Despite backing the board and its new chief, even Democrats are expressing concern over an early ruling from the Consumer Financial Protection Bureau warning auto dealers that offering to strike deals on car loan interest rates could be discriminatory.
Late last week, the Justice Department and CFPB said they struck a $98 million settlement with Detroit-based Ally Financial. The government said the company violated fair credit laws by charging minority borrowers higher markups on auto loans than white customers.
The settlement follows a “guidance” warning this year from the CFPB to car dealers to be vigilant against discrimination when they act as middlemen, offering lower interest rates to gain business.
The CFPB, set up as part of the Dodd-Frank legislation passed in the wake of the 2008 Wall Street collapse, is supposed to be an independent regulator working on behalf of consumers.
Republicans criticized the board and its extensive powers, while Democrats were supportive.
But the CFPB’s warning didn’t sit well with either party.
In late October, a bipartisan group of 22 senators led by Jeanne Shaheen, New Hampshire Democrat, and Rob Portman, Ohio Republican, wrote to Mr. Cordray asking for the bureau’s detailed methodology in determining whether an auto creditor’s portfolio shows “disparate impact” on minority borrowers.
They also questioned why the CFPB did not offer the public an opportunity to comment on the content of the guidance or its potential impact on the market.
“Like many of my colleagues, I will closely scrutinize any further actions the bureau may take in this area,” Mr. Portman said last week.
A bipartisan group of Florida’s congressional delegation also fired off a letter documenting concerns.
“While we commend the CFPB for its commitment to addressing unlawful lending practices, we are concerned that Congress has yet to be provided with the complete data and other information necessary to conduct proper oversight of this matter,” members of the Florida delegation wrote to Mr. Cordray on Wednesday.
The lawmakers — and the auto dealers — are worried about the effects of the guidance on consumer choice and services. The National Automobile Dealers Association says dealers can frequently help consumers get lower interest rates than those offered by banks or credit unions.
Auto dealers also question the bureau’s use of an analysis method that relies heavily on estimates. The bureau has not outlined its methodology in sufficient detail to satisfy the members of Congress who have been pressing for it.
Mr. Cordray defended his agency’s analysis at a Senate Banking Committee hearing last month.