I really don't like to write about the Consumer Finance Protection Bureau each month but they seem to make themselves such an easy target. Every week brings another story that is just so outrageous that it bears mention. Plus they have placed our finance model under direct attack without regard for the adverse affects to the consumer.
As you probably know, The Emperor's Clothes is a childhood story by Hans Christen Anderson. In this column, Randy Henrick, associate general counsel and lead regulatory and compliance Counsel for DealerTrack, Inc., draws a very striking analogy between the CFPB and the Emperor:
The CFPB reminds me of the Emperor. They must know that the legal arguments they hope to validate in the Ally Bank Consent Order will not hold up in a court. My fear is that other lenders will be like the Emperor’s ministers and go along for fear that they will be the next entity upon which the CFPB will try to impose similar conditions and thus they go along as well.
If you want a very good analysis of why Ally Financial's recent settlement with the government over auto dealer markups on indirect auto loans is dangerous, read Richard Riese's column in American Banker. Riese is senior vice president of the Center for Regulatory Compliance at the American Bankers Association. Riese argues that the settlement was based on based on leverage, not law.
He makes a very strong argument against the CFPB that can be summed up in the final paragraph of his column:
The government has overwhelming power and resources to pursue enforcement. Leveraging a settlement on threat of litigation with less evidence than is required to prove intentional discrimination is an abuse of power. Compensating presumptively-minority borrowers who pay the same markup as individual non-minority borrowers undermines equal credit opportunity policy.
Ironically, at the same time the CFPB is accusing others of disparate impact, CFPB's own managers have shown distinctly different patterns in how they rate employees of different races. This report in American Banker details the findings that show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses.
Ronald J. Rubin, a partner at Hunton &Williams LLP, comments on this issue in the Wall Street Journal.
The lesson the CFPB should learn from its own disparate-impact experience: Statistics are complicated. Numbers don't lie, but people often misinterpret them. Effect does not necessarily equal cause.
It is inconceivable that CFPB's management could be discriminating against its workers. But disparate-impact statistics equal discrimination. As they say, what's good for the goose is good for the gander!
NADA’s Service Provider Data Access Addendum Now Available for Download
Last month, NADA’s Legal and Regulatory Affairs department issued a sample Service Provider Dealer Data Access Addendum (“Addendum”) and cover memo for dealers to use with their third party service provider vendors. This follows a memo sent last August from NADA to all members that contained an overview of the primary regulatory issues surrounding dealer data, numerous practical tips for dealers to consider when protecting their data, as well as samples of the contract provisions required under federal law when a dealer wishes to allow access to dealer data with a third party service provider. The Addendum is now available to dealers as a Word document at www.nada.org/dealerdata.