Chief consumer watchdog takes stage, stays mum on auto lending

Jim Henry is a special correspondent for Automotive News

It's too bad that the head of the Consumer Financial Protection Bureau, which prides itself on enforcing transparency in the finance industry, is opaque about its plans for the auto-lending segment.

Apparently, auto lenders and the franchised, new-car dealers they do business with are just going to have to wait and see, even though that's not the answer anybody wants.

At last week's Consumer Bankers Association convention in Texas, Richard Cordray, CFPB director, stuck to his prepared remarks. He didn't even mention the word "auto," although he did mention mortgages, credit cards, student loans and checking accounts.

The Consumer Financial Protection Bureau hasn't gotten around yet to any specific public statements on auto lending. That has done nothing to calm high anxiety among auto lenders and dealers about whether the bureau or other government regulators, such as the Federal Trade Commission, will review the common practice of dealer reserve on indirect auto loans.That's where dealers in effect mark up the customer's interest rate and share in the profits.

As Cordray headed for the exit at the convention, I asked him whether he could talk about the auto sector in general or specifically about dealer reserve. "I respect your right to ask," he said, "but I don't have any news to make on that today."

To be fair, the bureau is still new, and Cordray is newer still, having been appointed in January. Moreover, when the bureau was created in 2010, dealerships were specifically carved out of its jurisdiction. That potentially complicates any rules the bureau might contemplate regarding dealer reserve. Technically, any rules would be for lenders, not dealers.

Still, it was a disappointing appearance for anybody hoping for more details.

You can reach Jim Henry at autonews@crain.com.

Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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CFPB Proposes Rule to Supervise Larger Participants in Consumer Debt Collection and More

The Consumer Financial Protection Bureau recently announced a proposed rule to include debt collectors and consumer reporting agencies under its nonbank supervision program — marking the first time these consumer financial market participants are subject to federal supervision.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, authorizes the CFPB to supervise nonbanks in the specific markets of residential mortgage, payday lending and private education lending.

In addition, for other nonbank markets for consumer financial products or services, officials noted the CFPB has the authority to supervise “larger participants.”

As directed by Dodd-Frank, the Bureau must define such “larger participants” by rule, and an initial such rule must be issued by July 21.

Last summer, the CFPB sought public comment about possible markets to include in the initial rule and available data sources the Bureau could use to define larger participants in nonbank markets.

“Debt collectors and consumer reporting agencies touch millions of American consumers,” stressed bureau officials, who estimated about 30 million Americans have debt under collection with the average amount being $1,400.

CFPB rattled off the three main kinds of debt collection firms that dominate the market:

—Firms that collect debt owned by another company in return for a fee.
—Firms that buy debt and collect the proceeds for themselves.
—Debt collection attorneys and law firms that collect through litigation.

The bureau also pointed out a single company may collect through any or all of these activities.

Under the proposed rule, officials explained debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to supervision.

Based on available data, the CFPB estimated that the proposed rule would cover approximately 175 debt collection firms — or 4 percent of debt collection firms — and that these firms account for 63 percent of annual receipts from the debt collection market.

“The consumer reporting market plays a critical role in the consumer financial services marketplace and in consumers’ financial lives,” officials emphasized.

“It includes the largest credit bureaus selling comprehensive consumer reports, consumer report resellers, and specialty consumer reporting agencies,” they added.

According to the Consumer Data Industry Association, each year there are 36 billion updates to consumer files, and 3 billion reports are issued. The three largest consumer reporting agencies alone maintain information on 200 million American consumers.

CFPB reiterated that lenders use consumer reports, which are commonly called credit reports, when evaluating applications for credit cards, home mortgage loans, automobile loans and other types of credit. Specialty consumer reporting agencies collect and provide information used to make eligibility decisions for a variety of products, such as checking accounts.

Under the proposed rule, the Bureau explained consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities would be subject to supervision. This would include approximately 7 percent of consumer reporting agencies based on available data.

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Domestics Lead Consumer Guide Automotive Honors

This week, Consumer Guide Automotive revealed the recipients of its 2012 Best Buy and Recommended Awards, showcasing a total of 106 vehicles.

Two domestic nameplates led the way with the most models honored as Chevrolet and Ford each had nine award winners. Toyota was right behind with eight lauded units while Honda had seven vehicles praised.

Since 1967, the editorial team at Consumer Guide Automotive has used a rigorous and comprehensive evaluation process to identify the vehicles that it deems worthy of serious consideration by a consumer, the publication noted.

In assessing each vehicles, the editors utilize such criteria as price, features, performance, accommodations, fuel economy, reliability records and resale value.

The winners are divided into two categories: The Consumer Guide Automotive Best Buy and Recommended winners.

Officials explained that a Best Buy rating signifies that a vehicle is ranked at the top of its class and is strongly recommended by the editors. Best Buy vehicles are said to represent the best balance of attributes and price within their classes, and they are said to be the most ideal choices for most consumers.

