By on December 4, 2013
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It is no surprise that U.S. automobile dealers have been in a tizzy the past few months as the Consumer Financial Protection Bureau (CFPB) has been rattling its swords threatening to ban them from marking up interest rates on car loans, a sacred profit center for dealerships. Using methodology that assumes a person’s race can be determined by their last name and their gender by their first name, the CFPB claims that certain protected classes are being discriminated against in terms of being charged higher interest rates and thus the practice must stop.

What is a surprise is that Congress is equally annoyed with the agency’s strategy and lack of transparency, and recently announced new regulations limiting their power. No matter the outcome, there is a real possibility that the unintended consequences of the CFPB’s actions will be higher car loan rates for you.

The three-year old CFPB faces several obstacles to reach their objective. The agency has been unable to produce a single example of a consumer complaint about this issue. They also have no authority over automobile dealerships, where cases of discrimination might exist, so their plan is to punish the banks for the actions of their dealers. Bear in my mind that lenders, be it a captive like Ford Motor Credit or a non-captive like Wells Fargo, never see the client, do not ask questions about race on credit applications, and pointedly do not ask for a copy of the buyer’s driver’s license until after the deal is done. Nonetheless, the agency has been demanding that banks produce data so they may study the customers’ first and last names and the rates they were charged.

Until three weeks ago the CFPB steadfastly refused to answer banks’ and Congress’s queries asking them to produce specifics of their strategy to uncover cases of discrimination. They were then summoned to a Senate hearing, where the CFPB chairman pledged to be more open and accountable. The House Financial Services Committee was not impressed and they imposed new measures on the regulator to insure they behave.

The CFPB then proposed an alternative method of compensating dealers: banks could pay them a flat fee for arranging consumers’ car loans as a substitute for rate participation. The problem with that scenario is that if Bank A approves a customer at 2.9% paying the dealer a $500 flat fee and Bank B approves the same customer at 3.9% with a $750 flat fee, the dealer will offer the latter to buyers. At which point the CFPB can produce another study and be outraged that people with certain first and last names were charged a higher rate.

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The CFPB is not alone in their quest. The Department of Justice recently successfully prosecuted the type of case the CFPB is desperately trying to find. They fined a Korean-owned Los Angeles bank and a Korean-owned Mitsubishi dealership for discrimination for their charging Hispanics consumers higher interest rates than non-Hispanics. The CFPB has not acknowledged this case as it is not the type of racial discrimination they are seeking.  Let’s face it, a Chrysler Capital or U.S. Bank will be perceived as “white” and if their dealers are charged with discriminating against minorities, they will be shamed by the media and the CFPB will be the hero.

The State of California – always irritated when the Feds find a business practice to regulate before they do – just announced a 2014 ballot initiative to ban interest rate markup by automobile dealers. The proposal includes other new dealer regulations, one of which prohibits dealerships from hiring individuals who have been convicted of identity theft. No dealer in their right mind would knowingly employ such a person but the strategy is to have it on the ballot so voters can think, “Damn car dealers, they must stop hiring convicted felons!” Like the Feds, Sacramento legislators know anything they can do to discredit automobile dealers will be cheered by the press and the populace.

So our question to the Best And The Brightest is this: if you are in the business of profiting by buying a product at wholesale and selling it at retail – and an interest rate is a product – should the government have the power to stop you from doing just that?

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51 Comments on “The Continuing Saga Of The Consumer Financial Protection Bureau And Dealer Interest Rate Markup On Car Loans...”


  • avatar
    AMC_CJ

    No no no no no no no no no no no no no no……

    We saw what happened when the federal government and it’s agencies, and subsidies (thank Fanny Mae and Freddie Mac) were wrapped up terrible in the housing loan market. Do we really need another repeat of that?

    When it comes down to it, the fact is it’s a bunch of bureaucrats trying to justify their employment and give themselves something to do.

