Indirect auto lenders have poor fair lending compliance programs, CFPB Director Richard Cordray said in a letter to Rep. Terri Sewell (D-Ala.), adding that failure to monitor auto loans for fair lending compliance “has been a contributing factor in discrimination.”
The Dodd-Frank act gave the CFPB authority the to supervise indirect auto lenders on fair lending issues. The CFPB announced its intention to pursue fair lending violations in car loans in March.
Cordray, responding to a letter from several House Democrats last month asking about how the CFPB would determine fair lending violations for auto loans, noted that the CFPB will use a proxy methodology to identify fair lending violations for auto loans. Because information on race, ethnicity and gender is often not collected during an auto loan transaction, the CFPB uses “surnames and geographic locations” as proxies, Cordray said.
Read the letter.