Not that the Consumer Financial Protection Bureau is omnipotent, but it found Herbies Auto Sales.
SAN ANTONIO – Attorney Tom Hudson says it shows something when a federal regulator with a reputation of aggressiveness found its way to a used-car dealership in northern Colorado.
His legal object lesson: You can no longer fly under the regulatory radar just because you’re a small operator.
Not that the Consumer Financial Protection Bureau is ubiquitously all-knowing and all-seeing. But it zeroed in on Herbies Auto Sales in Greeley, CO, after a local newspaper write-up on the business.
As part of a consent agreement, the buy-here, pay-here store ended up paying $700,000 in restitution to about 1,000 customers. That payout “made me blink,” says Hudson, a dealership attorney who had defended Herbies in the case.
Both small and large dealerships come under the same compliance requirements, Hudson notes during a presentation entitled “Does Size Matter?” at the DealerSocket User Summit here.
Hudson is no fan of the CFPB, a 5-year-old agency that is the creation of the Dodd-Frank Financial Reform Act. “It’s a big bully that looks for people who won’t fight back.”
A federal appeals court recently ruled the watchdog bureau’s structure is unconstitutional because its director isn’t answerable enough to the president.
But the agency has its supporters, particularly among consumer advocates. “We fought hard for the creation of the CFPB, a government agency with a mandate to protect everyday people from unfair financial practices,” says Liz Ryan Murray, a policy director for People’s Action Institute.
Dealers who arrange indirect loans between customers and lenders are exempt from direct CFPB oversight. Not exempt are buy-here, pay-here used-car dealers who do their own vehicle financing.
Herbies got into trouble for what the CFPB uncovered after questioning how the store could finance poor credit risks for only 9.9%, a rate touted in ads. “The CFPB said that doesn’t make sense,” Hudson says.
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