Little Rock, AR – CAB Meeting on 6/9/2016 (session 1)


Welcome to the Consumer Financial Protection
Bureau’s public meeting of its Consumer Advisory Board at the State House Convention Center
in Little Rock, Arkansas. The Consumer Financial Protection Bureau is
an individual federal agency whose mission is to help consumer finance markets work by
making rules more effective. By consistently and fairly enforcing those
rules. And by empowering consumers to take more control
over their economic lives. My name is Zixta Martinez. I am the Associate Director for the External
Affairs Division at the CFPB. And we are very happy to be in Little Rock,
Arkansas. This is the CAB’s second public meeting of
the year. And as always, we have a packed schedule. Today’s meeting is being recorded, and will
be available at consumerfinance.gov. You can also follow CFPB on Facebook and Twitter. Let me spend just a few minutes telling you
about what you can expect at today’s public meeting. First, I will introduce the Bureau’s CAB members. Then the CFPB’s Director, Richard Cordray
will provide opening remarks. Following the Director’s remarks, Gene Koo,
the Bureau’s Associate Director for the Office of Consumer Engagement, and Irene Skricki,
the Bureau’s Senior Financial Education Program analyst for the Office of Financial Education
will engage with the CAB in a discussion about the CFPB’s auto-lending education initiative. After that discussion the CAB will adjourn
at approximately 12:00 p.m., Central Daylight Time. At 2:00 p.m., the CAB’s Chair, Bill Bynum
will resume the meeting. He will introduce CAB members Chris Kukla
and Seema Agnani for discussion on trends and themes in the field. Following the trends and themes discussion,
Kelly Cochran, the Bureau’s Associate Director for the Office of Regulations will engage
the CAB in a panel discussion about the Bureau’s Notice of Proposed Rule Making, or NPRM to
address consumer harms from practices related to payday loans, auto title loans and certain
installment loans. After the discussion, there will be an opportunity
to hear from members of the public here today. As many of you know, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, which created the CFPB, also provided for the establishment
of the CFPB’s Consumer Advisory Board to advise and consult with the CFPB in the practice
and exercise of its functions and to provide information on emerging practices in the consumer
financial products or services industry, including regional trends, concerns and other relevant
information. Today’s meeting and discussion is in support
of this statutory responsibility. As a reminder, the views of the CAB members
are their views, and they are greatly appreciated. Yet, they do not represent the views of the
CFPB. So let’s get started with an introduction
of our CAB members. The Chair is Bill Bynum. Chair Bynum is a CEO of Hope Enterprise Corporation
in Jackson, Mississippi. The Vice Chair is Maeva Elise Brown. Vice Chair Brown is the Executive Director
of Housing and Economic Rights in Oakland, California. Seema Agnani is the Director of Policy and
Civic Engagement at the National Coalition for Asian Pacific American Community Development
in Washington, D.C. Ann Baddour is the Director of the Fair Financial Services program at
Texas Appleseed in Austin, Texas. Don Baylor is a Senior Associate at the Urban
Institute in Washington, D.C. Steve Carlson is the co-founder and CEO of
Ascend Consumer Finance in San Francisco, California. Tim Chen is the CEO of Nerd Wallet in San
Francisco, California. Kathleen Engel is research professor at Suffolk
University Law School in Boston, Massachusetts. Judith Fox is a clinical professor of law
at the University of Notre Dame, in Notre Dame, Indiana. Patricia Garcia Duarte is the President and
CEO of Trellis in Phoenix, Arizona. Julie Gugin is the Executive Director for
the Minnesota Home Ownership Center in St. Paul, Minnesota. Dr. Raul Hinojosa-Ojeda is an Associate Professor
at UCLA’s Division of Social Sciences in Los Angeles, California. Christopher Kukla is the Senior Vice President
at the Center for Responsible Lending in Durham, North Carolina. Joann Needleman is partner at Park Hills Consumer
Financial Services Regulatory and Compliance Group in Philadelphia, Pennsylvania. Patrick O’Shaughnessy is the President and
CEO of Advance America in Spartanburg, South Carolina. The Honorable Annette Rizzo, is a retired
Judge now working with the Judicial Arbitration Mediation Services, or JAMS in Philadelphia,
Pennsylvania. Paheadra Robinson is the Executive Director
at the Coalition for a Prosperous Mississippi in Richland, Mississippi. Ellen Seidman is a Senior Fellow at the Urban
Institute in Washington, D.C. Gene Spencer is the Senior Vice President
for stakeholder engagement, policy and research for the Homeownership Preservation Foundation
in Washington, D.C. Jim Van Dyke is founder and CEO of Futurion.digital
in Pleasanton, California. And Joshua Zinner is CEO of the Interfaith
Center on Corporate Responsibility in New York City, New York. We also have with us Delicia Hand, Staff Director
for the CFPB’s Consumer Advisory Board and Councils. I am now pleased to introduce Richard Cordray. Prior to his current role as the CFPB’s first
director, he led the CFPB’s enforcement office. Before that, he served on the front lines
of consumer protection as Ohio’s Attorney General. In this role, he recovered more than $2 billion
for Ohio’s retirees, investors and business owners, and took major steps to help protect
its consumers from fraudulent foreclosures and financial predators. Before serving as Attorney General, he also
served as an Ohio State Representative, Ohio Treasurer and Franklin County Treasurer. Director Cordray. Thank you, Zixta, and welcome to this meeting
of our Consumer Advisory Board. It is a pleasure to be here in Little Rock
today. And I look forward to our conversation. The feedback we received from the members
of this distinguished group invariably refines our thinking and our approach. It sheds new light on issues and helps us
achieve better solutions for consumers. No doubt that will be true today. Next month, we will celebrate the fifth birthday
of the Consumer Financial Protection Bureau. From the start, the Bureau has worked doggedly
on behalf of consumers on many fronts. In these remarks, I would describe three distinct
aspects of the most recent work that we are doing. One key task has been to create new informational
tools and resources that empower consumers to become savvier shoppers. We call this initiative Know Before You Owe. And we have applied it to mortgages and credit
cards and student loans. Today, we are unveiling yet another Know Before
You Owe initiative, this time for auto loans with a shopping sheet, step by step guide,
and additional online resources. Another important goal has been to fashion
new rules that protect consumers against the harms they may suffer from unfair, deceptive
or abusive practices. We have undertaken several years of research
on the operations and effects of loans issued to consumers for quick cash. Based on what we have learned, we have just
issued our proposed new rule on payday, auto title and certain other high cost installment
loans. Finally, we look for ways to make it easier
for everyone to implement our rules successfully, and achieve compliance with the law. We recognize that doing so is good for consumers
and for financial providers alike. One way we do that is through our e-regulations
platform, an online tool we created that makes it easier to navigate, understand and apply
the regulations we are authorized to interpret, oversee and enforce. So we will talk a bit about that as well. Let me start with our Know Before You Owe
auto initiative. These new resources, including an auto loan
shopping sheet, a step by step guide, and additional online information. We have developed these tools and are releasing
them today to help consumers take control of the auto loan process. We want consumers to use them to get a clear
picture of how much their loan will cost. The shopping sheet helps consumers break down
costs and make direct comparisons between loans. All of the resources are designed to help
empower consumers and aid them in taking control of the financing process to get the best result
that is right for their budget. Auto loans are the third largest category
of household debt for U.S. consumers behind only mortgages and student loans. In this country, we now have almost 100 million
auto loans worth just over $1 trillion. For those consumers who do not purchase a
home, an auto loan may be the largest debt they ever have. Nine out of ten households have at least one
car or truck, most of which are financed; 86 percent of new purchases and 55 percent
of used purchases. The typical consumer takes out a 60-month
loan, but the length of these loans, and the amount of indebtedness have been increasing
over time. On average, each vehicle is owned for about
eight years, which means many consumers purchase several vehicles over a lifetime. And they may regularly repeat the budgeting
and financing process. Sometimes, consumers are still paying off
vehicles they are no longer driving. The financing process can take the form either
of direct lending where consumers go to a bank, credit union, or other lender to get
their loan directly before going off to buy the vehicle. Or indirect lending, where consumers arrange
financing through an automobile dealership at the same time that they buy the vehicle. Indirect financing is used for most transactions. Before developing the Know Before You Owe
auto loan shopping sheet and other resources, the Bureau did some research, we looked at
