In a Bloomberg BNA Bank Report article written by Richik Sarkar, Edward Kraus and Matt Henken, "How the Consumer Financial Protection Bureau Ensnared Auto Dealers," addressing the Consumer Financial Protection Bureau’s increased efforts to regulate auto dealers' allegedly discriminatory practices through exceptions to the CFPB exemption and using financial institutions as proxies, the authors explained that lenders and auto dealers can expect additional regulatory guidance and enforcement activity from the CFPB.
Now, as reported in an Automotive News article, the CFPB has promised to provide members of Congress later this summer with a white paper explaining how it detects discrimination in auto loans; including the proxy methodology used to decide whether consumers belong to legally protected groups, such as minorities or women. Such methods are required to make discrimination inferences as auto lenders aren’t allowed to collect race or ethnic data on borrowers; rather, proxies -- like census tract data or customers names -- are used "determine" minority status. Armed with such inferential data, the CFPB determines whether protected groups on average pay higher rates for financing than other borrowers.
Per the article, the CFPB "says it will issue the white paper in response to criticism from Congress, lenders and dealers that auto lenders don’t have enough specifics on the CFPB’s standards to police themselves." Not surprisingly, the National Automobile Dealers Association is skeptical. In a written statement, NADA asserted that even if the white paper answers all questions about proxy methods, it almost certainly won’t be enough to solve the CFPB's transparency problems. And NADA has encouraged its members to contact their congressional representative to encourage them to co-sponsor a bill compelling the CFPB to issue new regulations via a more formal rule-making process, instead of issuing industry guidance such the document the CFPB published in March 2013 that kicked off the disparate impact controversy.
After a slew of attacks on its methods, employment practices, and agenda, the CFPB appears to be more willing to "show its work" with respect to its determinations. Whether this trend will quell calls to limit the CFPB's authority and/or changes its tactics remains to be seen.