This year’s models earning the Best Buy award include the Nissan Versa, Ford Expedition, Kia Optima, Buick LaCrosse, Dodge Charger and the Mazda MX-5 Miata.

Consumer Guide Automotive indicated that its Recommended list features vehicles that, though not ranked at the very top of their category, are still worth strong consideration by the consumer for their unique combination of attributes and value.

This year’s Recommended awards include the Toyota RAV4, Subaru Impreza, Honda Accord, Audi A7 and the Nissan Frontier.

“The key to Consumer Guide Automotive’s annual Best Buy and Recommended Awards is the careful evaluation of every aspect of each vehicle as it relates to consumers’ real-world driving experience,” editors explained.

“It is this thoroughness which is driving increasing numbers of consumers to check Consumer Guide Automotive reviews before buying a new vehicle,” they continued.

Consumer Guide's editorial team drives nearly 200,000 miles per year evaluating what these vehicles do well, and what they don't.

The publication said multiple editors evaluate each vehicle, a process that assure that recommendations are based on experiences that best reflect the settings and conditions that  buyers encounters every day.

“Whether it is driving through the city, highways, rural areas, long trips, or simply picking up the kids at school, the vehicles are tested in the same way that typical car buyers would use their vehicle,” editors concluded.

The following is a breakdown of the award winners:

Subcompact Car Best Buys
Ford Fiesta
Honda Fit
Hyundai Accent
Mazda 2
Nissan Cube

Subcompact Car Recommended
Chevrolet Sonic

Compact Car Best Buys
Ford Focus
Honda Civic
Mazda3
Nissan Versa
Volkswagen Golf
Volkswagen Jetta Sportwagen

Compact Car Recommendeds
Chevrolet Cruze
Hyundai Elantra
Scion Xb
Subaru Impreza

Premium Compact Car Best Buys
BMW 3-Series
Mercedes-Benz C-Class

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It's still wait-and-see on consumer bureau's impact

December 14, 2011 - 12:01 am ET

Jim Henry is a special correspondent for Automotive News

Dealers get to wait a while to find out how the new Consumer Financial Protection Bureau will affect day-to-day F&I business.

That's because Republican senators last week made good on their earlier promise to block the confirmation of Richard Cordray to head the CFPB. Cordray is a former Ohio attorney general.

Led by Sen. Richard Shelby, R-Ala., ranking member of the Senate Banking Committee, Republicans want to place a supervisory board over Cordray. In their view, the CFPB isn't sufficiently "accountable." Senate Democrats, led by Banking Committee Chairman Tim Johnson of South Dakota, accuse the Republicans of "holding financial reform hostage."

According to the law establishing the new bureau, the CFPB can't regulate "non-bank entities" -- including many auto lenders -- until a permanent head is confirmed. Its ability to regulate banks is also limited.

Auto dealers are exempt from CFPB regulation, except for buy-here, pay-here dealers. However, any new rules that affect auto lenders -- such as reporting requirements or potential limits on what the CFPB could consider abusive lending practices -- are likely to affect dealerships, too.

The CFPB was supposed to go into business in July, but Cordray's nomination and confirmation process have held that up. Not to worry, until the situation clears, dealerships have plenty of existing regulations to meet.

You can reach Jim Henry at autonews@crain.com.

Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Consumer advocate walks a tight rope in loyalty to dealerships

November 23, 2011 - 12:01 am ET

Jamie LaReau covers auto dealers for Automotive News

Meet Oren Weintraub.

He's a consumers' advocate who, surprisingly, believes in many of the aftermarket insurance products pitched by most dealers to many car buyers.

Weintraub, 43, founded Sherman Oaks, Calif.-based Authority Auto in 2006. It's a nationwide car-buying consultancy that helps car buyers through every part of a transaction.

Weintraub carefully balances his self-ascribed consumers' advocacy moniker with the caveat that he considers many dealers to be his partners. Admittedly, there are a few shady sales folk he says he wants to protect his clients from. But Weintraub believes most dealerships employ good business people.

The loyalty to dealers is understandable given that Weintraub worked at a Ford dealership in Southern California for 12 years. He ran it for four of those years.

Unlike some other car brokers, Authority Auto gets paid only by consumers. Weintraub takes no commission from dealers.

So Weintraub encourages customers to make the best decisions for their personal circumstances when buying aftermarket products.

For example, he asks car buyers thinking about purchasing paint protection to consider whether they park their car outdoors, where there may be harsh weather conditions, or indoors.

Or he helps research a make and model of a used car to find out whether it has known mechanical issues after a certain number of miles. That might influence a consumer's decision to buy a service contract or not.

From his years of running a dealership, Weintraub knows the inside operations.

Now he works for the other side -- the car buyer.

But he's not spilling the beans.

You can reach Jamie LaReau at jlareau@crain.com.
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