Advocates said they worry the reversal of this guidance would cause auto lenders and dealers to price loans on criteria other than creditworthiness and income.
“It’s amazing how large companies began to behave themselves simply knowing that they were being watched,” said Hilary Shelton, senior vice president for advocacy and policy at the NAACP. “Now we’ll see them going back to their discriminatory practices.”
Such a turnaround is already underway, said Davis, the lead researcher on auto lending at the Center for Responsible Lending.
Amid the scrutiny from the consumer bureau, BB&T, a retail bank that issues auto loans, voluntarily shifted from its interest rate markup model to a flat-fee method, in which every auto loan generates the same compensation, Davis said.
“But once the change in the CFPB leadership happened,” Davis said, “BB&T changed back to their original state of allowing interest rate markups.”
David R. White, vice president of corporate communications at BB&T, said that the company is committed to the equal treatment of all consumers — and that the return to the interest fee model was to improve its business.
“We introduced a more traditional auto pricing program in March of this year to provide our dealer clients with more options and better flexibility,” White said.
In a press release, Sen. Jerry Moran, R-Kan., one of the authors of the legislation to reverse the guidance, said doing so would “return a sense of stability to the auto marketplace, ultimately providing a path to lower costs for all car purchasers.”