Several auto lenders being probed by the Consumer Financial Protection Bureau for potential fair lending violations are being referred to the Department of Justice, sources say. Sources said at least three lenders, which have not been publicly identified, have been notified by the CFPB about the referral.
Agency officials have argued that auto lenders are responsible for mark-ups made by dealers, including whether they unfairly boost interest rates for minority and other protected classes. Despite protests coming from different corners -- the industry and lawmakers, for example -- that the CFPB is venturing beyond its authority and has not justified the need for the additional scrutiny, some lenders have responded by curtailing dealerships.
"Notwithstanding the legal arguments about coverage of dealers, at the end of the day, the CFPB has the ability to enforce fair lending standards against the finance parties so they have to take this seriously," remarked Donald Lampe, a partner in the financial services group at Morrison & Foerster. "It is affecting the auto finance industry and the conduct of the auto dealership industry."