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Ancillary Products Are Anything but Ancillary for the CFPB

John C. Redding & Mitchell M. Grod

October 16, 2015

It’s no secret that the Consumer Financial Protection Bureau (CFPB) has its sights set on the U.S. automobile finance industry. As evidenced by recent CFPB Bulletins and consent orders with indirect auto finance sources, the CFPB’s current focus within the industry is largely on the practice of dealers marking up the wholesale buy rates, alleging fair lending violations under the Equal Credit Opportunity Act (ECOA).

Until recently, the CFPB was limited in its ability to reach nonbank automobile finance companies through its broad authority to enforce violations of certain ‘‘enumerated consumer laws’’ and the Unfair, Deceptive or Abusive Acts or Practices (UDAAP) standards of the Dodd-Frank Act. On Aug. 31, 2015, the CFPB’s final rule to oversee ‘‘larger participant’’ nonbank auto finance companies became effective, expanding the CFPB’s authority to supervise all aspects of nonbank auto finance companies with at least 10,000 aggregate annual originations. At the same time it released the final rule, the CFPB simultaneously released its Automobile Finance Examination Procedures (Examination Procedures), which provide the first guidance specifically addressing ancillary products in the automobile industry.

Originally published in Bloomberg BNA; reprinted with permission.