Raj Date, the Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, spoke in Philadelphia on September 15. His presentation, which you can view or read on the CFPB’s website, was titled “Lessons Learned from the Financial Crisis: The Need for the CFPB.&rdquo
We noted two things about Mr. Date’s presentation that were encouraging. First, Mr. Date didn’t have much to say about car finance. I’m sure he hasn’t forgotten us, but we’re not at the top of the queue.
Second, our ears perked up when he began to explain what he believed the Bureau’s approach to its mission should be: “First, we are committed to basing our judgements on research and data analysis. We won’t shoot from the hip. We won’t reason from ideology. We won’t press a political agenda. Instead, we’re going to be fact-based, pragmatic, and deliberative.”
Ok, it’s all fine and dandy to base judgements on research and data analysis when your research and data analysis are independent and unbiased. Garbage in, garbage out, so they say. While I don’t doubt the integrity of the individuals working at the Bureau in the least, the institution suffers a structural flaw that calls into question its ability to conduct independent and unbiased research analysis. You see, the folks in charge of research, analysis and rule- writing, all report up to the same boss, who sets the policy. If your boss wants a particular outcome that unbiased research and analysis can’t support, how likely are you to object?
Giving the Bureau the benefit of the doubt, however, if the Bureau operates the way that Mr. Date says it will, we can expect that the Bureau will insist on facts and data, rather than anecdotes from consumer advocates who are pressing for various reforms. This will be really interesting, because there simply aren’t many available facts and data addressing many of the alleged bad practices in the auto finance and lease world.
The Bureau won’t press a political agenda? Those of you from Missouri might say, “show me.”
And pragmatism is in the eye of the beholder. If a consumer with ruined credit can finance a car only through a BHPH dealer who charges more for his products than those of us with prime credit might have to pay and who equips his collateral with a starter interrupt device, will the Bureau make rules that will eliminate the last possible creditor willing to work with that consumer? After all, it’s pragmatic to be able to drive to your job, take your kids to school, and get to the grocery store.
The deliberative part we do buy. If Washington’s good at anything, it’s deliberating things to death.
Federal Trade Commission Update
For those of you franchise dealers out there who have escaped the jurisdiction of the CFPB, don’t think for a moment you’re off the hook. Yes, the FTC is still your regulator, but with enhanced powers to write rules declaring your sales and finance practices unfair or deceptive. To its credit, FTC staff is conducting round tables to get better educated on dealer and dealer finance practices – the next one is on November 17th in Washington, DC and will focus on leasing – but I will be shocked if the FTC chooses not to exercise its new power. Washington just doesn’t work that way. Keep in touch with the NADA and your other trade associations—they’re working hard to protect your business and your livelihood and to limit unnecessary regulation.
Michael Benoit is a partner in the Washington, D.C., office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. Michael can be reached at 202-327-9705 or [email protected]. Nothing in this article is legal advice and should not be taken as such. Please address all legal questions to your counsel.