Source: http://www.scribd.com/doc/59802802/6-Just-Over-the-Horizon-Auto-Finance-Regulation-After-Dodd-Frank-A-NAAG-11-10
Timestamp: 2013-12-08 23:17:33
Document Index: 407945741

Matched Legal Cases: ['§1029', '§1029', '§1029', '§1027', '§1029', '§1029', '§1029', '§\n1029', '§1031', '§\n1031']

6. Just Over the Horizon - Auto Finance Regulation After Dodd-Frank -- A NAAG (11-10)
P. 16. Just Over the Horizon - Auto Finance Regulation After Dodd-Frank -- A NAAG (11-10)6. Just Over the Horizon - Auto Finance Regulation After Dodd-Frank -- A NAAG (11-10)Ratings: 0|Views: 835|Likes: 0Published by Judicial Watch, Inc.More info: categoriesGovernment & PoliticsPublished by: Judicial Watch, Inc. on Jul 11, 2011Copyright:Attribution Non-commercialAvailability:Read on Scribd mobile: iPhone, iPad and Android.Free download as PDF, TXT or read online for free from ScribdFlag for inappropriate content|Add to collectionSee MoreSee lesshttp://www.scribd.com/doc/59802802/6-Just-Over-the-Horizon-Auto-Finance-Regulation-After-Dodd-Frank-A-NAAG-11-1007/11/2011pdftextoriginal MOTOR VEHICLE FINANCE REGULATION AFTER DODD-FRANK:
Who’s Got the Ball? 2011 NAAG Presidential Initiative“America’s Financial Recovery: Protecting Consumers While We Rebuild”April 10-12, 2011 Charlotte, North Carolina
Senior Policy CounselCenter for Responsible LendingDurham, NC
Adapted from materials originally presented to the Consumer Financial Services Committee, American BarAssociation, January, 2011, prepared by Kathleen Keest and Michael Benoit, Hudson Cook, Washington,DC.
Motor Vehicle Finance Regulation After Dodd-FrankOverview & General Principles
Scope of the Dealer Exclusion from CFPB:
If a dealer qualifies for the exclusion, then it is excluded from CFPB rules,supervision and enforcement. §1029(a). (FTC is the federal regulator forexcluded dealers, see below.)
Excluded from CFPB authority – Dealers that arrange the vehicle financingand assign the car loans to unaffiliated third parties. (dealer-as-broker /“indirect lending”/ “three-party financing” model.)
Franchise dealers only? As drafted, this exclusion may apply onlyto franchise dealers. The exclusion applies to a dealer that is“predominately engaged in the sale and servicing
of motorvehicles, the leasing and servicing of motor vehicles, or both.”§1029(a). Many independent dealers who do indirect financingdo not have servicing departments. Presumably CFPB and FTCrule-making will clarify what role a dealer’s service departmentplays in the exclusion.
Included under CFPB authority– Buy here/pay here (“BH/PH”) dealers, i.e.ones that extend retail loans or leases directly to consumers and do not“routinely” assign the loans or leases to unaffiliated sources of financingor leasing. §1029(b)(2)
: What about the hybrid BH/PH dealers?
the oneswho “routinely” keep subprime customers in house or withaffiliated finance arms, but “routinely” send prime buyers out tounaffiliated banks or indirect lenders?
: There is a separate CFPA provision with an extremelyconvoluted exclusion for merchants, with special emphasis onsmall businesses, §1027, Dodd-Frank wonks disagree as towhether dealers who are subject to CFPB under §1029 get a“second bite” at being excluded through the merchant exclusion.(This wonk believes rules of statutory construction would say“no”.) Presumably rules will clarify this, as well.
To the extent that a dealer offers mortgage-relatedservices, it will be under CFPB, and to the extent it offers any consumerfinancial product not relating to the sale, financing, leasing, rental,repair, refurbishment, maintenance, or other servicing of vehicles, it willbe under CFPB. In other words, if an otherwise exempt dealer runs apayday loan business on the side, the payday loan business is subject tothe CFPB. §1029(b)(1), (3).
Definition of “motor vehicle:” The definition includes recreational boats,motorcycles, motor homes, RVs, etc. §1029(f).
Basic allocation between CFPB & FTC :
The basic breakdown (with some tweaks) isthat the “
” and other dealer-finance models are under CFPB jurisdiction, while the “originate-to-sell” or brokered-loan model
(“indirect lending” )model stays with FTC.
The FTC is granted APA rule-making authority to issue UDAP rulesapplicable to the dealers under its jurisdiction. §
1029(d).
By its terms,this FTC UDAP authority is not limited to rules relating to financialproducts and practices.
The FTC does not have APA rulemaking authority as to dealers subject toCFPB authority, but retains enforcement authority concurrent with theCFPB.
Vehicle financing itself is not excluded from CFPB jurisdiction, just qualifyingdealers
The dealer exclusion is personal to qualifying dealers. The vehicle financingproducts and practices themselves are not the subject of a categorical exclusion
If someone other than an excluded dealer is a provider of vehiclefinancing products and services, that provider is covered, absent its ownindependent exclusion.
The exclusion also only applies to qualifyingdealers’ three party vehicle-financing business. As noted above, CFPB willhave jurisdiction over dealers to the extent dealers provide otherfinancial products or services,
mortgage products or payday loansare subject to CFPB without regard to the dealer exclusion.
UDAP and UDAAP :
The reference to “UDAP” in the chart below refers to “unfairand deceptive acts and practices,” familiar from the FTC Act and state laws.§1031(a) “UDAAP” is not a typo – it refers to the CFPB’s statutory charge to prevent“unfair, deceptive, or abusive” acts or practices.
“Abusive” is defined as an act or practice that “materially interferes withthe ability of a consumer to understand a term or condition of aconsumer financial product or serve; or takes unreasonable advantage of a lack of understanding on the part of the consumer or the material risks,costs, or conditions of the product or services; the inability of theconsumer to protect the interests of the consumer in selecting or using aconsumer financial product or service; or the reasonable reliance by theconsumer on a covered person to act in the interests of the consumer.”§
1031(d).
This statutory definition of “abusive” resonates of unconscionabilitydoctrine, and the pre-1980
Sperry-Hutchinson
test for unfairness used bythe FTC.
The term (undefined) was first used in the 1994 HOEPA
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