With the CFPB pushing to change the dealer income model in the auto industry, it seemed inevitable that lenders would adjust.  The question was who would get the ball rolling?  The answer: BMO Harris Bank.  (For previous discussions of the fight between the CFPB and the auto industry, see all the links here.)

As reported by Auto News and others:

[BMO Harris Bank], which offers auto loans via franchised dealerships in 25 states, could be the first auto lender of appreciable size and scope to change to flat fees since the Consumer Financial Protection Bureau started campaigning last year to eliminate dealerships’ ability to set varied rates for dealer reserve.

CFPB Director Richard Cordray responded, “It is encouraging to see BMO Harris taking this proactive step to protect consumers from discrimination”.  While I’m not sure it will offer such protection, it certainly will eliminate the discretion dealers have to adjust rates with any particular lender.

It’s always fun to make predictions, so here are my two.  We’ll see how long it takes to determine whether I should moonlight as a professional prognosticator!

  1. More dealers will follow suit, but it will take longer than expected (1-2 years) for the industry to change in general.
  2. When the CFPB  achieves its flat-fee push, it will pursue greater disclosure of dealer compensation to the consumer, just like it did in the mortgage market.

What are your predictions?