    • 0 avatar
      sirwired

      Yes, clearly the problem with Fannie Mae and Freddie Mac was an excess of oversight and regulation. *sarcasm*

      I won’t argue with the notion that Fannie Mae and Freddie Mac should never have been set up; they were a bad idea to begin with. But neither GSE was a regulatory agency.

      You might have a point if the CPFB was proposing a GSE to make and/or buy car loans, but they aren’t.

      • 0 avatar
        AMC_CJ

        There was push in the housing sector to for people who were in “minority” groups to have the same equal housing opportunities as others.

        http://en.wikipedia.org/wiki/Community_Reinvestment_Act

        This wreaks of how the federal government pushed it’s way into the home mortgage market. Slippery slope and all. It’s starts like this, some good sounding well-meaning intentions, then people end DO getting discriminated because they meet certain racial/social/income criteria. Then the whole market collapses because all those people you gave loans too can’t pay them back.

        This is a old trick with a new hat. Know your history well.

        • 0 avatar
          sirwired

          The CRA explicitly did not require banks to do things like ignore credit history when granting loans. It’s sole purpose was to force banks to make loans available (at risk-appropriate rates) throughout the geographic area they were chartered to serve. (Fannie Mae and Freddie Mac existed for decades before the CRA did, and a relatively small portion of their portfolio (and losses) were CRA loans.)

          Most of the mortgage debacle occurred in areas (such as boom-towns and suburbs/exurbs) that were not subject to the CRA and much of the loans were originated by banks also not subject to the CRA. While “CRA loans” did have higher loss rates than “non-CRA” loans, those loss rates were not appreciably higher than non-CRA sub-prime loans.

          In any case, this proposal by the CPFB has nothing to do with extending (or refusing) credit to unworthy borrowers. Since the dealer neither makes the credit nor rate decision and has no money at risk in the deal, there’s no reason for the interest markup to be connected to creditworthiness.

          • 0 avatar
            Waterview

            While factually true (CRA did not require banks to ignore credit history), the practical application of the regulation has been markedly different. I’ve sat in meetings with federal regulators who compared our lending stats to a local subprime operation. Their conclusion — “if the subprime guy down the street can make these loans, you should be too”. The “threat” was not veiled.
            We tried to make the case that the subprime shop down the street wouldn’t be around in a year, but they didn’t care. “Either make the loans or we’ll bring down the hammer”. Meanwhile, the subprime shop down the street has failed . . . . .

          • 0 avatar
            AMC_CJ

            “The CRA explicitly did not require banks to do things like ignore credit history when granting loans.”

            My point was, that was the start of it. From there, it went far beyond, and deeper, then that. I was using that example to correlate with the original article. Sure, it just starts like this, then it turns into this, that, etc.

            As I said, same old tricks out of a new shiny hat. Housing is the #1 loan market. They got a hold of that. Cars are #2, correct?

            Same as Healthcare being the #1 industry in the country. It’s about controlling as much as possible. It only makes sense, from their perspective, to go after the car loan industry, and they’re using the same playbook they used for the mortgage market. Read the article above, read the laws/regulations I posted. Exact…..same….. language and basis.

  • avatar
    Pch101

    I don’t have a problem with usury laws. Then again, I’m not a loan shark or a car dealer.

  • avatar

    Ask these idiots to tie a shoe, and they’ll need a panel of 20, $15m for prelim studies, 6 months, and they’ll still tie the shoe improperly. Then they’ll do it again for the second shoe. Why anyone is for larger government is beyond me.

  • avatar
    afflo

    I get discriminated against every time I walk into a dealership. I’m 32 and look maybe 25. When I bought my last car, they tried to steer me to the used lot. They balked at even running the numbers when I said I wouldn’t put down a down payment!

    Them: “How much are you willing to put down?”
    Me: “Nothing”
    Them: “You know you won’t get a loan without it, right?”
    Me: “Yes I will”
    (10 minutes later)
    Them: Oh, I’m sorry about all that, I see you have excellent credit!

    The only reason I got a loan was because it was part of the $1000 rebate deal from Toyota. I paid it for a couple of years until I got tired of it, and just paid the rest off.

