Now that the Consumer Financial Protection Bureau has indicated that it will put stricter limits on how much dealers can earn on customer interest rates, dealerships are looking for ways to offset any loss in revenue, such as by selling extended-service contracts.

Christopher J. Willis, a Ballard Spahr partner whose clients include banks involved in auto lending, said the CFPB apparently sees dealerships playing a similar role as mortgage brokers who used to add an additional spread to a customer's interest rate, a practice the bureau stopped. He said it is probably a good idea for dealers to look for other ways to make up for dealer reserve.

"They're smart to consider that," Mr. Willis said. "Unless something happens to prevent what happened in mortgages, I think the same thing will ultimately happen in autos."

Related Practice

Consumer Financial Services