According to a recent Wall Street Journal report, the Consumer Financial Protection Bureau (CFPB) has expanded its investigation into the car loan industry and subpoenaed auto lenders over concerns about some of their financial products, including extended warranties and additional insurance.
During a February 20 Consumer Advisory Board meeting, CFPB Director Richard Cordray said, “From the perspective of the consumer disadvantaged by policies that have a discriminatory effect, it makes no difference whether a lender consciously intended to discriminate.”
The bureau, which was created as part of the 2010 Dodd-Frank financial law, reportedly has additional concerns about whether or not some lenders are offering full disclosure with regard to the loan terms and prices being offered to consumers.
The bureau’s deputy chief of housing and civil-enforcement, Jon Seward, was quoted as saying that the Justice Department will also be investigating auto dealers who offer high-interest loans to consumers with subpar credit ratings.
In a separate interview Seward said, “In response to a question about abusive practices associated with buy-here, pay-here dealerships, I responded that DOJ was focused on such issues, but that nothing was public at this time.”
Last March, the Consumer Financial Protection Bureau issued a warning to dealerships who offer high-interest auto loans on the grounds that such arrangements unfairly target certain minority groups. Based on its research, the bureau claims that auto dealerships frequently markup loans they make to Hispanics and African-Americans.
Under the Dodd-Frank law, the Consumer Financial Protection Bureau was granted authority over home mortgage lenders, credit card companies and auto lenders. It has not yet announced whether or not automakers’ financing divisions will be included in the probe.
The Dodd-Frank legislation does not give the bureau jurisdiction over franchised auto dealers who arrange third-party financing for their customers. It does, however, have jurisdiction over dealerships that offer in-house financing.