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AFSA Defends Indirect Auto Finance at CFPB Forum

AFSA Executive Vice President Bill Himpler participated in an Auto Finance Forum hosted by the Consumer Financial Protection Bureau (CFPB) on Nov. 14. Himpler was joined on the “Perspectives on Fair Lending Risk in Indirect Auto Lending” panel by Richard Riese, Senior Vice President, Center for Regulatory Compliance, American Bankers Association; Paul Metrey, Chief Regulatory Counsel, Financial Services, Privacy, and Tax, National Automobile Dealers Association; and Stuart Rossman, Director of Litigation, National Consumer Law Center.

Himpler outlined the success of the indirect lending model and noted that the current method of compensating dealers who arrange financing for consumers provides enhanced competition in the marketplace. Recognizing the critical need for data, Himpler stated that AFSA is commissioning an independent study to assess the effectiveness of the present dealer compensation model and evaluate the costs and benefits of alternative approaches. The industry takes concerns about discrimination very seriously and is taking a proactive approach with this study. “AFSA and its members do not tolerate discrimination in any size, shape or form,” said Chris Stinebert, AFSA president & CEO, when the study was announced on Nov. 12. AFSA is vetting researchers for the study on fair lending in the indirect auto lending market.

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AFSA Outlines Concerns to Massachusetts Legislators

AFSA submitted a comment letter to Senator Cynthia Creem and Representative Jonathan Hecht of the Massachusetts State Legislature outlining concerns with S.1648 and its companion bill, H.3608, which would place significant restrictions on the use of Automatic License Plate Reading (ALPR) technology. The Joint Committee on Transportation also received the Nov. 11 letter.

The use of ALPR technology has become commonplace among law enforcement personnel as a fast and efficient way to locate individuals suspected of crimes. The vehicle finance industry uses the technology to assist in the repossession of vehicles when borrowers are severely delinquent. In 2009, 90,000 more vehicles were repossessed than in the previous year, partly due to the use of ALPR technology. Plate reading systems reduce the financial risk to the creditor in making a loan and, in turn, keep loan prices down for a broad field of consumers. The vehicle finance industry takes vigorous precautions to maintain consumer privacy.

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AFSA/NADA Executive Forum Video Now Available

A video outlining major issues discussed at the AFSA/NADA Executive Forum this summer in Dallas is now available via AFSA’s YouTube channel. The event brought together CEOs and other top executives from virtually every major finance company and bank in the nation engaged in indirect auto financing, as well as the leaders of the nation’s franchised automobile dealers. Representatives from the American International Automobile Dealers Association, Louisiana Automobile Dealers Association and National Association of Minority Automobile Dealers were also in attendance.

The video highlights key changes in the regulatory atmosphere in consumer finance. The hallmark issue in the video is recent attempts by the Consumer Financial Protection Bureau (CFPB) to change the way auto lenders compensate dealers for arranging financing for consumers. Speakers in the video include Andrew Stuart, chairman of AFSA’s Vehicle Finance Division and president & CEO of VW Credit, David Westcott, NADA chairman, and AFSA president & CEO Chris Stinebert. The leadership group featured in the video discussed the tremendous amount of uncertainty surrounding how the CFPB will oversee financial institutions and best practices for moving the vehicle finance industry forward.

The fifth AFSA/NADA Executive Forum is scheduled for June 24-25, 2014 in Washington, D.C.

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AFSA Attends Republican Attorneys General Association Meeting

AFSA staff attended the Republican Attorneys General Association (RAGA) Fall National Meeting Nov. 10 – 12 in Charleston, S.C. Republican attorneys general in attendance included those from Alabama, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Michigan, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Utah, Virginia and West Virginia.

Meeting topics included a political update on key 2014 attorneys general races – where attendees were able to hear from the candidates themselves – as well as issue briefings on identity theft protection, featuring renowned security consultant Frank Abagnale, and new consumer protection issues and the role of attorneys general in the new healthcare environment.

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Inside the Beltway
CFPB Chief Concedes Need for Balance in Auto-Loan Oversight
Automotive News (11/12/13) Nelson, Gabe

Remarks by Consumer Financial Protection Bureau (CFPB) Director Richard Cordray on Nov. 12 signaled the bureau’s openness to a more transparent and communicative relationship with the vehicle finance industry. Making remarks during the CFPB’s semi-annual report to the Senate Banking Committee, Cordray conceded that the bureau needs to do a better job of outlining the role it expects to play in auto lending. However, he reiterated that the bureau still has significant concerns about how vehicles are financed.

