A comprehensive study of more than 8.2 million auto financing contracts found that the disparity alleged by the Consumer Financial Protection Bureau (CFPB) between the amount of dealer reserve charged to minorities and nonminorities is not supported by data.
The Recreation Vehicle Dealers Association (RVDA) reported in a press release that the study, Fair Lending: Implications for the Indirect Auto Finance Market, commissioned by the American Financial Services Association (AFSA), found “high error” rates with the proxy methodology used by the CFPB.
RVDA and the National Automotive Dealers Association (NADA), as well as the vehicle finance industry, have been highly critical of the CFPB methodology used as a basis for its March 2013 guidance to lenders which questioned common methods of compensation for dealers that arrange financing.
Besides a low success rate in identifying minorities, the CFPB methodology also produced a lot of “false positives,” exaggerating the number of minorities, the study said.
The study will add pressure to efforts in Congress, supported by RVDA, to rescind the CFPB guidance on auto lending.
For an executive summary of the AFSA study, click here.