The Dodd-Frank financial reform law, which passed Congress in 2010, authorized the creation of the Consumer Finance Protection Bureau, and now the CFPB wants to regulate the banks that make consumer loans, the dealers that refer them, and the service providers that broker them.
The CFPB has been tasked by the Dodd-Frank law with, among other things, enforcing the Equal Credit Opportunity Act, which prohibits lending practices that discriminate against borrowers based on criteria such as gender or ethnicity.
The Marine Retailers Association of the Americas worked closely with the National Automobile Dealers Association and Robert Fisher, a New York City lawyer, to exempt marine, RV, and auto dealers from the jurisdiction of the CFPB when the Dodd-Frank legislation was in the House-Senate conference. The Bureau has since been lobbying Congress asking why it allowed this exemption. The Bureau clearly wants to further regulate boat dealers in the same way as it does when it regulates financial institutions. When asked during the lobby campaign, Rep. Frank (D-MA) said there was no intent to include dealers because dealers were not the cause of the financial meltdown in 2008.
MRAA understands some lending institutions have already told dealers that the Bureau can enforce fair lending laws to prohibit intentional and unintentional lending discrimination. Banks now suggest that they want to pass the additional compliance costs on to the consumer through higher interest rates or by placing limits on their financing programs. These additional costs would be charged because the CFPB believes there is discrimination in the lending process. That is the angle it appears to be using to regulate dealers, since dealers are clearly exempt from regulatory compliance under Dodd-Frank.
Banks may also look at other changes to consumer financing by either exiting the indirect marine lending business in favor of a direct-to-consumer model.
MRAA is closely watching these developments and is working to retain the dealer exemption to reduce the cost of compliance to Dodd-Frank but also wants to retain direct and indirect financing models at low competitive rates to encourage boat sales.
It is becoming clear that the CFPB wants to eliminate the indirect dealer/broker participation programs and regulate dealers by making indirect financing models cumbersome and costly for consumers, dealers, and banks or by placing banks in the position of overseeing the actions of dealers.
The entire issue has become more complicated by a recent Obama Administration executive order that says agencies cannot discuss rules and regulations with interested parties or groups that may be impacted by a rule during the drafting stage and not until a rule has been published in the Federal Register.
