The Consumer Financial Protection Bureau confirmed that it will work to end discrimination in the auto lending industry by limiting or even eliminating the dealer reserve. Dealer reserve is the car dealer’s addition of interest to lenders’ wholesale rates and keeping the additional interest as profit. The Bureau is concerned that allowing the dealers to set the final interest rates can lead to discrimination, even if it is unintentional.

Christopher J. Willis, a partner at Ballard Spahr with clients in auto lending, said that the CFPB wants everyone to pay the same rate at every dealership. To do that, the agency is considering eliminating the dealer reserve or instituting a flat fee to replace it.

Auto lending and dealer trade groups have responded to the proposed change by insisting that their members do not discriminate.

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Consumer Financial Services