    • 0 avatar
      AMC_CJ

      Being young and/or looking young is probably the biggest discriminating factor in any of these situations.

      I went through the same deal, except I was actually about 25, and had no credit. Dealer didn’t want to give me the time of day. I eventually got the car I wanted at 3.9%apr though…..

      I’ve always looked a bit younger then I was. Age is starting to catch up to me a bit, and I’ve noticed how much better/different I get treated. You don’t get followed/watched in stores, the cops treat you MUCH nicer. Just in general, it’s a big difference.

      • 0 avatar

        When we take turns with customers no one wants to work with the 25 year old looking at a Mustang when there are middle aged people looking at the new hybrids. We know the statistical odds and we mostly work on commission. I’m newish enough to work with young folks but I’ve sold one performance car to a young kid and have a very long list of tire kickers who I just like to pretend will one day buy a car and remember me.

        • 0 avatar
          cdnsfan27

          I agree with you Frantz, I try not to pre-qualify but unless you prove you have the means, then no, you are not test-driving an R8.

          We are on commission also and if I spend three hours with a customer on a Saturday who has no intention to buy then I am costing myself money.

    • 0 avatar
      Kyree S. Williams

      I’d have taken advantage of that and guilt-tripped them into giving me a lower price. I know they get a lot of dead-end customers—people who either can’t finance the car in question or who string the salespeople along and deliberately waste their time—but those are the breaks of the industry and that was just rude.

  • avatar
    E46M3_333

    “…if you are in the business of profiting by buying a product at wholesale and selling it at retail – and an interest rate is a product – should the government have the power to stop you from doing just that?”

    No.
    .

  • avatar
    Kyree S. Williams

    As someone who is young, male and part of a minority race, I don’t think this is a good idea. You’re right that dealerships like higher interest rates, because they make more on the back end. Some people—the “I can do $350 a month” kind of people—don’t even know what their interest rates are and these are always the people that have the higher rates and longer durations. It doesn’t seem like there would be any way for CFPB to actually regulate how consumers are or are not discriminated without going completely overboard, and, yes, raising interest rates for everyone. If the folks at CFPB really want to help, they should do public, nationwide programs that educate buyers on how to actually shop for loans and not get taken advantage of by lenders. Even that won’t completely help, but it’s better than trying to find a problem that likely isn’t there, and that would only be of minimal impact to consumers as a whole.

  • avatar
    Conslaw

    “there is a real possibility that the unintended consequences of the CFPB’s actions will be higher car loan rates for you.”

    Horsecookies! Auto dealers aren’t even close to having the lowest rates. Secondly, even after getting caught systematically charging minority-group members more, they have continued to do so. We’re not talking about a little bit, we’re talking billions of dollars.

    Congress is giving the CFPB a hard time because the financial interests that pull their strings are telling them to do so.

    The US financial markets did not tank because they were over-regulated, they tanked because they were under-regulated, allowing greed and incompetence to rule.

    A free market is not a fair market or an efficient market if the market allows people to lie cheat and steal with impunity. A free market is not a fair market or an efficient market if the market exploits predictable irrational behavior.

    • 0 avatar
      Toad

      If you try to legislate away irrational behavior you would have to eliminate most of the things that make life fun :) Of course, to some people on the far left and right, that is a feature, not a bug.

      “A free market is not a fair market or an efficient market;” you can have any combination of two of the three, but having all three in equal parts at the same time is virtually impossible. Just like trying to get something good, fast, and cheap; you can pick two out of three but it is impossible to get all three in the same transaction.

    • 0 avatar

      When a customer comes in with a great rate from their bank I can typically beat them. I’d argue that we have the ability to get better rates than most customers do with their own walk in rates. Every customer has the right to negotiate their rate, just like the price of their car. I sell several new cars a quarter at full sticker. Should there be a regulation against that too?

