CARY, N.C. -

Both the Department of Justice and the Consumer Financial Protection Bureau sent out press releases on Tuesday afternoon reporting the settlement the agencies made to resolve allegations that Toyota Motor Credit engaged in a pattern or practice of discrimination against African-American and Asian/Pacific Islander borrowers in auto financing.

While each regulator highlighted similar points — how the captive must restrict dealer markups and send restitution back to contract holders — a key statement was not included in the material from the Justice Department but was shared by the CFPB. It’s a statement that perhaps might give finance companies of all sizes a moment to reflect.

“The investigation did not find that Toyota Motor Credit intentionally discriminated against its customers, but rather that its discretionary pricing and compensation policies resulted in discriminatory outcomes,” the CFPB said.

SubPrime Auto Finance News reached out to both regulators for an explanation about the difference in the settlement press releases but did not receive replies.

Toyota Motor Credit officials reiterated their stance about the investigation and settlement as the agencies made their announcement.

“We want to emphasize that TMCC does not tolerate discrimination of any kind, even perceived or unintentional, from its employees or business partners,” captive officials said in a statement to SubPrime Auto Finance News. “This principle extends to the company’s fair lending practices. 

“While TMCC respectfully disagrees with the agencies’ methodologies to determine whether industry lending practices have been discriminatory, the company shares the agencies’ commitment to ensuring that consumers can count on competitive and fair auto financing options,” Toyota Motor Credit officials added. “The actions TMCC will take under this agreement are intended to further that commitment.”

In reacting to the settlement, the American Financial Services Association used the term “some progress” when the organization sent a statement to SubPrime Auto Finance News on Wednesday.

“The announcement of the voluntary settlement entered into by Toyota Motor Credit Corporation with the Consumer Financial Protection Bureau and the Department of Justice represents some progress,” AFSA officials said.

“However, we continue to advocate for a universal, market-based solution to dealer compensation rather than the use of one-off enforcement actions, based on flawed methodologies, to address potential disparate impact,” they continued.

“The American Financial Services Association stands committed to working with the CFPB to resolve this issue and reach a solution that is in the best interest of millions of U.S. consumers,” AFSA went on to say.

Growing burden on finance companies

The CFPB did point out that its latest coordinated action with the Justice Department in the auto finance space marks the fourth one since December 2013.

So far, the bureau and DOJ have reached settlements with Ally Financial, American Honda Finance and Fifth Third Bank. The agreements included not only contract holder restitution but also curtailment of dealer markup practices.

This series of events likely has pushed auto finance companies of all sizes to try to modify their practices in order to be compliant with the demands of the CFPB and other federal regulatory agencies. AFSA president and chief executive officer Chris Stinebert discussed what finance company leaders are potentially facing during a conversation with SubPrime Auto Finance News back in December.

“Auto finance companies for years have been regulated in every state where they operate and have worked hard to adhere to strict compliance rules and regulations in those various states,” Stinebert said.

“Now the federal government, namely the CFPB, is adding another layer of complexity with rulemaking and certain enforcement actions which seem to be an overreach to the auto finance industry and certainly unfair to law-abiding companies who are targets of the enforcement actions,” he continued.

“As a result, auto finance companies are awash in state and federal compliance standards,” he went on to say. “Companies have had to beef up compliance staffs which means hiring additional lawyers, paralegals and staff professionals to support their efforts to be compliant on both the federal and state levels.”

With agreements involving some of the largest players in the auto finance space and including millions of dollars in actions, organizations such as AFSA are trying to convey a strong message to lawmakers, regulators and other important parties within the Capitol Beltway about the growing burden these intensifying compliance mandates are placing on finance companies

“The message AFSA is trying to convey to lawmakers, regulators and other important stakeholders inside and outside the Beltway is something that regulators do not think of when they are writing regulations for our industry. That is, in order to enact all of these rules it takes money,” Stinebert said.

“Unfortunately, more often than not, the unforeseen costs of overzealous regulations ultimately flows to the customer and what they are paying for the cost of access to credit,” he continued.

“The cost of credit, determined by credit scores and such factors as the length of time on a certain job or the length of time at a certain residence, can lead to access to affordable credit for the customer,” he went on to say. “But the cost of beefing up compliance staffs by adding more professionals and IT systems, squeezes the margins and ultimately raises the cost of affordable credit.”

The ultimate cost on vehicle buyers as regulators intensify their actions is a point raised by the National Automobile Dealers Association late Tuesday in a statement to SubPrime Auto Finance News. An NADA spokesman reiterated the solution the association has tried to give the CFPB.

"The CFPB's campaign to eliminate auto loan discounts has already cost consumers money and eroded the rights that every consumer has to negotiate and benefit from a competitive marketplace,” NADA said.

“As long as those rights are under assault, NADA will continue to urge the CFPB to adopt a solution, developed by the U.S. Department of Justice, that fully addresses fair credit risk in auto lending without needlessly harming consumers,” the association added.