Auto dealers appear to be resigned to eventual oversight from the Consumer Finance Protection Bureau.
Most are currently exempt, but the carve out that they enjoy from Dodd-Frank is contentious; former Congressman Barney Frank, one of the act’s co-authors, called attention to it at his keynote speech at IMN’s ABS Vegas conference on Monday morning.
Industry executives speaking at a panel on auto ABS that afternoon clearly expect the loophole to be closed. Susan Sheffield, executive vice president and Treasurer at GM Financial, said the firm has hired a compliance chief, a new position. “We’re preparing for when — and it’s not if, but when,” she said, referring to CFPB oversight for dealers. “It’s clear...they don’t like having auto dealers as part of process” of taking out auto loans. We fully expect that once a larger part rule is confirmed, they’ll be in to visit us in 2015.”
Sheffield added that GM Financial is “very well prepared,” calling eventual CFPB oversight, “just the cost of doing business today.”
Jeb Ebbott, senior vice president at Santander Consumer USA, a majority owned unit of Santander Bank, said that his firm is also well prepared. “The CFPB is one of those entities we see a lot of,” he said. “We’ve got really robust regulatory compliance framework.”
Auto makers are already under scrutiny from several regulators concerned about subprime auto lending and securitization. Stuart Litwin, co-head of securitization at law firm Mayer Brown and a panelist, said that the Justice Department and other regulators looking at subprime lending “are just in the process of learning,” and that their inquiries have not affected either lending or securitization activity.
The CFPB’s attention is not likely to be so benign, however.
“It’s clear the CFPB doesn’t like the way that dealers are compensated,” Litwin said. “It does not want to let dealers negotiate rates with customers.”
