers under the Dodd-Frank Act.

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