The National Automobile Dealers Association (NADA) is going out on a limb by recommending ways for dealerships to ward off discrimination charges from the Consumer Financial Protection Bureau (CFPB).
The CFPB hasn’t said whether NADA’s recommended actions will suffice in the eyes of the agency but said that it would review the proposals.
The short version of the NADA recommendations is that dealerships should adopt a percentage ceiling on dealer reserve, never exceed it and document a legitimate business reason every time they offer a discount below that ceiling.
The approach is modeled after a 2007 settlement in which a couple of Philadelphia-area dealerships settled lending discrimination charges filed by the U.S. Department of Justice.
The NADA recommendations, unveiled prior to the NADA annual convention this week, include a list of seven suggested reasons which, in NADA’s opinion, a dealership could cite as legitimate reasons for making an exception its policy — for instance, to meet or beat a competing offer.
There also are recommendations for setting up a compliance program at a dealership, appointing who’s responsible for it, suggested templates for documents and more. NADA is expected to distribute the “NADA Fair Credit Compliance Policy & Program” booklet to its members soon.
“We believe this approach addresses Fair Credit concerns and at the same time it preserves many of the benefits of the dealer reserve structure,” said NADA General Counsel Andy Koblenz. Dealer reserve is the dealership’s share of the interest rate profit on a loan, also known as dealer markup.
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