WASHINGTON — Thirty-five congressional Republicans warned the Consumer Financial Protection Bureau (CFPB) in a letter sent last Thursday that the auto finance reforms it seeks could weaken competition and hurt a consumer’s ability to obtain the best financing terms.

The letter also requested information on the CFPB’s use of the disparate impact theory in its review of dealer participation programs auto finance sources offer to dealers. In March, the CFPB issued guidance that said finance sources could be held liable if it determines such programs, which allow auto dealers to mark up the interest rates on retail installment sales transactions in exchange for services rendered, create a bias that causes minority groups to pay higher rates.

“We are all strongly opposed to any discrimination in lending,” the letter stated. “However, it is highly concerning that the agency is issuing such significant new directives without affording the public a proper opportunity to comment on its methodology and analysis for determining whether discrimination has occurred and without addressing the effect of its directives on consumer financing and choice in the intensely competitive auto lending market.

“To allow Congress to evaluate the statistical model that the CFPB used to justify the new directives, we request that the agency provide us with the full set of details concerning its statistical disparate impact methodology.”

Last month, 13 Democrats issued a similar letter to the bureau, requesting background information “about the origination of and investigation into alleged practices within the auto lending industry.” The letter asked that the bureau to respond by June 7.

In the midst of this controversy, the CFPB has also confirmed the departure of Assistant Director Rick Hackett, who was hired in May 2011 to oversee installment lending markets, including auto finance. He’s the fourth top bureau official to depart this month. He was viewed as a key conduit between the bureau and the auto finance industry.

“In my opinion, Rick Hackett represented the best kind of regulator the auto financing industry could hope for,” said Jack Tracey, executive director of the National Automotive Finance (NAF) Association. “He systematically set about gathering factual information about industry practices to identify and target areas that needed regulatory attention. He strived to meet with industry leaders to hear their views and gather data so that policy could be focused and would not adversely affect the industry at large. He attempted to identify problems and develop policy directed at the problems and was concerned about any unintended consequences resulting from policy."

News of Hackett’s departure came 14 days after he made an appearance at the association’s  17th annual Non-Prime Auto Finance Conference, where he confirmed that supervisory investigation of auto finance sources are underway.

“His stay at the CFPB was too short for the industry to see the benefits of this approach,” Tracey added. “Hopefully, his replacement will pick up the flag and carry on the cause.”

To read the full letter, click here.