how consumers approach the auto finance decision and the challenges they face in navigating
that process. The findings of that research can be found
in a report we are issuing today, entitled: Consumer Voices on Automobile Financing. Perhaps not surprisingly, our research finds
that even when consumers diligently research the auto purchase itself using resources like
Kelley Blue Book and other internet resources that are much more common for consumers to
use today, they often do not fully explore the available financing options. According to data from the National Financial
Capability Survey, only half of consumers report comparison shopping for an auto loan. This is much like what we had found in the
housing and mortgage markets where consumers spend a lot of time finding the right house,
but often do not take the time to shop for the best mortgage, and that can be very costly. And the same is true here. The auto loan shopping sheet can help consumers
shop more effectively. It breaks down the financing terms so they
can make apples to apples comparisons from one loan to another. Anyone can download the shopping sheet from
our website at consumerfinance.gov. We encourage people to print it out, take
it with them, and use it when they are talking to lenders or to auto dealers who are arranging
a loan for a consumer. Specifically, it helps consumers understand
the total cost of the loan as well as the monthly payment. It is important for us to understand that
when we lower the monthly payment by taking out a longer loan, we will end up paying more
in total interest. A longer loan also puts consumers at risk
of having the loan last longer than the vehicle itself. For too many consumers, focusing only on whether
the monthly payments are affordable does not paint the entire picture. The total cost of loan, the number of months
of debt, the interest rate and the additional charges also are important factors. The shopping sheet makes clear what consumers
can negotiate and what they cannot. That is important information for consumers. Items that they can negotiate include the
price of the vehicle, the down payment, the interest rate, the length of the loan, and
the trade-in value of their current vehicle. Knowing what is negotiable allows consumers
to negotiate with greater power and more clarity about the ultimate result. The shopping sheet also helps consumers watch
out for add-ons in other costly financing features. Consumers should make their own assessment
about the potential value of optional add-ons to their purchase or their loan. Such as service contracts, extended warranties,
specialty insurance, and credit insurance. They should also carefully check the paperwork
to be sure all loan costs and other terms are the same in the end as what they agreed
to during the negotiations. Our website also contains information, tips
and pitfalls to watch for, as well as a step-by-step guide to help consumers all along the way,
from budgeting to signing the final documents. In short, we simply want to help people know
before they owe. Consumers should feel like they are in the
drivers seat. Not just as they are buying a vehicle, but
as they are financing it, too. While it is fresh in my mind, let me also
talk about a field hearing last week in Kansas City, where we announced our proposed new
rule aimed at ending debt traps created by loans made to consumers for quick cash. Our rules would cover payday loans, auto title
loans, and certain high cost installment and open end loans. After years of work, we determined that in
such markets, where lenders can succeed by setting up borrowers to fail, something needs
to change. Our extensive research into millions of such
loans has brought to light several key facts. Our research found that most payday borrowers
reborrow within a month. And more than half of all loans occur in sequences
of ten or more. With each new loan, the consumer pays more
fees and interest on the same debt. The loan that was supposed to fill a short
term need becomes a long-term debt trap. It is much like getting into a taxi just to
ride across town, and finding yourself stuck in a cross- country journey that is ruinously
expensive. We found similar rates of reborrowing for
single payment auto title loans, and found that one in five sequences ends with the consumer
losing her vehicle. We also researched loans from several payday
installment lenders and found that over one-third of loan sequences end in default. We further found that nearly one-third of
auto title installment loan sequences also end in default. And more than one in ten end with the borrower’s
car or truck having been seized by the lender. Currently, about 16,000 payday loan stores
operate in the 36 states where this type of lending takes place, joined by an expanding
number of online outlets. Some of these lenders also make auto title
loans or payday installment loans or both. What they have in common is that they are
for quick cash on terms that make it very hard for consumers to pay off their loans
on time. And they have devised ways to be profitable
without determining whether consumers who take out these loans can actually afford them. In the case of payday and single payment auto
title loans, this business model depends critically on repeat borrowing. For payday installment and auto title installment
loans, the business model depends primarily on access to a borrower’s account or auto
title, which provides the lender with the necessary leverage to extract payments even
when the borrower cannot afford them. As we took up the task of proposing reforms,
we spent much time and effort learning about state and tribal regulatory regimes, including
many discussions with state payday regulators, state Attorneys General and tribal leaders. Payday lenders already have to comply with
federal law on matters such as truth in lending and debt collection practices. Now, we are proposing to add new federal protections
against lending practices that harm consumers by trapping them in debt they cannot afford. These strong common sense protections would
apply mainstream lending principles to such loans. Traditional lenders such as community banks,
credit unions and many finance companies make an effort to determine a borrower’s ability
to repay before offering a loan with affordable payments. Both the lender and the borrower have a mutual
stake in one another’s success. But today, the borrower’s ability to repay
is often entirely absent from these transactions when it comes to payday and other similar
loans. Our proposed rule seeks to address these concerns
by protecting consumers from such debt traps. Let me first describe how the proposal applies
to short term loans. For these loans, the lender generally would
need to apply a full payment test to determine if consumers have the ability to repay the
loan without reborrowing. Specifically, lenders would need to verify
the borrower’s income, borrowing history, and certain key obligations to decide whether
the consumer will have enough money to cover the basic living expenses and other obligations
and still pay off the loan when due without needing to reborrow in the next 30 days. Lenders could also offer a loan with the principal
payoff option, but only under specified conditions that are directly designed to ensure that
consumers cannot get trapped in an extended cycle of debt. Under this option, lenders could extend a
short term loan of up to $500. But they could offer no more than two extensions
to the original loan. And then only, if the consumer repays at least
a third of the principal with each extension. This proposal would afford somewhat more flexibility
while expressly protecting borrowers from debt traps and providing them with a simpler
way to pay off their debt. To further safeguard against extended indebtedness,
lenders could not offer this option to any consumer who has been in debt over the preceding
year on short term loans lasting 90 days or more. The proposed rule takes the same basic approach
to longer term loans that it covers. Here again, it would generally require lenders
to apply the same full payment test to determine whether borrowers can pay what they owe when
it is due, and still meet their basic living expenses and obligations. For pay day and auto title installment loans,
either with or without a balloon payment, this means consumers have to be able to afford
to repay the full amount when it is due, including any fees or finance charges. A proposed rule would permit lenders to offer
certain longer-term loans without applying the full payment test, if their loans meet
specific conditions designed to pose less risk to consumers and provide access to responsible
credit. In particular, we are not intending to disrupt
existing lending by community banks and credit unions that have found efficient and effective
ways to make small-dollar loans to consumers that do not lead to debt traps or high rates
of failure. Indeed, we want to encourage other lenders
to follow their model. Therefore, our proposal would not require
lenders to apply the full payment test for loans that generally meet the parameters of
the kind of payday alternative loans known as PAL loans authorized by the National Credit
Union Administration. For these loans, interest rates are capped
at 28 percent, and the application fee is no more than $20. The same is true of certain installment loans
that we believe pose less risk to consumers. These loans would have to meet three main
conditions. First, they must be for a term of no more
than two years, and be repaid in roughly equal payments. Second, the total cost cannot exceed an all
in percentage rate of 36 percent, plus a reasonable origination fee. Third, the projected annual default rate on
