WASHINGTON, D.C. -

The U.S. Chamber of Commerce recently followed the path forged by the American Financial Services Association, the National Automobile Dealers Association and other interested parties in questioning the new regulatory environment for indirect auto lending created by the Consumer Financial Protection Bureau.

One of the recent developments that concerned the U.S. Chamber's David Hirschmann most is the CFPB actions against Ally Financial that came back in December. In the 12-page letter addressed to CFPB director Richard Cordray, Hirschmann rattled off six concerns with how the CFPB found "statistically significant" violations through a proxy methodology described as "the Bayesian Improved Surname Geocoding method."

Hirshmann contends the bureau is under the presumption explanations offered by Ally did not "appropriately reflect" legitimate business needs, and the bureau's order does not explain:

—How its "proxy methodology" works.

—The error rate anticipated by this proxy methodology and the level of errors at which the underlying conclusions about disparate impact would remain statistically valid.

—What it considers a "statistically significant" disparate impact or even whether it gauges that impact by basis points or another measure.

—What analytical controls it applies to ensure that the consumers from different groups who are being compared are "similarly situated" (such as what analytical controls it is applying to isolate a consumer's background as the sole reason for any statistically significant pricing disparities that the Bureau finds between different groups of consumers).

—What it considers to be "legitimate business needs" that properly may result in pricing disparities.

—How it concluded that the disparities at issue resulted from the subject lending practices.

"Because the analysis and factors used by the bureau remain unknown, no company can build a compliance regime that it knows will satisfy the bureau," said Hirshmann, who is the president and chief executive officer of the U.S. Chamber's Center for Capital Markets Competitiveness

"Indeed, the continuing monitoring system imposed under the Ally consent order appears premised on the inevitability of future violations, suggesting that no one — including the bureau — knows how to ensure compliance going forward," he continued. "Lenders that are unwilling to operate under the constant threat of disparate impact liability — and no company wants to be labeled ‘discriminatory' by a government agency — have two choices: either leave the market or move to a flat-fee model.

"The bureau appears not to have considered the consequences of such changes for consumers — even though reduced lender participation and the elimination of price discounting could shrink credit availability and raise consumers' costs. So far, in fact, industry groups have had to fill the void for research into the consumer impact associated with a move to a flat-fee model. Surely that is a matter warranting significant attention from the bureau," Hirshmann went on to say.

Hirshmann's entire letter to the CFPB can be found here.