by Jeff Sovern
Here. The piece begins:
Auto dealership advocates are warning that costs will rise for borrowers if the Consumer Financial Protection Bureau presses banks to curtail auto loan markups determined by dealers.
The warning followed the CFPB's bulletin this week that said banks are responsible for discrimination if their partner dealers mark up the interest rates on loans for minority borrowers or engage in other fair lending abuses. The agency is encouraging lenders to adopt a flat-fee model for dealer compensation.
But dealer industry representatives said doing so would hurt competition and ultimately boost car prices.
Of course, the industry always argues that regulation will increase costs. But in this case, it's not clear why that would occur. At present, some lenders sometimes tell dealers the lowest rate they would provide a particular consumer and then allow the dealer to negotiate a higher rate. The Bureau claims that some dealers respond to that ability to negotiate by consistently charging higher rates to protected groups. If dealers can no longer bargain for a higher rate, won't everyone get the lowest rate, including protected groups? Or is the thinking that lenders will increase the lowest rate they will charge to offset the loss from discriminatory pricing? In that case, some groups will pay higher rates than they now get because of disrimination. It's hard to see as a bad thing that some consumers won't benefit from discrimination that others pay for.