all of these loans must not exceed 5 percent. The lender would have to refund all of the
origination fees paid by all borrowers in any year with an annual default rate of 5
percent is exceeded. Lenders would also be limited as to how many
such loans they can make to a consumer each year. The Bureau is also proposing new requirements
to address how lenders go about extracting payments from consumer accounts for these
types of loans. Our research found that when these attempts
failed because they were returned for insufficient funds, online payday and payday installment
lenders often made repeated attempts to extract money electronically, even though they were
unlikely to succeed in doing so. When these attempts repeatedly failed, consumers
risk incurring substantial fees. So these lenders would have to give borrowers
advance notice before accessing their account to collect their payment. In addition, we propose what we call the debt
attempt cut off. After two straight unsuccessful attempts,
the lender could not make any further debits on the account without reaching out to the
borrower to get a new and specific authorization. Based on our review of the available evidence,
we believe that under our proposal, the vast majority of borrowers would still be able
to get the credit they need in an emergency. But now they would be shielded by an umbrella
of stronger protection so it would keep them from getting trapped in debt they cannot afford. We seek comment on this proposal from all
stakeholders. And that will be true through the summer until
September 14th. Finally, we want to share with everyone that
we have recently added some further updates to our innovative e-regulations platform. As anyone who works with them knows, federal
regulations can be difficult to navigate. Frequently readers cannot follow them carefully
without having to connect information from very different places, often separated by
dozens or maybe even hundreds of pages of dense text. We found that many people were trying to understand
our regulations by perusing paper editions or using several different online tools to
piece together the online information. Even paid subscription services which can
be expensive often do not succeed in making things very easy. So a few years ago, our people decided to
try to create a new tool, which we call e-regulations. This tool organizes the information in a user
friendly format that lets people search through our regulations, refer to the definitions
as terms are being used, and view the official interpretation alongside the regulatory text. It has drawn rave reviews from industry groups
and consumer groups alike, which is no small feat. The only real complaints about this tool were
that people wanted more of it. They wanted to see it cover more of our rules. So we are glad to announce that we have now
added some important additional rules to our regulations tool on our website, which cover
further aspects of the mortgage market and consumer lending more broadly. With these new additions, we now have on our
e-regulations platform rules implementing most of the major consumer financial laws
that we enforce, including the Truth in Lending Act, the Truth in Savings Act, the Electronic
Funds Transfers Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the
Consumer Leasing Act, and the Real Estate Settlement Procedures Act. We continue to look for ways to improve and
expand upon this tool. And we encourage you to suggest ideas that
will make it even more useful in the future. I am very proud of our team for developing
the concept and now executing on it to help people work with federal regulations. I am told that Maya Angelou spent some of
her childhood here in Arkansas. And she once said, nothing will work unless
you do. We take that advice to heart at the Consumer
Bureau, and we have been applying ourselves to support and protect consumers over the
past five years. Although some would like to put the financial
crisis in the rear view mirror, we are keenly aware that much important work still lies
ahead of us. And we will continue our earnest efforts to
create a financial marketplace that works for American consumers, for responsible providers
and for the economy as a whole. We have much to discuss today, and I look
forward to it very much. Thank you. Thank you. Here you go. Thank you, Director Cordray, and thank you,
Zixta. I would like to join you in welcoming everyone
to this meeting of the Consumer Financial Protection Bureau’s Consumer Advisory Board
both those who are here in the audience in Little Rock, and those who are participating
by phone. The first half of this meeting we’ll focus
on, as you have heard, on a new initiative that the Bureau is launching today. And during my course of service on this Advisory
Board, I have been constantly impressed by the efforts that the Bureau has undertaken
to focus on the consumer’s experience while shopping. Specifically are consumers doing appropriate
cost comparisons. Are they familiarizing themselves with the
terms of a financial service product, service or product. And are they empowered in these transactions? Today, as you heard, the Bureau has launched
an auto lending initiative which is designed to help consumers navigate through the auto
buying experience. As someone who I am sure is not alone in having
stressed through the auto purchasing process, I am looking forward to learning more about
this new endeavor. To walk us through this background research
on which this tool is based, we have Irene Skricki, the senior financial education program
analyst. Irene will orient us to the research and the
consumer survey information which informs this shopping tool. Following Irene, we will hear from Gene Koo,
Associate Director of Consumer Engagement. Gene and his team have led the development
of this tool. And they will describe and demonstrate it. After we hear from Gene and Irene, we will
then turn to the CAB for discussion. Irene. My name is Gene Koo, and I lead the CFPB’s
Office of Consumer Engagements. And when Congress created the Consumer Financial
Protection Bureau, it authorized us to ensure that consumers have timely and understandable
information to make responsible decisions about financial transactions. Buying and financing a vehicle can be amongst
the biggest financial commitments a consumer makes. And today, we unveil new resources that will
help consumers Know Before You Owe. These resources will help consumers navigate
the process of financing a vehicle. They encourage consumers to, one, shop for
an auto loan with as much care as they shop for the vehicle itself. Two, look beyond the monthly payment and use
total costs to compare and negotiate for financing. And three, Know Before You Owe by spotting
situations and financing features that could lead to unexpected or higher costs later. We designed this initiative to respond to
consumer challenges in the auto finance marketplace. And my colleague Irene Skricki will now describe
those needs and the research we undertook to uncover them. Great. Well, thank you very much, Gene. Oops. Thanks very much, Gene. And thanks to members of the CAB and the public
for being here today for this discussion. So I am going to set the stage for this morning’s
discussion by describing why auto finance is important to consumers and what we have
learned in some qualitative research we did on this topic. And this is really reinforcing what Director
Cordray said in his opening remarks. Vehicle loans are the third largest category
of household debt. There is about 100 million auto loans outstanding. About 90 percent of households own vehicles. About two-thirds of vehicle purchases are
financed. And typically, consumers are buying and financing
vehicles multiple times throughout their lifetime. Most cars are owned or autos are owned about
eight years before replacement. So obtaining auto finance is something that
people may do over and over again. And it is significant in a substantial part
of their financial lives. And this significant financial decision is
also a complicated process, and a complicated financial decision. Like other situations where the purchase and
finance happens more or less together, it can be hard for consumers to separate the
different decisions and features that they have to make. Consumers face many choices in the auto finance
process. For example, where to get financing, how much
to finance. The duration of the loan. Whether to do a down payment and what size. Whether to trade in a vehicle, or sell it
themselves. They also face decisions around what are typically
optional add-ons. By which we mean features or credit products
such as warranties or gap insurance that are added into the financing. Most if not all of these different features
and factors are negotiable. And they all influence what the total costs
will be. How much they will borrow and the total amount
the consumer will pay. And consumers may have difficulty keeping
track of all of these features, especially since some of these terms and features can
actually change simultaneously during negotiations. And it is a lot to kind of keep in one’s head. So we wanted to understand how consumers experience
navigating the auto finance process. So we undertook some qualitative research
to better understand this. And generally, in our financial education
work, in order to learn how to help consumers make well informed financial decisions and
achieve their own financial goals. We seek to understand what consumers know,
and how they think about financial decisions, by listening to consumers talk about their
experiences and also by examining in some cases the complaints that are submitted to
