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Statement of CFPB Director Richard Cordray on BMO Harris Auto Lending Policy

On May 21, 2018, the President signed a joint resolution passed by Congress disapproving the Bulletin titled “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act” (Bulletin), which had provided guidance about the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. Consistent with the joint resolution, the Bulletin has no force or effect. The ECOA and Regulation B are unchanged and remain in force and effect. See more information on complying with the ECOA and Regulation B. The materials relating to the Bulletin on the Bureau’s website are for reference only.

WASHINGTON, D.C. — Consumer Financial Protection Bureau (CFPB) Director Richard Cordray issued the following statement responding to news that BMO Harris Bank plans to pay auto dealers a flat percentage of the loan amount to compensate dealers for originating indirect auto loans.

“It is encouraging to see BMO Harris taking this proactive step to protect consumers from discrimination,” said Director Cordray. “When people go to buy a car, they should not have to worry whether they’ll pay more for their auto loan because of their race, gender, or ethnic background. The CFPB is committed to creating a fair marketplace for all consumers, and we recognize that many lenders share that commitment as well.”

The CFPB issued a bulletin in 2013 reminding lenders offering auto loans through dealerships that they remain accountable for complying with fair lending laws in their indirect lending programs. The Bureau’s bulletin explained that policies which allow dealers to exercise discretion over interest rates and provide direct financial incentives for charging higher prices may lead to fair lending violations under the Equal Credit Opportunity Act (ECOA). That type of policy can create significant risk of illegal price disparities based on factors like race, gender, or national origin.

In the bulletin, the CFPB identified potential approaches that indirect auto lenders could take to ensure they are operating in compliance with fair lending law. The CFPB does not mandate any specific form of dealer pricing and compensation, and has indicated that lenders may choose to adopt a variety of means, including but not limited to non-discretionary pricing and compensation policies.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.