"We're going to make sure that we're engaging with key stakeholders in that area," Cordray said. "I think that's an area where I would agree with some of the criticism. I'd like to have a little more openness and transparency, and we're going to provide that."

Several Senators, including Jerry Moran (R-KS), raised concerns that have been brought up by industry, including how the CFPB determines discrimination. Cordray maintained that the bureau’s methods were sound. "Anything we do could ultimately be tested in court, and the court would have to have confidence in our methods."

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Warren Says Put Auto Dealers under CFPB
PoliticoPRO (11/12/13) Davidson, Kate

Sen. Elizabeth Warren (D-MA) provided Consumer Financial Protection Bureau (CFPB) Director Richard Cordray with some backup during his testimony on Nov. 13 before the Senate Banking Committee, as he defended the bureau’s push to regulate auto lending. Senator Warren praised the bureau’s hard work in defending the American consumer and suggested that automobile dealers as well as auto lender should be subject to oversight by the CFPB. “It makes no sense to me that there should be any exception here for consumers who are being tricked out of billions of dollars every year on car loans,” Warren said.

Dealers won a heard-fought exemption from the Dodd-Frank Wall Street Reform and Consumer Protection Act. Cordray seized the opportunity to note that this exemption has complicated the bureau’s outreach and information-gathering efforts. “We’re trying very hard to observe the line Congress drew. It’s not a natural line, as Sen. Warren mentioned, but it’s in the law and it’s something we’re trying to be careful about,” Cordray said.

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Federal Regulators Unveil Rules on Their Sometime Proxies, Bank Consultants
The New York Times (11/12/13) Protess, Ben and Silver-Greenberg, Jessica

The Office of the Comptroller of the Currency (OCC) unveiled new regulations on Nov. 12 intended to oversee consultants employed by the nation’s largest banks. The new rules are intended to curb the influence of the multibillion dollar consultancy industry and are just the latest in a series of new regulations. The OCC argues that the regulations are necessary – the companies are hired to provide independent, third-party analysis of the banks, but are hand-picked and paid by those same banks, creating a conflict of interest.

Under the new rules, the bank must conduct due diligence on a consultant before hiring it, and that research will be examined by the OCC. The scrutiny is intended to guard against conflict of interest and ensure that the consultant is qualified. The new rules may also forbid any consultant from reviewing the same transaction twice. The OCC admitted that the rules may not completely remove conflict of interest concerns, but that the standards were a step in the right direction.

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National and State News
N.J. Housing-Bias Accord Scuttles U.S. Supreme Court Case
Bloomberg (11/13/13) Stohr, Greg

The city council of Mount Holly, N.J. has settled with a citizens group that sued the town over plans to demolish a predominantly minority neighborhood. The case was set to be heard before the U.S. Supreme Court, which would have examined the 1968 Fair Housing Act and whether disparate impact claims of discrimination are valid.

Eleven separate courts of appeal have ruled on the issue of disparate impact claims and all have held that they are valid. The Mount Holly case would have provided a vehicle for lenders to make their case against the claims directly to the high court. Another case is pending relating to the insurance industry that may make its way to the Supreme Court as well.

The Mt. Holly case centered on the town’s plan to redevelop a neighborhood that was heavily blighted and crime-ridden. The town began buying homes and lots in the section of town, known as The Gardens, and planned to demolish all of the homes. The resident sued, claiming that the area was made up of predominantly minority residents, who were being disparately impacted.

Under the settlement, the township can continue with the development of the neighborhood, but must provide 44 emerging market homes – 20 to current residents – at no extra expense.

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Hire of Raj Date Boosts Bitcoin Credibility
Wall Street Journal (11/14/13) Sidel, Robin

Former Consumer Financial Protection Bureau (CFPB) Deputy Director Raj Date has joined the board of Circle Internet Financial Inc., a company that is developing ways to get merchants and consumers to use the virtual currency Bitcoin. The momentum to use Bitcoin has been steadily rising as merchants and industry analysts examine the lower costs associated with offering it as a payment option.

The company, which launched last month, is focused on making it easier for companies to accept bitcoins and for consumers to use them. The head of Circle, Jeremy Allaire, noted that Date "brings tremendous experience to the company, and a very deep understanding of critical regulator issues and how consumer-financial products interact with the government."

Date highlighted his fascination with digital currency as his reason for joining the board of the company, which received an infusion of venture capitalist cash earlier this month. "The underlying infrastructure of the payments industry is decades and decades old. There is a tremendous opportunity to change that and build better products for consumers," Date said.

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November 14, 2013

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