the CFPB. We use this type of information gathered by
listening to consumers to inform our financial education efforts at the Bureau and also to
share with others in the field of financial education to help improve their work as well. And so we used this process in the auto finance
area. And the research I will describe today is
being released as part of the consumer voices on automobile financing paper. That is coming out today along with the other
materials you will hear about later. So you can read more about this in the paper. What we did in this research was two things. First, we did focus groups with just over
300 consumers in four cities in the summer of 2014. And we looked at consumer attitudes, perceptions
and actions around financial decision making, including auto finance. In addition, we looked at some of the data
in our consumers complaint database. The CFPB has been taking complaints for basically
the entire five years of its existence. Just over a year ago, the CFPB began to allow
consumers the option to share their narratives, the kind of stories behind their complaints
in our public database, so that others could see them. Since that started, a year ago, up to April,
there were about 2,400 public narratives on auto finance and auto issues. And so we looked through those, looking at
ones dealing with obtaining auto finance and looked for themes related to the consumer
experience in obtaining auto finance. So I just want to note generally that these
data sources gave us qualitative insights into a broad range of consumer thinking. But they are not necessarily representative
of the U.S. population as a whole. And so we just want to keep that in mind as
we look at the data. It is meant to inform our sort of financial
education themes and efforts. So I will just walk through a few of the high
level themes from these two data sources that are in the paper. So first, looking at the focus group themes,
in terms of the challenges in the auto finance process, we found that in general, consumers
told us that they shopped primarily for the vehicle, not for financing, as the director
said earlier. Many people reported researching vehicles,
features, prices related to the vehicle, but generally didn’t do the same for the auto
loan and the auto financing. Consumers told us often that they focused
on the monthly payment and not so much on the other loan terms and features. And lastly, consumers reported that they rarely
negotiated on financing terms. They may negotiate on the price of the vehicle. In some cases, monthly payment or interest
rates. But not often on all the financing terms that
are negotiable. And then the second set of themes in the paper,
again come from the consumers complaint data that we looked at. And I will just note that in the database,
people are complaining about particular products and services. We really looked at that data through the
lens of the consumers experience. So we were trying to understand where consumers
were having trouble. So it is a slightly different take than what
our consumers response team may do with that data. And things that we heard included sort of
they sort of reinforced what we heard in the focus group findings. It looked like people often did not comparison
shop, so consumers mentioned that they didn’t always understand that they had financing
options. They weren’t confident about exploring those
options in many cases. And in some cases, they thought that there
would be no difference between the different possible financing options available. Secondly, we also noticed in the complaints,
the challenges consumers had in understanding and negotiating loan terms. So consumers reported they found some of the
terms confusing. In some cases, they didn’t know what the terms
were they had agreed to until later, when they began paying back the loan. And that there were fees that they didn’t
know about or found confusing. Then we also heard about some situations that
consumers should be wary of as they go into the auto financing process. For example, some consumers knew that the
loan terms they were getting weren’t great. But they were told they could refinance in
the future, and get better terms. And when they tried to do that, it often didn’t
happen. Often, because the size of the loan relative
to the size of the car didn’t make refinancing viable. And so they ended up with a loan that was
more than they felt they could afford. In some cases, there were loans that generally,
we could say lasted beyond the life of the vehicle. In some cases, cars were damaged, stolen or
even returned to the dealer, but consumers were still left with balances owed. Some consumers noted years into the paying
back the loan that they had made only a small dent in the principal and were surprised by
that. A fifth issue is problems related to the purchase
and use of add ons. Some consumers said they felt pressure to
buy add ons in order to qualify for financing. Other consumers found that add ons that they
had purchased ended up being difficult to use. For example, gap insurance that did not actually
cover the balance of the loan when something happened to the car. And then the final situation, we would just
note, is unauthorized loan applications or credit increase. Consumers told us that they had in some cases
visited a car lot once, and then discovered that loan applications had been filed in their
name, or multiple credit increase had been made. That they either hadn’t expected or had not
authorized. And so these situations suggest that consumers
need to be careful. They need to have their eyes open. They need to examine paperwork, ask questions,
and walk away if needed, in order to protect themselves in this financing decision. So together all of this data plus other publicly
available data that we looked at suggested to us that many consumers face challenges
in getting loans that are the best for them. And really, this work has informed the educational
resources that Gene is now going to walk us through. So Gene. Thank you. Thank you, Irene. So to help consumers overcome those challenges
that Irene has just described, we have designed an educational imitative with three main goals
for you, the consumer. Again, to one, shop for an auto loan. Two, look beyond the monthly payment and use
total costs. And three, to Know Before You Owe. So our message is simple. Understand the total cost of financing a vehicle. With the emergence of longer repayment terms
and other innovations, auto finance has become more complex. And you can’t just compare total costs simply
by looking at monthly payment. Our educational materials will help you figure
out the total costs to better understand whether a particular loan makes sense for you. We have created a new set of web pages to
help guide consumers through the process of shopping for auto finance. You can find that at CFPB.gov/auto-loans. And the centerpiece of our initiative is a
downloadable printable shopping sheet. And we have copies available for those of
you in the audience, so you can look at that as we move along here. Consumers can use our shopping sheets to figure
out and compare total costs of different financing options, and quickly see what is negotiable. And so let’s take a look at how you might
use this worksheet as a consumer. We start with the cost of the vehicle itself,
including features, services, add ons and fees to get to the total cost of the vehicle. And then next, we would figure out how much
you need to borrow by subtracting your down payment and trade in value to find the total
amount you will need to finance. And now that you know what you need to finance,
you need to determine how much your loan may actually cost you. And so we provide a space for you to record
each of your loan offers. And remember, we are suggesting that you comparison
shop to include interest rate and the length of the loan for each of the options. And you can use a loan calculator to determine
your monthly payment, or you can ask the lender for that amount. And then figure out how much it’s going to
cost to borrow that amount over the life of the loan. You can add in your original down payment
to the total payment to see the total cost of the vehicle, and subtract the cost of the
vehicle from the cost of the financing. And that is how we would get to the total
cost of the financing. And this lets you see the total cost of borrowing. The total cost gives you a powerful way to
compare your financing options in addition to just looking at the difference in monthly
payments. And again, you can download this worksheet
from our website at CFPB.gov/auto-loans. While you are there, you can also read up
on how to shop for an auto loan, how to explore loan choices. What aspects of a loan are negotiable. And how to choose and lock in a good deal. For example, many people don’t really know
what aspects of an auto loan are negotiable. And we explain that while highlighting one
of our main messages: to consider total costs, and not just a monthly payment. And while our online materials cover the most
important topics, consumers who love to get down to fine details can also download and
read our consumer guide to auto loans. And financial educators and others who work
with consumers may also find this guy particularly valuable. We have also updated 61 auto finance questions
in ask CFPB, our popular collection of frequently asked questions. One example of a question that is along those
61 is, if I cosign on someone else’s auto loan, what does this mean for me? My son happens to be turning six today, so
I probably won’t be looking at that question for another ten years. But some of you might be thinking about that
right now. And so in conclusion, this educational initiative
