auto dealer in black and red logo
MenuMENU
SearchSEARCH

(UPDATED) CFPB Officials Acknowledge Issues With Proxy Methodology, American Banker Reports

Internal CFPB documents obtained by American Banker show bureau officials repeatedly acknowledging that the method used for detecting discrimination by indirect auto lenders may overestimate disparities.

by Staff
September 22, 2015
(UPDATED) CFPB Officials Acknowledge Issues With Proxy Methodology, American Banker Reports

 

4 min to read


Editor's Note: Story has been updated to include a statement from the Consumer Financial Protection Bureau.)

WASHINGTON (UPDATED: 2:07 p.m. PST, 9/22/15) — According to internal documents obtained by American Banker, officials with the Consumer Financial Protection Bureau (CFPB) have acknowledged that the method the agency uses for detecting discrimination by indirect auto lenders can overestimate potential bias, resulting in higher penalties for finance sources cited by the regulator.

This revelation marks the second time this year that the media outlet has obtained internal CFPB memos. In July, American Banker reported that it had obtained proposed consent orders that indicated the bureau was preparing to take action against three captive finance companies for allegedly allowing their dealer partners to charge higher interest rates on loans to minority buyers.

This time, a series of internal documents the media outlet obtained show CFPB officials repeatedly acknowledging that the bureau’s methodology miscalculates the potential discrimination by firms. In an April 2013 memo, according to American Banker, Patricia Ficklin, assistant director of the CFPB’s Office of Fair Lending, writes in response to objections raised by a finance source the bureau was investigating at the time that although there may be some risk of overestimating disparities, “the alternative presents an equal (and perhaps greater) risk of underestimating disparities and thus consumer harm.”

Samual Gfilford, a spokesperson for the CFPB, issued the following statement to F&I and Showroom: "Nothing in the American Banker story disputes the existence of discrimination in auto lending, or that minority borrowers have been charged higher interest rates on their loans as a result. We use all information at our disposal, and the best available methodologies, to fairly and consistently enforce the Equal Credit Opportunity Act and ensure borrowers harmed by discrimination receive the relief they deserve."

The American Banker article was the lead story in the National Automobile Dealers Association (NADA)’s Sept. 18 enewsletter. In an editor’s note at the bottom of three-paragraph brief, the NADA noted that the article “highlights the need for the transparency that ‘public notices and comment’ would provide if H.R. 1737 were enacted.”

Introduced in April by Reps. Frank Guinta (R-N.H.) and Ed Perimutter (D-Colo.), H.R 1737 would repeal the CFPB’s March 2013 guidance on dealer participation and add a few more steps to its guidance-writing activities. On July 30, the House Financial Services Committee approved the bill by a 47-10 vote. The legislation now awaits consideration by the entire House of Representatives.

Andrew Koblenz, the NADA’s executive vice president of legal and regulatory affairs and general counsel, called the committee’s passage of the bill “a major success for consumers” when he spoke to F&I and Showroom magazine last month, noting that 13 out of the 23 Democrats on the committee voted for it.

“H.R. 1737 is a good-government bill that says to the CFPB, stay in your lane, make sure you understand the market, listen to the public, listen to the stakeholders — all of them — understand the implications of what you’re doing, understand what your actions do to consumers, and understand what they do to minority-owned businesses, women-owned businesses, and, in fact, all small businesses,” he said. “And be transparent. Tell us what you’re basing your analysis on, your conclusions on, and, to the extent you can, what your data shows.”

Koblenz said the NADA’s concerns emanate from the fact that the CFPB’s attempt to address the fair credit concerns it has identified “has utilized an approach that we think doesn’t really address those fair credit concerns, and that has adverse effects on consumers.”

By adverse effects, Koblenz meant the potential loss of rate discounts for consumer if the pressure the CFPB is putting on finance sources results in an across-the-board move to a flat-fee dealer compensation model.

“So, in our view, adoption of the CFPB’s approach would fail to advance the ball from a fair credit perspective, and at the same time would move the ball back from a consumer perspective by reducing the amount of discounts that are available to consumers,” Koblenz said.

According to American Banker, its Sept. 17 article is the first in a series about the CFPB’s use of disparate impact, a legal theory that says finance sources can be penalized if they have a neutral policy that creates an adverse impact against a protected class of borrowers, regardless of intent.

Originally posted on F&I and Showroom

More Dealer Ops

Cover image for a BOK Financial report titled “Timing the market: How avoiding volatility entirely can hurt long-term reinsurance program performance.” The image shows several road construction barricades with flashing amber warning lights lined up in a nighttime work zone. Beneath the image, red text explains that avoiding volatility can mean falling behind inflation and missing market rebounds that drive long-term surplus growth. The BOK Financial logo appears at the bottom right.
SponsoredMay 8, 2026

Timing the Market Can Hurt Long-Term Program Performance

For dealer-owned reinsurance entities, avoiding volatility entirely can mean falling behind inflation and missing market rebounds that drive long term surplus growth. Missing just a handful of strong market days can materially impact cumulative returns—an important reminder for long horizon trust and investment strategies.

Read More →
two cars on a billboard, No Hidden Fees
ComplianceMay 1, 2026

Dealer Ads and the FTC

The agency has made it clear in recent enforcement actions and warnings, in auto retail and other industries, that advertised prices must include all nonoptional costs to the consumer.

Read More →
Closeup of white car's headlight, front end
Dealer Opsby Hannah MitchellApril 17, 2026

Used Autos Supply Dwindles

The March shopping surge, despite high prices, cut into inventory by the most since the thick of the pandemic, Cox Automotive analysts calculated.

Read More →
Ad Loading...
hands making protective frame over red car, Risk Reality Check, Be Proactive, Auto Dealer Today logo
Dealer OpsApril 1, 2026

Managing Risk Effectively Through Changing Times

The variables influencing risk pricing have changed significantly over the past five years. Being proactive and responsive to emerging trends is not optional but essential.

Read More →
Car key, stacks of coins, and a paper car cutout with AutoPayPlus logo, representing auto financing, loan terms, and vehicle affordability trends.
Dealer Opsby StaffMarch 31, 2026

Survey Reveals What Won't Fix What's Breaking Car Sales

AutoPayPlus says extra-long auto loans are trapping consumers and threatening the dealer trade-in cycle, and that the industry is leveraging the wrong tools to combat high MSRPs.

Read More →
Headshots of two male executives
Dealer Opsby StaffMarch 24, 2026

IA American Appoints Two Execs

Senior vice presidents of the company's agent and dealer channels chosen to support general agents and help auto dealers with sales and performance.

Read More →
Ad Loading...
Dealer Opsby StaffSeptember 8, 2025

Cox Automotive Acquires Inspection Firm

Full ownership of Alliance Inspection Management, or AiM, meant to unlock growth for Manheim inspection capabilities

Read More →
Dealer Opsby StaffAugust 26, 2025

Assurant Expands Partnership With Holman

Extended collaboration delivers training, products and performance development to 30 newly acquired Holman dealerships

Read More →
Dealer Opsby Hannah MitchellAugust 26, 2025

Franchises, Throughput Down in First Half

A handful of states see franchise growth through June, while EV sales per store boost overall business in U.S.

Read More →
Ad Loading...
Dealer OpsAugust 25, 2025

How to Build a High-Performance Sales and F&I Team

Performance and profits start with people chosen and led the right way.

Read More →