Pub. 17 2018-2019 Issue 1

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 . 2 , 2 0 1 8 8 new jersey auto retailer President’s MESSAGE | BY JAMES B. APPLETON The Consumer Financial Protection Bureau’s (CFPB) unwarranted attack on auto financing has been reined in, thanks to the recent passage of S.J.Res. 57, a joint resolution passed by Congress and signed into law by President Trump last month. The bill disapproved the CFPB’s 2013 auto lending guidance, which the retail automotive industry viewed as a thinly-veiled effort to limit dealer discretion in auto lending by going after the financial sources. This legislative victory inWashingtonD.C. was a long time coming and is absolutely cause for celebration. But, keep in mind that leg- islative victories can easily be undone by a future administration, particularly in today’s hyper-partisan political environment. And New Jersey new car dealers may not have to wait for a change at the federal level. The Garden State’s own Senator Cory Booker made an impassioned speech on the Senate floor suggesting that discrimination was rampant in auto lending and he argued that disapproving the CFPB’s guidance would hurt consumers. The Senator’s positionmay be shared by our newDemocratic Governor, who has sought to position himself as a leading voice in progressive politics and expressed a willingness and desire to resist any regu- latory roll-back instituted by the Trump Administration and the Republican-led Congress. Let’s be clear: Washington’s decision to rescind the CFPB’s auto lending guidance WILL NOT put an end to the issue of alleged racial bias in auto finance. Not in Washington, D.C. Not in New Jersey. Dealers should expect the CFPB’s allies in the nation’s capital and advocates here in New Jersey to pursue this issue at the state level. It’s worth noting that the New York City Department of Consumer Affairs recently adopted regulations requiring new car dealers there to disclose “the lowest buy rate” offered by any banks extending credit to a prospective buyer. The CFPB developed its auto lending guidance using flawed research, with no transparency and no public feedback. The guid- ance was intended to pressure lenders to eliminate auto dealers’ ability to discount loans using “dealer reserve,” because the CFPB mistakenly believed it was being applied in a discriminatory way. But dealers know this is not true and the industry deeply resents any suggestion that lending decisions are biased. Automotive loan discounts are offered for legitimate, non-discriminatory business reasons, such as meeting a customer’s competing loan offer, meeting their monthly budget or even tomove a slow-selling model. What’s more, this ability to discount a loan provides a significant benefit to consumers. Dealers want to sell as many vehicles as possible to as many in- dividuals as possible and they know that there is no place for dis- crimination in the retail automotive industry. What some public officials fail to grasp is that DISCRIMINATION IN LENDING IS ALREADY ILLEGAL . The Equal Credit Opportunity Act (ECOA) makes that crystal clear. Rolling back the CFPB’s flawed auto lending guidance does no harm to car buyers. Consumers are still well-protected and discriminatory lending is still very much illegal, as it should be. NJ CAR is not sitting idly by and simply waiting for the inevitable. The Coalition is speaking to dealers and encouraging them to be proactive and document non-discrimination in every consumer financing transaction they arrange. Fortunately, the National Au- tomobile Dealers Association (NADA) has already developed a tool that can help dealers document their fair lending practices and avoid potential legal problems. The NADA’s Fair Credit Compliance Policy and Program was created in response to the CFPB’s auto lending guidance, and modeled after past settlement agreements in discrimination actions brought by the U.S. Department of Justice. NJ CAR recommends dealers review the NADA Program with their attorneys and determine whether it makes sense to adopt and implement its provisions. There is no guarantee implementing the NADA Program (or something similar) will allow your dealership to completely avoid future accusations or enforcement actions. But implementing a formal process will place your dealership in a better position to demonstrate compliance with existing federal and State laws. It will also bolster your dealership’s defense against potential claims by compiling legitimate, non-discriminatory justifications for ALL your lending decisions. Battle Over Dealer Assisted Finance Could Shift FromWashington to Trenton