      • 0 avatar
        cdnsfan27

        Frantz is right, my F&I manager can beat the bank 90% of the time while making 1% for himself. On certain vehicles MSRP is the price, on others we have some room to negotiate. Funny that we are the only business where paying a retail price is getting screwed:)

  • avatar
    tonycd

    This is a rather one-sided assessment.

    It’s worth mentioning here the larger picture that the Consumer Financial Protection Bureau was created to do just that: protect consumers from the rampant predatory loan practices of the banking industry. Not only did these practices — particularly in home mortgages, credit cards and student loans — cheat consumers out of billions, they also contributed greatly to the housing bubble collapse that took down the entire national economy and banking system in 2008-09.

    Ever since, Congress — so banker-dominated that the Senate Majority Leader flatly declared “The bankers own this place” — have been trying to gut the CFPB before it’s even had a chance to get off the ground. This desperate effort has even extended to the point of declaring for months that NO nominee for the post of CFPB director would be approved unless the commission’s powers were gutted first, not just for car loans but across the board.

    I have no strong opinion about the specific question here, and frankly no real knowledge of the auto-industry specific ramifications. I would only caution that Congressional disapproval of proposed CFPB regulations is no proof that the regulations in question are a bad idea.

    • 0 avatar

      In general, I think the CFPB is well intentioned and has done some good. They have slapped around some credit card companies put needed scrutiny on credit reporting agencies. They have also complicated getting a mortgage to the point that when you sign a new mortgage you have to sign documents that conflict with each other to complete the deal.

      I despise, however, their efforts to get involved with auto finance in terms of trying to set the margin a dealer can or can’t make. Dealers are often able to arrange financing on behalf of consumers that the consumer couldn’t arrange for themselves. Consumers determine interest rate through shopping, which they are free to do. The best negotiators get the best deals, regardless of race or gender.

      There ARE some egregious offenses committed by auto dealers and Buy Here Pay Here dealers. I’m fine with some serious hand slapping in these areas. But the CFPB doesn’t understand the retail auto business. They are an agency with immense power and little or no oversight. This makes them potentially dangerous.

      • 0 avatar
        Kyree S. Williams

        Right. One of my friends is basically a broker who gets a percentage of profit from book sales in exchange for arranging printing, editing and publishing services for those books. No one regulates what he makes on the back end. And this is quite a common practice in the book industry and even more so in the music industry. And like I said, quite a large number of borrowers aren’t bothered by their interest rates because they can’t even be bothered to find out what those rates are. All they know is that they’re paying $375 for some number of months. And that’s something that no amount of discrimination-regulation will correct.

  • avatar
    racer-esq.

    If the government really cares about discrimination it should go after the explicit gender discrimination in auto insurance and life insurance industries. Europe prohibits explicit gender discrimination in car and life insurance.

    With regard to disparate impact, it is a joke for the government to be looking for small evidence of disparate impact in auto loans when the government itself is committing massive gender and race based disparate impact discrimination with its prison system and war on drugs.

    1 in 15 black men are currently imprisoned by the government, the vast majority for nonviolent crimes, and 1 in 3 black men will be imprisoned by the government in their lifetime. But the real enemy of black people is car dealers. The government is here to help. Hahaha.

    • 0 avatar
      racer-esq.

      The government’s criminal justice system is so discriminatory that the EEOC has determined it is a violation of Title VII of the Civil Rights Act of 1964 for a company to not hire someone based solely on their having a criminal record.

      That is correct – the goverment is so sexist and racist with its criminal justice system convictions that, according to the government, companies cannot rely on criminal justice system convictions without de facto discriminating.

      http://lac.org/doc_library/lac/publications/employ_laws_and_convictions.pdf

      The government is fine with putting minorities into the criminal justice system to enrich government contractors and politically powerful union cops and union prison guards. With the US imprisoning more people than China, India, Russia or any other country. But how dare a private sector auto dealer have any disparate impact.