has three main goals for consumers, which I will repeat again. One, to shop for an auto loan. Two, to consider the total cost of the loan
and not just the monthly payment. And three, to Know Before You Owe. And to help as many consumers as possible,
we need to reach as many consumers as possible. And so I would remind everyone here that this
content is public domain. And we hope to see others adopting it, and
adapting it, so that we can help as many consumers as we can, and to help them Know Before You
Owe. And again, this is the website where you can
find these materials. Thank you. Thank you, Gene. Thank you, Irene. I’d like to open up the discussion now to
the CAB and invite you to talk about your observations about what is going on in the
auto lending and financing marketplace in your communities. And your thoughts about the research and the
tools that have just been described. Chris. Thank you. And first, I really want to commend you all
on the work that you have done to put this tool together. The more time I have gotten to spend with
it, the more impressed I am with it. And I know it took us a lot of work to get
it to this point. Especially something that is going to be helpful
and understandable for consumers. So great job on this. I really appreciate that the tool highlights
the places that are negotiable, particularly in the financing market. As your research shows, and as even the form
shows, the auto finance market is much more complex than I think most people even understand. Even folks who study it regularly, continue
to find its complexity. So giving folks an opportunity to see where
they might be able to have leverage points is really, really helpful. I think also that the connection that you
are making between that, the negotiability of certain parts of the loan, and the need
to shop around. And one of the things that our research has
indicated is that it is not necessarily a question of negotiation ability. It is a question of leverage. So the folks who tended to do best tended
to be those who had choices, who came in with multiple offers, and were able to leverage
those offers into a better rate. Our research also indicated that folks who
just tended to try to negotiate didn’t always fare so well. And in fact, our research showed that for
borrowers of color in particular, that even those who said that they negotiated, paid
higher interest rates than white borrowers. And in fact, even folks who said borrowers
of color who negotiated compared to white borrowers who did not negotiate still saw
that they were paying higher interest rates. So I think that that connection is really
important, to make people aware that that leverage is going to be crucial. And then also, highlighting the fact that
add on, add-ons add to the total cost. I mean, certainly that is an old tried and
true trick of expressing these costs as a factor of monthly payment. So wouldn’t you, for a dollar a day, you can
protect your investment forever, right. And then you don’t see how much that adds
to the total cost of the vehicle. It doesn’t show how much that impacts the
amount of interest that you pay. So I think, you know, you are hitting the
nail on the head in terms of the places where folks tend to fall down the most. And where it is easy to take advantage of
them. I think, continuing to draw those connections
between shopping around is so vital. And then in particular, my last point is that
in the sub prime space in particular, I think that is where we tend to see the inability
to leverage. So while for prime borrowers, there is lots
of places that you can go, for sub prime borrowers, many sub prime lending outfits predominantly
do their lending through dealerships. Finding a direct loan is more difficult. And so helping, especially those who are low
on the credit spectrum, and you talk about that in here, and that is really helpful about
making sure that even if you are having trouble finding the loan, you should still continue
to try to push forward and get another offer. Thank you. Seema. Thank you. I wanted to also congratulate the CFPB on
another great valuable resource that I think. You know, one comment I wanted to make is
that I think that this tool, you know, because it applies to so many more people that a mortgage
would, or another loan product, you now, really serve the CFPB’s mission to sort of change
habits, I think, a lot more. Borrowers will also learn to you know, learn
how to really assess a loan in general, and sort of learn more broadly what lending actually
means, and what the costs are. So thank you for this tool. I think it is going to be really valuable. And I hope that it really reaches local communities. One of the things that I was thinking about
was using VITA sites and libraries as a good place to disseminate these tools. You know, I think that people turn to VITA
sites for tax assistance. It is already a place where people turn to
for financial education. So I think this would be a good place to sort
of disseminate the tool. And then of course, always have to think about
translating in the long run. And so I would encourage the CFPB to think
about that as a next step. Paheadra. I also wanted to commend CFPB for this tool. I think it is wonderful. And very needed in the communities. My question is, for the borrowers who typically
are placed in a subprime loan, was there any research done to show that they have a better
outcome once they research and shop around for a loan. I think that would be great to show the outcome
of really putting forth the effort to go in well researched and well armed with options. I think it is a wonderful thing to say, but
we also need to show that there is actually a benefit to it. My second question concerns leasing. Was there any research around the difference
between an automobile purchase and leasing a vehicle. We know there are different tactics used when
a person is entering into a lease as opposed to a purchase. And if so could you share any information
regarding that situation. We don’t I still haven’t learned how to turn
the mic on. We don’t address a very brief sections in
the consumer guide on those. There is a little bit of information. But we did not look deeply into researching
those two topics. But I think those would be great things for
us to think about going forward. Ellen. So I also think this is a fabulous tool. I am going to admit to never having financed
an automobile, because I couldn’t figure out the financing. So you know, even for people who think they
know what they are doing, this is a wonderful tool. And I know that you wanted to do it on paper,
in part, to test, and in part to enable people to have something with them. On the other hand what paper does is, it leaves
you at the mercy of, as you say, a calculator or ask your dealer to figure out what the
monthly payment is for various combinations of interest rate and term. And so I think if you are going to I think
a good next step is when you put this on an electronic device, a desktop or mobile, that
you include, you embed the calculator in it, which I think probably is not very difficult. So that the consumer really has all the control
they need to understand what the monthly payment would be. Yes. I want to say a couple of things. I mean, I think what is really interesting
about this whole exercise, the fact that there is really this attention to data to gathering
information from the focus groups, from looking at these experiences. It is just really the quality, and I am you
know, I am relatively new to the CAB. And seeing the work of the CFPB really, the
immense amount of work and quality that goes in to this, before it comes out. The fact that the focus groups already were
almost two years ago. And I am appreciating how much work goes into
this. But I definitely want to echo this. This is a great first step. And I think it is something that people can
put their heads around. Everybody has had this experience. I know. I mean, I go into, whenever I have gone in. And I had the same question about leasing
versus buying. And you really are at the mercy of the math
of the other side. So from a negotiating point of view, if our
objective here is to really sort of even out the playing field. And really give consumers protection, right. Which is what we are talking about here. And I think it would be fantastic if we could
take it to this next step of making that math more clear, right. Because at the end of the day, that is what
you are really negotiating is, you know, the terms of the math, and the way the math is
being calculated. You know, it just struck me, any time probably
everybody in this room has been in one moment of this negotiation. And it is really just an incredible asymmetric
process of information. Right. So classic, in fact. People have gotten a Nobel Prize talking about
this exact problem of the asymmetric information in buying a car. So you know, how so this could be an incredibly
important example. Right. And a way of really demonstrating how everybody
in this country would benefit by having these types of tools in these types of negotiations. And in the end, creating a much fairer marketplace. Coming up with much more interesting solutions. So again, I am very enthusiastic about this. But I would definitely recommend we keep going
here. We keep going on this calculator idea. Trying to make it. I know it is a challenge. I know you guys can do it. And also, definitely look into this lease
as another element of the calculation and how that should be done. So got great time. We don’t have an on off switch. So I started my career in auto, in the auto
industry. And bought a number of cars and feel like
I am a fairly savvy negotiator. But I have no idea that I could negotiate
