29 Apr 2013 Obama’s Controversial New Consumer Financial Protection Bureau Goes After Vehicle Lenders

CFPB Seeking Evidence that Fair and Unbiased Lending Policies Nonetheless Had a “Disparate Impact” on Minorities

Situation Further Complicated by Court Ruling that the Appointment of CFPB Director Richard Cordray Was Illegal

Milwaukee, WI / Washington, D.C. – Harley-Davidson executives rose to the challenge posed to them by the National Center for Public Policy Research’s Free Enterprise Project – decisively stating “we’re on it” when asked if the company was prepared to defend itself from Obama Administration racial politics.

At Harley-Davidson’s annual meeting of shareholders Saturday, April 27 in Milwaukee, National Center Executive Director David Almasi pointed out to Harley-Davidson management and shareholders that the Consumer Financial Protection Bureau (CFPB), a new federal entity created by the 2010 Dodd-Frank Act, appears to be targeting lenders in the vehicle industry.

Congress explicitly denied the CFPB the power to regulate the automotive industry when it created the CFPB, but the agency apparently plans to end-run Congressional intent and regulate vehicle dealers indirectly by regulating their relationships with major banks and finance companies that are subject to the act.

The CFPB has already demanded vehicle-lending data from several banks (more information here and here), and is looking for evidence of “disparate impact” – circumstances in which dealers follow policies that are neutral and non-discriminatory that nonetheless disproportionately affect individuals in covered groups, such as racial or ethnic minorities.

Pointing out approving more loans to potentially risky buyers for political reasons could lead to a new cycle of subprime lending of the kind that caused America’s recent and disastrous mortgage bubble, Almasi asked: “You obviously know that you are on [acting CFPB director] Richard Cordray’s radar, if not already in his sights… [H]ow does Harley-Davidson management plan to protect this company against this assault? Will you cave or will you stand your ground? Are you willing to fight this issue in the halls of Congress and by speaking out in the news media, or will you buckle to the coffee-break regulators of the bureaucracy?”

A copy of the complete question asked by Almasi, a Harley-Davidson shareholder, as it was prepared for delivery, can be found here.

Larry Hund, president of Harley-Davidson Financial Services, who spoke at the meeting, said that dealing with the new demands of the CFPB is a “very big topic.” He noted – as Almasi pointed out in his question – that the company has retained a Washington lobby firm for help in getting a handle on the issue of CFPB data requests.

Hund told shareholders that Harley-Davidson “hired an outside law firm… who is helping us accumulate data. Look at this. Make sure that we are, you know, in compliance. And also make sure we are on top of where the CFPB goes. And – at the same time – still providing the opportunity for credit for so many of our riders…”

In a conversation with Almasi after the meeting adjourned, Hund added that the regulatory agenda of the CFPB is a “rapidly changing situation,” but nonetheless assured Almasi that “we’re on it.”

In addressing the issue of Harley-Davidson’s treatment of minority customers, Harley-Davidson president and CEO Keith Wandell said, to loud applause from the shareholders: “Let me just say this: that, at the very core of what we believe, we do believe that everybody should be treated fairly. Right? And that people shouldn’t be taken advantage for any number of different reasons, which happens – and it’s wrong.”

During the business portion of the shareholder meeting, Harley-Davidson reported that it leads in sales to several demographic groups, including blacks, Hispanics and women as well as middle-aged white men.

“Harley-Davidson should have nothing to worry about because it wants as many people as possible to be able to acquire and afford its motorcycles and fulfill their dreams of independence and adventure – and the company is working hard to make sure these dreams are achieved,” said the National Center’s Almasi. “It’s also reassuring to know that, despite what seems like sound business practices, that Harley-Davidson is making sure to cover its bases should the Obama Administration play the race card against them.”

Almasi added: “I was approached by many of the shareholders in attendance who thanked me for speaking up about this issue. Some were downright fearful of the situation as I described it, with one likening it to a scene out of the Ayn Rand novel Atlas Shrugged. What needs to be understood is that Harley-Davidson wants to do good and wants to do right by all people – and, by the numbers and the assertions of its executives, it is proving successful in this pursuit. And the company’s strategy appears to have the full backing of its shareholders. It would be a shame for Harley-Davidson, a company that has clawed its way back from the brink of bankruptcy to become an American icon, to now fall victim to the radical machinations of the Obama Administration.”

The situation is made even more complicated by the fact that some of the CFPB’s authority is not effective until the President appoints, and the Senate confirms, a CFPB director. Current director Richard Cordray not only was a recess appointee, but possibly an illegal one, as a Court has ruled that the Congress was not in recess when he was appointed.

The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think-tank. Ninety-four percent of its support comes from individuals, less than 4 percent from foundations, and less than 2 percent from corporations. It receives over 350,000 individual contributions a year from over 96,000 active recent contributors.

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