    • 0 avatar
      jpolicke

      Auto and life insurance rates are based on actuarial tables derived from real world statistics. Should I or my daughter pay higher rates to subsidize someone else’s hooner son? Europe’s obsession with ‘fairness’ is what inspires guaranteed issue health “insurance” which is no longer insurance at all.

      • 0 avatar
        racer-esq.

        So should auto insurance be broken down by race also? Not every man is a hoon, that is a discriminatory stereotype.

        Due to Obamacare/ACA people’s sons already have to subsidize your daughter’s health insurance. Before Obamacare women had higher health insurance rates, because they cost much more to insure. But not now, because that was deemed discriminatory, despite solid actuarial justification. The explicit discrimination in auto and life insurance still needs to be fixed.

        All discrimination, including employment discrimination, can be justified by actuarial tables. The question is whether we allow official, explicit discrimination. We still do in auto and life insurance.

        Disparate outcome is much more complicated. Nobody is explicitly taking gender into account in auto loans, like insurers are currently, discriminatorily allowed to do with auto and life insurance.

      • 0 avatar
        racer-esq.

        Health insurance actuarial gender discrimination, which benefits men since women use much more health care, is illegal, so auto insurance and life insurance gender discrimination should be illegal also. Not every man is a hoon. Should we break down auto insurance by race also?

      • 0 avatar
        danio3834

        What if you were shown a table that indicates people of certain ethnicities have a higher default rate on loans? Would that then make it OK to charge them higher rates?

        Let me make clear my stance on this issue, I think it’s OK for anyone to charge anyone else any price on anything, as long as the buyer has the right of refusal.

        • 0 avatar

          RE: “What if you were shown a table that indicates people of certain ethnicities have a higher default rate on loans? Would that then make it OK to charge them higher rates?”

          This is handled based on credit score, debt to income levels, job time, advance, and other factors. Credit score controls most of it. Credit score is blind to ethnicity and gender. In fact, if not for the Community Reinvestment act of 1977, we probably wouldn’t have the sophisticated credit scorning that drives our credit system.

          We now have a system that allows lenders to price risk based on so called credit tiers. That didn’t exist before the late 1980s. Good credit buyers paid too much and poor credit buyers didn’t pay enough.

          BUT the issue before the CFPB has to do with the margin a dealer adds into the deal to compensate for the expense of handling loan origination on behalf of lenders. The dealer controls large volumes of business which can be leveraged for many purposes.

          RE: “Let me make clear my stance on this issue, I think it’s OK for anyone to charge anyone else any price on anything, as long as the buyer has the right of refusal.”

          Well put!

  • avatar
    sirwired

    I’m a little fuzzy as to how eliminating the practice would lead to higher lending rates. The dealer isn’t making the lending decision, providing funds, or setting the base financing rate, the bank is. And if the dealer can’t markup the rate, wouldn’t that generally lead to the rate dropping?

    I don’t even think it would lead to fewer dealerships offering financing. After all, they can’t sell a car if you don’t have the money lined up to pay for it.

    I’m not saying dealers don’t deserve to make money, but they can simply demand more money for the car if revenue is taken away from the financing desk.

    Also, while certainly it might be difficult-to-impossible to levy a civil case based on first and last names, it seems like a decent starting point for a general study.

    • 0 avatar
      Pch101

      “And if the dealer can’t markup the rate”

      That is the issue. The dealers do increase the rate, and pocket the markup: it’s referred to as “dealer reserve,” and produces considerable F&I profit.

      http://www.responsiblelending.org/other-consumer-loans/auto-financing/tools-resources/how-does-a-dealer-reserve-work.html

      • 0 avatar
        sirwired

        Yes, I know. The proposal from the CFPB is that the dealers could no longer markup the rate. I was commenting on that proposal and how the article’s assertion that it would lead to higher lending rates is dubious, at best.

        • 0 avatar
          Waterview

          All of you are missing a significant negative impact of the CFPB: Banks will likely no longer purchase loans from car dealers as they have in the past because any violations of the rules (as determined by the CFPB) will pass through to the bank. While banks will still lend directly to consumers, there will be a much smaller supply of buyers from auto dealers. Fewer buyers and more regulation will result in less available credit and higher prices (as was observed by a few in notes above).

