The Consumer Financial Protection Bureau has issued a bulletin targeting the practice of dealer markups, saying they run afoul of the Equal Credit Opportunity Act. Such markups involve auto dealers charging consumers a higher interest rate than the rate at which indirect lenders are willing to purchase the consumer's retail installment contract.

The CFPB said that because of the incentives these policies create, and the discretion they permit, there is a significant risk that they will result in pricing disparities on the basis of race, national origin, and potentially other prohibited bases.

Critics argue that the CFPB is overstepping its role because it does not regulate, supervise, or have the authority to investigate or initiate enforcement actions against auto dealers, said Ballard Spahr partner Alan S. Kaplinsky, who monitors the CFPB. He said the Federal Trade Commission is the only agency that has the right to investigate and bring enforcement actions against auto dealers for violating the ECOA.

"I believe that the CFPB’s guidance has a disparate impact on the large banks," Mr. Kaplinsky said. "The large banks will certainly feel more pressure than the small banks or nonbanks to stop using dealer rate participation."

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