Pub. 14 2015-2016 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 3 , 2 0 1 5 F&I Compliance Has Become Complicated by Evolving Issues New Regulations BY PATRICK COX F inance and Insurance compliance is probably more complicated than ever, as a result of changing and unsettled law and increased scrutiny at both the federal and State level. At the federal level, the biggest issue continues to be the actions of the overzealous regulators at the Consumer Financial Protection Bureau (CFPB), who are “making it up as they go along” in an effort to force lenders to put an end to dealership rate markups under the guise of ending alleged “discrimination.” This has forced the big lenders to require dealerships to adopt complicated Equal Credit Opportunity Act (ECOA) compliance policies and procedures, despite the fact that the CFPB has no authority to regulate automotive dealerships. Beginning in 2013 the CFPB started going after automotive lenders in an effort to indirectly impose finance rate markup restrictions on dealerships. And CFPB’s entire justification for this power-grab has been purely statistical evidence (based on questionable methodology) of “disparate impact” or miniscule differences in the average interest rates paid by customers of different races, genders, or ethnicities. The CFPB claims this represents intentional discrimination by dealerships, in violation of the ECOA. There was some hope that the US Supreme Court would cut the legs out from under the CFPB’s ef- forts when it decided the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. Unfortunately, the Court, in a decision released this summer, held that disparate impact statistics may serve as proof of discrimination under the Fair Hous- ing Act (FHA), a decision which keeps alive the CFPB’s theory of disparate impact under the ECOA, although it does not appear to new jersey auto retailer 16 EVOLVING ISSUES  continued on page 18