Three years after Congress passed the Dodd-Frank Act, the Consumer Financial Protection Bureau is looking to crack down on auto loan markups that are virtually identical to ones that Dodd-Frank banned in the mortgage loan market, in which borrowers were steered toward loans with high interest rates.

But the CFPB is taking a different approach to auto loans and not banning markups outright. Instead, it is warning lenders that the markups could be racially discriminatory because they are higher for minorities than for whites. While this could pave the way for enforcement actions, the CFPB says publicly that it’s keeping its options open for now.

This approach enables the CFPB to avoid facing a backlash from auto dealers, unlike a rulemaking process, which requires a public comment period, said Christopher J. Willis, a Ballard Spahr attorney who defends banks in fair lending cases. “I believe [the CFPB] is worried about that,” Mr. Willis said.

Related Practice

Consumer Financial Services