CFPB Needs a New ‘Tool,’ Study Finds, from F&I Magazine.
Almost a year after making the pledge, the American Financial Services Association (AFSA) delivered this week a study that addressed the Consumer Financial Protection Bureau (CFPB)’s concerns regarding dealer participation. Its conclusion: The bureau needs a new “tool” for examining disparities in dealer markups.
Commissioned by the AFSA, the study characterized the bureau’s use of the Bayesian Improved Surname Geocoding (BISG) proxy method to measure disparities in dealer reserve as “conceptually flawed,” with the authors, Boston-based Charles River Associates (CRA), adding that the potential biases and estimation errors could contribute to the overstatement of alleged harm to consumers.
“Our research concludes there is very little evidence that dealers systematically charge different dealer reserves on a prohibited basis,” the study, “Fair Lending: Implication for the Indirect Auto Finance Market,” concluded. “Rather, variations in dealer reserves across contracts can be largely explained by objective factors other than race and ethnicity.