      • 0 avatar

        But whats wrong with that? The customer is agreeing to a contract. If you aren’t a big kid enough to make your own contracts you shouldn’t be able to decide if you can really afford $400 a month for 84+ months.

  • avatar

    If only there was some way that customers could get a loan outside of the car dealership – from a local bank or credit union, or an internet bank, or a big national bank. Then they could compare the rate they got to what the car dealership was offering, and avoid being discriminated against.

    /sarcasm.

    Seriously, this is just protecting customers who are too dumb or lazy to shop around for a loan.

    • 0 avatar
      sirwired

      It should not be the consumer’s job to try and avoid illegal discrimination. The CPFB doesn’t have any problem with the idea of financing markup. However, markup should not depend on race or gender. (And it has nothing to do with credit-worthiness since the dealership bears no risk and has nothing to do with the base rate.)

      And if you don’t qualify for decent rates, will branch banks and credit unions even consider you? I thought most sub-prime paper originated from non-retail operations.

      • 0 avatar

        Do you really believe it’s based on race or gender? Seriously, you think a car dealership says “oh look a white guy, we’d better not try to make any extra money on him”. This is a regulation based on free market being greedy, it’s that very “greed” that guarantees it is universal.

        • 0 avatar
          Tacky-Wacky

          “Do you really believe it’s based on race or gender?”

          That is exactly what was found. The dealers were marking up black guys the most and white guys the least. Women, both white and black, were somewhere in between. Is it wrong to add mark up? No. Is it wrong to do so based on race or sex? Yes.

    • 0 avatar
      05lgt

      Exactly. Protecting consumers (dumb customers) who don’t know F&I as well as the dealership F&I team.

      as to the original question “– should the government have the power to stop you from doing just that?” Yes. If your buisness model relys on informational asymetry (luring and fleecing suckers) than the government should have that power. Free market includes the idea that the buyer and seller have equal information about the product under discussion. That’s why the SEC has so many disclosure rules. Trading something you know with someone who doesn’t know it isn’t “the free market”. It’s a con.

      • 0 avatar
        Toad

        Virtually every financial transaction involves asymmetrical information, either real or imagined. As a general rule the manufacturer of every product or the provider of every service you purchase knows more about that product or service than you do. Based on your assumption that all asymmetrical information gaps are a “con” the government should micromanage every financial transaction.

        Not a good plan.

  • avatar
    Lou_BC

    When I purchased my truck the local car dealership pushed real hard for me to go with their own financing. The dealer was part of a massive chain and had its own financial arm. It actually was at a better rate than what I could get at most banks but I already had made my own arangements that were superior to what they had to offer.

    The dealerships in my town regardless of brand are owned by 2 guys with the exception of the Toyota dealership. Both offer in house financing because of being part of larger “family” chains of dealers. The irony is that when things went bad in 2008-2009 the local repo lots were full of relatively new Chrysler/Dodge/Jeep products. They were the most aggressive with loose financing. They survived and the owner still drives around in a Lamborgini or other europenile extension.

  • avatar

    @ Virgil – Your piece here is simply brilliant. You have captured it all, even better than many of my learned brethren in the business. I wonder what your background might be that you have this level of insight.

    I think the CA Mitsubishi decision might not have been specific about Hispanics, but the regulators determined that Asians in general received better interest rates than other classes, including whites. Of course, your point is well made, “how can you determine the ethnic extraction of a consumer based on their name and zip code?” Some of us in the industry have joked that we need to have independent agents putting a bag over the heads of buyers when they come to the dealership. Of course, we can’t take a drivers license to prove a buyer can legally drive a car on a demo drive. Then there is the conflict over the dealer’s responsibility to make sure the buyer is who they say they are, an example of conflicting regulation.

    Some bank examiners, especially on the credit union side, have castigated the lenders for maintaining a copy of a drivers license in the deal bag.

