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Congress Considers Several CFPB Reforms

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Last month, a bipartisan majority of the House voted in favor of more transparency with the Consumer Financial Protection Bureau, approving the Consumer Bureau Advisory Commission Transparency Act.

The bill would bring more transparency to the CFPB by subjecting the organization to congressional oversight under the Federal Advisory Committee Act. Only three agencies are currently exempt from open meeting provisions in the Act, including the CIA, the Director of National Intelligence and Federal Reserve.
The legislation would go a long way toward easing concerns for some in the RV, auto and boat industries, who complain that the CFPB’s voluntary reporting on the methodology used to seek out unfair lenders is unfounded.

An RVDA graphic calls for support of H.R. 1737, one of several measures before Congress to reform CFPB. Click to enlarge.

“We don’t believe the CFPB rationale for issuing the guidance is valid,” RV Dealers Association President Phil Ingrassia said. “Even when Congress asks (the CFPB) to get a better handle on their methodology for showing there is bias to protected auto loans, (the CFPB) really doesn’t come across with adequate transparent information.”

The RV industry is exempt from CFPB oversight under the Dodd-Frank Act legislation that created the Bureau in 2010, but many in the industry, including the RVDA, believe that CFPB oversight could affect the price of consumer loans by pressuring banks to stop rewarding dealers for indirect loans.

“We don’t believe that the CFPB should be impacting how customers finance their vehicles – RVs, autos or boats,” Ingrassia said. “Congress specifically exempted us from this oversight when it enacted the enabling legislation (Dodd-Frank Act).”

Ingrassia and others in the RV industry fear that the language in a 2013 guidance, which outlines lending practices by third-party and captive-lenders, may lead banks to resort to flat-fee lending, effectively ending dealer compensation for third-party deals.

The RVDA contends that third-party deals lower consumer loans by providing competition to the marketplace, and that dealers should be compensated for doing so.

“The loans that originate with dealers, often can have better rates – not always but often – than what is available locally to the customers because these people specialize in RV loans,” Ingrassia said.

CFPB proponents argue that the markup dealers make for brokering third-party deals is unfair.

RVDA Director of Legal and Regulatory Affiars Brett Richardson disagrees, noting that dealers often work to provide a service to consumers, helping them find competitive national loans as possible alternatives to local credit unions.

“You don’t have a local lender like that in every market, so often times they have to use national lenders. … (If) someone goes to their local credit union, there would be no competition for them, if a dealer doesn’t advise them where to go,” Richardson said.

Among the CFPB reforms in Congress is H.R. 1737, a bill introduced in April by Reps Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.), which would rescind the 2013 guidance on indirect lending.

Late in April, the House approved H.R. 1195, a bill that would establish a Small Business Advisory Board to oversee the CFPB.

Opponents of CFPB oversight believe the organization attempts to fix something that isn’t broken.

“There’s no crisis here. The process for financing RVs, cars and boats, works,” Ingrassia said. “You can finance it where you buy it. It’s helped the car industry rebound, the RV industry rebound and boat industry rebound. When we get into some of this over-regulation, you’re playing with fire here because you don’t know what the unintended consequences are of putting more regulation, or adding more cost, and really for no reason.”

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