the delivery charges and a few other things. Those tend to just get kind of lumped in. So I think the point there is you can educate
a lot of folks through the process of your doing. I was one thing that jumped out in the research
was around gap insurance. And some of the complaints that you are hearing
on gap insurance. One of the biggest risks that you have in
a lease is if you actually have a situation where you owe a significant amount of money
during that process. And gap insurance is there to cover it. And if it is done right, it can be a great
tool. So the question is, I would have thought that
that was a fairly heavily regulated you know, it is an insurance product. So I don’t know what the regulations are behind
that. But from a consumer protection perspective,
that seems to be an area that demands a little bit more inquiry. I don’t know where that falls on the radar
screen today. Ann. I particularly enjoyed the more detailed step-by-step
guide. I think it is very helpful, because a lot
of the time, a lot of the instances where people fall into pitfalls is when emotion
overtakes the process. And so it really breaks it down and helps
people take the emotion out of the process. It addresses some of the practices of the
high pressure sale or other kinds of things that happen. But one suggestion would be to have a page
at the very front. Because it goes methodically through the whole
process. But if you don’t read the whole guide, you
miss out on some key information. Just what to do and common pitfalls. Just something that pulls it out on the very
first page because it will help people overcome the emotion. Because if I love this car, I am going to
want to do everything I can to buy it. And so if I have in my head, oh wait a minute,
they are talking to me in a particular way, or I feel pressured, it will help people perhaps
balance the emotion with the practical financial interest in a more guided way. Yes. Thank you. Yes. I want to follow up on those comments. Because there is a relationship with the earlier
work that you did, Irene, regarding how much investment the financial services industry
places into marketing. And compared with financial education resources,
it is vastly superior. And my dad was a car dealer. So I know very well that he was very effective
as a sales person. And so to your point, and having the borrower,
you go in armed with as much information about, you know, what they should consider. But also, an understanding of the sales techniques
that they are going to be experiencing. I think really helps them kind of push back
and go okay. So now I can expect this and so forth. I have observed in the rural community that
my house is in, is that, you know, a lot of the auto dealers actually don’t put prices
on their cars. They do put monthly payments. So you go buy this car, it is $250 a month
or $300 a month or whatever. So it seems to be just a further way to obscure
actual pricing. So you have to really peel back that to say,
okay. So what is this really costing me, rather
than hey, you know, for $250 a month, you can just drive off the lot today. And again, it appeals to people’s emotions
and desire for immediate satisfaction. So other than encouraging borrowers, which
I think this is a great tool. But to be aware of that and to try to resist
that. And to take a slow approach, I think, is very
important to their financial health. So Gene, to your point, the Bureau propose
total costs over the life of a loan as in apples to apples way to compare. Do you think that is inappropriate comparison
point or Yes. I think the more people will take the time
to do the comparison and to take into consideration all of the things that you pointed out, I
mean, the better off they are likely to be. The better decisions that they will be able
to make. Yes. Again, I would like to echo earlier comments
to really commend the Bureau on this project. It is another example of the Bureau being
really creative in looking at a major problem that people are facing across the country. And really, auto financing is, you know, is
really the Wild West. And there are so many abuses. And so this is not just an important tool
for people in communities, but also I think sets a template for restoring some set of
some form of order to this marketplace. And it is a really important first step. I echo earlier comments that I think it would
be really useful to have it is sort of a one pager maybe, on what to look out for. A cheat sheet for people. I think that would be really valuable. It is in this, and that is really important. But it wouldn’t be useful for people to not
have to pull that out, but to have that out in front. I also think that looking at total costs over
time is really important. And echo those earlier comments. Dealer markups are addressed in this. That is one of the most serious problems that
we been seeing both anecdotally and of course, the data shows that this is a problem nationally. And it has a really discriminatory impact. And that can really have devastating consequences
for people who need automobiles to survive to get to work. And so it is I like how it is discussed in
this document, and how people are urged to negotiate the interest rate when they get
to a dealer. But as we know, high pressure sales tactics
can be very difficult to overcome. So I just want to say that this, I think,
highlights the continued need for the outstanding work that the Bureau is doing in enforcement,
in looking at auto lending discrimination and the effect of dealer markups, in particular,
on people of color and communities of color. And so that that enforcement work is very
important piece of restoring this order to the work. I would say, bringing order to the auto market,
and making sure that it is fair for everybody across the board. Irene and Gene, just related to that point. Did you research with the observations that
you gleaned regarding differential in terms of geography or we all hear about the stereotypical
way that women are treated. And these dynamics. And certainly, people of color seem to be
disproportionately targeted. What other observations did you glean in your
research here? Okay. Fail number three on the microphone. We had a very diverse set of consumers who
were part of the focus groups. We didn’t do a lot of demographic breakdown
in part, because it was meant to be really qualitative. This is not meant to be a rigorous quantitative
research study. But I think we can take back that feedback
and think about that for the future. I do think that Bill, we have seen from the
work we have done on auto lending elsewhere, we believe that we know, and we think we have
heard from industry on this as well, as well as consumer focus. That there was a certain amount of sizing
up, of the customer, that happens almost immediately in this setting. And that the people they are working with,
typically dealers will size up the customer, and they know who the shoppers are. They think they can tell pretty quickly who
the shoppers are. There is a lot of eyeballing that occurs. And how they size up the customer can lead
to a dramatically different shopping experience in financing experience. So several things here, that becomes key tips
to consumers are number one. Think about direct auto financing first. Explore that option. You may end up with indirect financing, but
you will have a better sense of what your options are. And you may well find that direct financing
is a better way to proceed. Second, if you have these tools, and resources,
and you take them with you, you may get sized up differently by those who are going to engage
in the transaction with you, and you may get a different experience. So it may be that this tool and the visibility
of it becomes a factor itself in this dynamic. And that is something we will be interested
in seeing over time. Thank you. Maeve. Thanks. A couple of quick things. One is, especially if you add a calculator,
sorry. That echo is kind of throwing me off. When you add a calculator, adding something
that makes the final total costs pop up on the screen, especially when you optimize for
mobile. So that boom I put in the first one. I see what my total cost is. I put in the second one. Wow, great. Side by side, total costs. And then I could see people really honestly
taking, whipping out the phone and using this in their actual shopping process. There is also scenes given the prevalence
of automobile use that this is an incredible opportunity for the CFPB to maximize its and
highlight its utility to maximize its resources by making this maybe a primary point of entry
into the consumer’s mind. And here is this incredible tool. Wow, I use this for an automobile. What else have you got? Okay. Fantastic. This is my go to resource for everything. Because automobile usage is so ubiquitous
still. Another thought was that we split the shopping
and costs comparison from verification of final terms. And even, and I know you can’t fit everything
onto two pages. But I know, especially when you put it on,
get it on somebody’s phone. There could be that warning of, you know,
read that final contract, folks. What you agreed to might not be what is in
writing, what is handed to you. And then you have really got more of the total
package. But I would also love to see it in here. Because the deal, the warnings, it is really
complete when you have that final piece. It is not enough to shock. You have to make sure you walk away with what
you agreed to. Otherwise, this is fantastic. Judy next. I don’t know if that is on yet. Well again, I want to thank you for this work. I was actually in the audience at the hearing
