ADL Releases Fair Lending Policy for Dealers to Protect Against New CFPB Policy

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Company Urges Dealerships to Consider Using a Standard Rate Exception Report.

Tustin, CA. (March 22, 2013) In response to recent, bold actions taken by the Consumer Finance Protection Bureau, Auto Dealer Law has released a sample Desking and Fair Lending Policy in their most recent quarterly update. This policy is designed to help dealerships protect themselves against government enforcement action, private lawsuits, as well as lender demands related to fair lending practices.

According to a CFPB bulletin issued on March 21, lenders that offer auto financing through dealerships will be held responsible for discriminatory pricing at the dealership level. Without citing to any actual data, the bulletin states that auto lenders’ compensation policies create incentives that result in a “significant risk [of] pricing disparities on the basis of race, national origin, and potentially other prohibited bases.” The CFPB then goes on to recommend alternative forms of compensation such as flat fee programs.

Last month the Consumer Finance Protection Bureau issued warning letters to at least four banks involved in auto financing. The letters indicated that the banks may be sued by the CFPB due to their payment of dealer participation in violation of the Equal Credit Opportunity Act. The theory advanced by the CFPB is that discretionary pricing of auto financing at the dealer level has a “disparate impact” on protected classes of consumers. These letters have prompted at least one lender to issue a “Fair Lending Notice” to dealers. The notice, issued by Chase, warns dealers that it may seek information to justify any “differences in dealership’s pricing to protected classes on a prohibited basis.”

“Based on this most recent CFPB bulletin, as well as communication from lending partners like Chase, dealerships must be proactive about protecting themselves against lending discrimination claims moving forward ,” said Rob Cohen, co-author of Auto Dealer Law and president of Auto Advisory Services. “Dealers can dramatically reduce exposure in this area by doing three things: (1) Adopt a fair lending policy that includes mandatory usage of what we call a ‘Standard Rate Exception Report’; (2) Train all sales and finance managers on this policy; and (3) Monitor for compliance with and enforce the policy.”

Subscribers to ADL have full access to a customizable fair lending policy and the newly created Standard Rate Exception Report form.

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About Auto Dealer Law:

Auto Dealer Law, The Definitive Legal Guide to the Purchase, Sale, and Operation of Vehicle Dealershipsis a comprehensive guide and subscription service that provides vehicle dealers and their advisors with access to legal information that, until now, was simply not available from any one source. Written by nationally recognized auto industry legal experts, Mike Charapp and Rob Cohen, the fully indexed reference book is authoritative and easy to read and includes a subscription service to keep users up to date on industry events and changing laws. Auto Dealer Law is a joint venture between Charapp & Weiss, LLP and Auto Advisory Services, Inc. To purchase your copy, visit

For more information on Charapp & Weiss, LLP, visit For more information on Auto Advisory Services, Inc., visit

Media Contacts:

Laurie Halter

Charisma! Communications


Rob Cohen

Auto Advisory Services, Inc.


Michael Bowen


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