    In the middle of this there are market based solutions taking place. Companies like “Rate Genius” identify consumers who paid a high rate of interest and contact them to refinance the loan. In many instances, the interest rate at inception accurately fit the borrowers credit profile, but after months of steady payment, the consumer’s credit score rose to the point that they qualified for a better rate.

    I believe in CA dealers are already capped at a 2% markup. But I am still laughing over your comment about how CA is offended whenever the Feds find something to regulate before they find it themselves in CA. No truer words have been spoken.

    Congratulations on a very fine article!

    • 0 avatar
      Kyree S. Williams

      “Of course, we can’t take a drivers license to prove a buyer can legally drive a car on a demo drive.”

      Nope, and lenders usually make it the dealers’ responsibility to check for adequate insurance before driving the car off the lot, too…

  • avatar
    dtremit

    It would seem like the easy answer here would be disclosure requirements. Rather than capping anything, require dealers to report the interest rate offered by every bank they submit the consumer’s credit to. Seems simple enough.

  • avatar
    dwford

    Many states already limit the amount of the dealer markup. In CT where I sell cars it’s 2.5%. Is the government saying that if my finance manager could get 2.5 points on a white customer he’d voluntarily give that up due to race?? That’s stupid.

  • avatar

    RE: “It would seem like the easy answer here would be disclosure requirements. Rather than capping anything, require dealers to report the interest rate offered by every bank they submit the consumer’s credit to. Seems simple enough.”

    If you want to start that, why wouldn’t you force EVERY merchant to disclose THEIR cost factors to consumers? You know, at the grocery store? The furniture store? The jewelery store? Why just on car dealers?

    If the consumer wants to shop, let them shop.

  • avatar

    “The CRA explicitly did not require banks to do things like ignore credit history when granting loans.”

    The CRA? Hell, the CRA had nothing to do with the mortgage crisis, if that’s what you are implying? It wasn’t government intervention that caused that but a LACK of government intervention that enabled the securitizers who did what they did for reasons of profit. They didn’t give a rat’s ass about altruism of any kind and were NOT regulated in any way by the CRA.

    It impacted auto loans somewhat in that a lender had to have good reason to turn down a loan other than just the zip code where the customer lived. It forced the move to our sophisticated credit scoring system, which is a good thing. That enable tiering which allowed for better pricing for risk.

    RE: “Controlling as much as possible?” Who? What?

  • avatar

    As a slimy car salesman I find it amusing that someone thinks I wouldn’t jump at the chance to earn extra money from white people. Seriously. I do like people with poorish credit because they are more likely to say yes to anything that involves them getting into a car they cant afford (as in pay cash), but race has nothing to do with this. I personally drive a 1993 Caravan. I make decent money, but nothing more than what a gov drone does and I only get paid if I perform.

    Also, it’s pretty rare that I make much money on the actual car. If rates can’t be a profit center guess what will happen to the price of cars? I am working a two car cash deal at the moment where we are losing money on both cars and they fellow wants better discounts. I told him we were losing money and he laughed and said “if that were true then you wouldn’t stay in business long, my son needs a car soon too so this will be a three car deal”. I told him if he was also paying cash then I wasn’t interested in ever meeting his son. There is plenty of info on how to get a great deal from a dealership out there, but it doesn’t cover how we actually make our money, which we do need to do. Believe it or not, we aren’t a government provided and subsidized service.

  • avatar

    RE: “That is exactly what was found. The dealers were marking up black guys the most and white guys the least.”

    First, the CFPB has NOT put out specific findings. Second, how in the hell would they know who is black and who is white?

    RE: “Women, both white and black, were somewhere in between. Is it wrong to add mark up? No. Is it wrong to do so based on race or sex? Yes.”

    The best negotiators get the best deals, white, black, Asian, female, or whatever. If certain groups tend to be worse negotiators, they might pay more. Uneducated white men pay more than educated white men. It all depends on how you slice and dice the groups but first you have to have a way to determine who is who.


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