you did in Indianapolis on this issue. So it is nice to see the product come to fruition. I just had sort of one question and one comment. Gap insurance is a huge problem that I see
all the time. And where it is a problem is that a customer
might actually want it. They might think it is a good idea. And they sign up for it. And then a year and a half later, when they
have a car accident, and then they go to collect on it, they have no idea who their insurance
company is. Because unlike when you buy auto insurance
and homeowners insurance, you know, you have a dealer. You get a copy of something. Most of the time, my clients either never
got any information about who their insurance company was, or if they did, they have no
idea. So when I was looking on your little link
to gap insurance, it would be good to add in there, if you actually buy it, get a copy
of the policy, the name of the company, how you contact them. Because what I find with gap insurance is,
even if you buy it, you can’t use it, because you have no idea who it is with. And then the other thing I would just like
to add. I work a lot with financial counselors. And I think this guide would be a wonderful
thing for them to have. You know, how we do get it. Is is something that gets downloaded from
the web, or can they order copies? You know, what would be the way that counselors
could get copies of this, you know, for their clients. I will answer that just quickly. It will be both on the take control of your
auto loan site. But we also have a page for financial educators
called resources for financial educators that has all sorts of tools and resources that
can be used. We will put it there as well. And then we do outreach through our CFPB financial
education exchange, which is sort of a kind of a something you can sign up for as an educator,
to get regular newsletters. And we will do a webinar on this. And we will share it broadly. And it will also, I believe, our plan is to
make it order able through our fulfillment site, where you can either download, or in
some cases, order paper copies. So all of the Bureau’s sort of printable or
most of the Bureau’s printable resources are available for order. And so I think our plan is to put this into
that process as well. So and we would love to have your help in
getting the word out to educators about how they can use this. Thank you. Kathleen. One thing, I want to repeat the thanks for
this great work. I think one of the things that is really valuable
in this device, and to maybe you can think about it going forward, if you haven’t already,
which you probably have, is the fact that it requires action by the borrower. And I think that when people have to actively
enter information, fill things out, they kind of become more committed to what they are
doing. So I just from a behavioral perspective, I
think this is very clever. The second thing is, I am a little bit worried
about bait and switch. I recently arranged to buy a car. I hadn’t even seen it, but I knew what I wanted. We negotiated the price over the phone, and
went to pick it up. And when I got there, they said we made a
mistake. We sold the car 45 minutes ago. But we have this other one, but it has a $2,000
sparkly paint job. So we’ll drop the price to $1,500 you know
how it goes. Right. I got it for free. But the important point is that people could
go through this whole process, feel really comfortable they have got the right car, the
right financing. And then they show up maybe the next day,
after they have gone to a few dealerships, and all of a sudden, the salesperson says,
well, I didn’t get that approved with the manager. I have to go and get it approved now. So I am wondering if there is a and just as
a peril, sometimes they will have you sign things during the negotiation, the buyer. They say, well, would you be willing to accept
this, if I can get my manager to agree. And then they have you sign something. Well, what would happen if the salespeople
had to initial at the bottom of each of the columns about what the price terms were, for
the total costs. It wouldn’t be legally binding. It is not a contract. But it would kind of shift the power in a
way, that might make it, maybe reduce the chances of a bait and switch. Chris. Thanks for the opportunity to do a second
round. I wanted to respond a little bit to what Steve
mentioned, and then kind of build that into a larger point about add-on products. So Steve, you were talking about gap insurance
and sort of the regulation around that. And there has been this move in state legislatures
to change the way that it is regulated from being an insurance product to a financial
product. So changing it from gap insurance to a gap
waiver, using North Carolina as an example. If it is gap insurance, then the Department
of Insurance has oversight over that product, and they can write rules. They can do all sorts of regulatory things
related to that. If it is a gap waiver, then there is a sort
of minimum terms in the statute that is required. The Attorney General can enforce that law,
but doesn’t have rule-making authority or any ability to go in afterward, to look to
see whether there might be abuses. They might be able to do it under a UDAAP
claim. But again, it is kind of putting it onto an
agency that already is overloaded with lots to do, and not necessarily with strong experience
in the insurance market. And that leads to a larger point about the
complexity of add-ons. You are sort of the consumer needs to know
that that is the difference between a cap insurance product and a gap waiver product. Think about how many products are being offered
in that finance and insurance office. I have sat down myself just off the top of
my head to figure out how many of those there are. And I came up with about 30. And so you can imagine what you are faced
with, at the end of a very long and grueling process that is designed to be long and grueling,
so that you are more likely to buy these things. And we’ll talk about this a little bit later. But to the point of the educational materials. I mean, one of the things that I really appreciate
about what the Bureau does is that you continue to look at these issues, even after you have
put these materials out. And continue to look at ways to educate the
public. One specific point to this piece is that most
consumers aren’t aware that after they leave the dealership, even if they buy an extended
warranty or an insurance product, most of those you can cancel and get a refund of the
unearned premium. So if you have second thoughts about this
thing that you purchased that you added to the loan, you can actually you can get out
of it. I think most consumers aren’t aware of that. It might be worth pointing out to consumers
that you don’t have just because you bought it, and you don’t like it, you don’t have
to keep it. But to a larger point is, this it is very
difficult to look at these add-on products and figure out what covers what. This gap insurance example is a good one of,
you would expect that the gap insurance would cover most events that would result in a loss
of the car. But we know that that is not necessarily true. Some gap insurance will cover theft. Some won’t. Being, it is very difficult as a consumer
to be able to compare those different products. The disclosures aren’t particularly helpful. It reminds me a little bit of the credit card
market prior to the card act, where they would stuff so many different pieces, you know,
disclosures within the disclosure, that it was really tough for people to focus on the
really important things that are in there. And so potentially, as down the road as you
are looking at this, I would urge that looking at ways to help consumers to understand what
the important points of these add-on products are. To be able for them even just to ask the question
of does this cover this, does this cover that. To reduce some of, you know. Potentially reduce this. And then be looking at the ways the disclosure
are being handled, whether or not there is a role to play in looking at how that information
is being given to consumers. Thank you. Richardson. Let me just follow up with Chris for a moment. On their right to rescind, I just don’t happen
to know. Is there a time frame on that, for the consumer? It depends. And it is really up to the provider to have
it. And it also depends on what kind of product
it is. Because some, for insurance products, in a
lot of these cases, the insurance departments or state statutes require that there is a
refundability. And sets out the terms of that. It is different for each product. And so it just depends. So it is going to vary with state law. It is going to vary by state law, and sometimes
vary by provider as well. I have got it. Okay. The microphone is over here. I am going to steal it real fast. That just sounds a lot like credit insurance
to credit protection and what happened in credit cards. That is exactly what it is. Judge. So all this great talk about it. Tremendous product. But I found that I love is the fact that you
went to data, right what is in the website for comments and complaints. Those you took up the banner to actually record
it. And I see part of it is sort of, what is the
afterlife. There is so much involved, the depth of this,
in terms of just getting the deal done, and trying to understand it. But perchance is the next phase going to be
on the other side of the ledger, in terms of the D word. When there is default, in a sense. Because this is so misunderstood. And so precious. For those on the CAB before, we saw that movie
Josh Silverman gave us about Spent. Repossession of a car, where a nurse really
needed it to get to work. So it is all in the fine print. Chris is mentioning it. That is, you know, constant to all of the
