Perhaps the single most concerning government regulation issue for RV industry executives has been the vehicle lending “guidance” issued by the Consumer Finance Protection Bureau.
While the guidance was meant to prevent discrimination on auto and RV lending practices, critics, including the RV Dealers Association and the RV Industry Association, have expressed deep reservations with the CFPB’s guidance, saying it threatens to eliminate dealers’ flexibility to discount the annual percent rate (APR) offered to consumers who finance vehicle purchases.
Many in Congress share those concerns, and U.S. Rep. Ed Perlmutter, D-Colo., co-sponsored a bill, House Resolution 1737 – the Reforming CFPB Indirect Auto Financing Guidance Act – that would rescind CFPB lending guidance and seek input from affected parties, such as RVDA and RVIA. In November, some 244 Republicans and 88 Democrats voted in favor of the bill.
Recently, Congressman Perlmutter agreed to answer a series of questions from RV PRO about dealer feedback he’s received on CFPB guidance, why he co-sponsored H.R. 1737, his thoughts on whether the legislation will be passed into law, and other legislative issues he and other members of Congress can tackle that will benefit the RV industry and American businesses in general. His answers follow below.
RV PRO: What prompted you to be a co-sponsor of House Resolution 1737?
Perlmutter: The Fourteenth amendment of the United States Constitution allows for due process and equal protection under the law. In this instance, however, we have a conflict of these two principals.
The CFPB rushed through a formal policy change while not giving affected parties the ability to comment and be heard. The legislation in no way prohibits, disrupts or affects the enforcement of fair lending laws, but rather asks the CFPB to use a more informed process under their existing authority.
No one disputes the CFPB has been given the authority to enforce the Equal Credit Opportunity Act and hold lenders liable for fair lending violations. But let’s not forget Section 1029 of Dodd-Frank explicitly exempts auto dealers from the CFPB’s jurisdiction. However, the CFPB is using an ‘end-around’ through their ECOA enforcement authority to regulate the auto finance business.
I support the CFPB’s desire to eliminate discrimination across this country, as it should never be tolerated. I also believe the Civil Rights Division at the Department of Justice is more than capable of bringing discrimination cases.
RV PRO: Did you receive any feedback from RV or auto dealers in your district, or in the state of Colorado, about the impact or potential impact CFPB guidance is having on their ability to get their customers financed for vehicle purchases?
Perlmutter: While we did not engage directly with any RV dealers in our district or state, we did receive an industry letter of support signed by the National RV Dealers Association and the Recreation Vehicle Industry Association. …
I heard directly from auto dealers in my district and state who raised significant and serious concerns about how the CFPB’s guidance would impact their ability to help consumers get the best price and cheapest financing. I’ve read reports that suggest some lenders are proactively changing their business models as a result of the CFPB’s guidance that could ultimately lead to the increase in the cost of credit to purchase a vehicle or RV.
RV PRO: What is the status of the legislation currently?
Perlmutter: The bill still needs to be voted on by the Senate and sent to the president for his approval.
RV PRO: Are you reasonably confident that H.R. 1737 will pass and be signed into law? Why or why not?
Perlmutter: H.R. 1737 is about preserving affordable financing for millions of Americans who wish to secure the best interest rate when purchasing a vehicle. In this instance, the CFPB needs to be more transparent and accountable in order to promote access to credit for all hardworking Americans when they purchase a vehicle.
The goal of H.R. 1737 is to have the CFPB reissue their March 2013 guidance under a more transparent and open process by soliciting stakeholder input through a formal notice and comment period, to study the costs and impacts on consumers and businesses, and involve other relevant agencies. I’m hoping the strong vote in the House of Representatives will encourage the CFPB to engage in a robust dialogue with all the stakeholders.
RV PRO: RV businesses tell RV PRO that access to capital is improved from 2008, but could still be better. Is there anything Congress can/should do to help ensure that capital is available for American businesses?
Perlmutter: Low interest rates, coupled with a strong economy, are instilling confidence in our economy since the depths of the recession and financial crisis. The House Financial Services Committee, of which I serve, is working on efforts to provide meaningful and targeted regulatory relief to community banks and credit unions. These efforts should help free up time, resources and credit for financial institutions to focus on making strong prudent loans to borrowers.
RV PRO: Have you been involved in other legislation that would benefit the RV industry and American business interests in general?
Perlmutter: I’ve been involved in the JOBS Act, crowd funding and the Export-Import Bank, which helps small and medium-sized businesses in the 7th Congressional District export to overseas markets to increase sales. …
I’ve also been a strong supporter of the ‘Make It In America’ philosophy, which focuses on creating high-wage, private-sector jobs for more individuals and families in the U.S. The bipartisan plan calls for additional investments in innovation and research, creating connections between educators and employers, expanding America's manufacturing sector quickly and sustainably, and rebuilding infrastructure to move goods to market more efficiently.