CFPB loan discrimination methodology under spotlight

The National Automobile Dealers Association (NADA) is highlighting further criticism of the methodology adopted by the Consumer Financial Protection Bureau (CFPB) to assess whether indirect auto lenders are acting unfairly when they make loan and lease offers to minority groups, which it says support its view that the level of discrimination in lending is being overstated.

NADA points to a review by the publication American Banker of a series of private internal CFPB documents which appear to concede that the assessment method used by the agency can overestimate potential bias.

NADA says the documents show CFPB officials repeatedly acknowledge its methodology could over count the potential discrimination by firms, but is preferable to the alternative where bias is underestimated.

“In order to have an accurate measurement of potential consumer harm, you have to isolate out legitimate pricing factors that can cause a deviation in the results. There are business factors that the Justice Department has recognized as legitimate that the CFPB appears to be blatantly ignoring during investigations,” said Paul Metrey, NADA’s chief regulatory counsel.