products and issues we deal with. But on this side of the ledger. It is actually raised that even, payment was
still due on a loan, when they didn’t even have the car any more. You can’t give the legal advice. We get that. But sort of a road map of just to be considered,
that could be, I don’t know, possible second phase. So you got the good deal. You want it sustainable. You did your metrics. You went through all of the calculations. You have read everything. But life changes, right. So unemployment can put exactly that consumer
who felt very proud about a great deal still into a bad situation where thought might be
some guidance from this group of, other than consulting an attorney. We get that. But maybe to be mindful of certain things
that can right the ship, get you to a point where you can renegotiate or do something
else that could really just as a mortgage. Find a path that really would keep that the
auto with that consumer. So that is just a thought. And this is such a great base for it. Thank you. Okay. Patricia. Great step-by-step tool. I see me using this a lot, and promoting it. If you haven’t thought about it, I would encourage
you to consider a short video, like using a YouTube, just to introduce the step. Because I think that we will have more reach
by a quick just one minute-to-minute intro, and lead people to the website to download
the step by step guide, and the shopping list. It is a great tool. Thank you. Don. So I think a lot of the comments here have
reflected that buying a car is some form of psychological warfare. And part of that is, I think, dealing with
the onslaught of advertising that kind of comes about by auto dealers, et cetera. One of the tactics, I think that is still
going on in the field is around tax time, January or February, when they are not selling
a lot of cars. And folks are getting their refunds. They will market. You know, bring in your W-2. This, I think, can have some effects in terms
of people buying a bigger car than or too much car than they actually are able to afford,
et cetera. So I am not sure how to kind of incorporate
that. But that is something that is really prevalent,
I think, around tax time. It’s when they market you know, they are able
to potentially estimate your refund, and say hey, you can use that for a down payment. Or even do some type of refund anticipation
loan to finance your vehicle. Tim. May have to just chalk that one up to tough
competition in the free market. But we’ll think about it. Tim. Yes. Great tool. I just wanted to provide one observation that
we had in our conversations with some credit unions, which there are certain credit unions
that are heavily reliant on indirect lenders. It may provide some sort of incentive problem,
both pertaining to gap insurance as well as with rates. So I was I’m chatting with a fellow who was
a salesperson into car dealerships, who works on behalf of the credit union. And I said, well, tell me about things that
the car dealerships really don’t like, and that you won’t do as a result. And one of them was, actually selling gap
insurance at a highly discounted rate to people who are coming in to get prequalified for
a loan. And the reason that auto dealer doesn’t like
that is because it takes away a very profitable add-on sale. Another thing he told me was that they would
prefer the volumes can be highly steered by the dealer towards credit unions that they
find favorable. And one of the biggest factors for them, for
the dealership is actually whether the credit union pays on time, and whether they cross-market
these profitable add-ons to the customer in advance, where after the sale. So just something to put out there. Raul. Yes. Well, I am getting more and more excited as
this goes on. I really do think that this could be a very
interesting continued project. And particularly this would I want to continue. And brought up yesterday, this idea of optimizing
this for things like this, right. Mobile and other features. Because that is what happens, right. You go into buying the car. You are sitting there in that office. It can take quite a bit of time, going back
and forth. That is what you need. You need a real time tool. And I don’t know if you have done any of this
work. I mean, there is something that I have looked
at, called calculator.net, right, which is a bunch of IT professionals, that have but
the more you go into it, I am not quite sure who is behind this. And so it would be really awesome, I think. Again, rule, a type of contribution that this
Bureau could provide, is to have a trusted source for this type of tools. So I am an as an advisory, I would definitely
recommend doing a lot more resource allocation towards this project. Really building this up. Because it is, I think, one of the touchstones
that we can show to the public, why this really matters. Right. This is a very big decision that people make,
and they make it all the time. And it usually is a very emotional one. And you really don’t you are doing it in the
dark. And there is a lot of pressure. And when that happens, to have these various
options, and to really optimize it, not only on mobile. But optimize it for the experience. Optimize it for really balancing out that
process, and taking the anxiety away. And really making an important difference
on and there is a lot of other issues, obviously, that and a lot of variables. I mean, I am thinking back now. Every time I have gone in there, there is
you do end up negotiating, and the stronger information you have, the better you are going
to end up. There is no doubt about it. And this creates a much more efficient market
in general, because, you know, we end up there’s a lot of fluff in this market. A lot of people get abused. We get inefficient vendors. And so we are not helping anybody in the country
by not advancing even further in this way. Ann. The conversation around distribution and getting
these materials out, makes me think of another CFPB initiative, and how you worked with a
lot of credit card providers to post people’s credit scores as part of their bill, or part
of their online statement. And I wonder, do you think there would be
any receptiveness to certain financial statement providers or like loan, direct lenders or
auto dealers and affirmatively providing this resource, as a way to highlight that their
options is going to be better than other things that you are going to you will find. And it would be very interesting to see if
there was a interest in the market, in proactively offering this resource as a way of like saying
that affirming that what they are offering might just be one of the better options and
to help facilitate the competition, and let the competition work in the marketplace. We have heard several discussions about how
to improve this tool. But also, ways to Kathleen, it is your idea
about having the dealer sign off on the terms. Are there disclosures, other ways to improve
disclosures. Other tools that you all think would be helpful
to protect an informed consumer. One general question is, I think across subject
areas. I think about the fact that for the consumer
wellness tool that the Bureau produced, there was a different version for seniors. And I wonder about whether there was some
form of improvement, or design change across the Bureau for disclosures in general, based
on the age of the viewer. And the fact that apparently, our ability
to assess things starts to decline, at like 50 or something. Hideously young. So that was one thought. And I also notice for example, in the CFPB
en Espa�ol website, it was organized slightly different, visually different, the same topics. Wondered if that was a choice related to a
perception about how a particular community may want to walk itself through a website. So similarly. Like, if different communities have different
priorities, do you want to hit them with the thing that is most important to them first. If different demographics have different capacity,
do you want to hit them visually with the thing that is most important, first. It is a broader thought. So just very briefly, we definitely are interested
in meeting people where they are. But that is just a simple factual clarification. The reason why the Spanish website is different
than the English one, is that simply, they were developed at different times. And so the content evolved in between. Irene and Jane, I wanted to make sure we were
addressing points that were most helpful to you. Are there other questions that you would like
to put before this group, feedback, that you would like. I definitely feel like you all have raised
important and interesting questions for us, that focuses actually a lot on what you have
all underlined, what is next. What are the next steps. It is really encouraging to hear from all
of you about what you think we should be doing next. We definitely will be exploring some of those
options. We would love to learn more about how we can
help get this into the hands of consumers. I think that is the number-one most important
thing we have invested in this resource. But to help people, it has got to get into
the hands of people who are intending to use it. So I love to just put that question out to
everybody here. Paheadra. Have you given any consideration to reaching
out to colleges and universities? You have a lot of students who are first-time
car buyers. They are away from their parents, don’t really
have a lot of people around them who are knowledgeable about things like this. And I think that would be a great resource
for them. One of the things that I also wanted to point
out was on the add-ons, is maybe thinking about giving examples of what add-ons are. I know in our area in a lot of the buy-here
pay-here car lots, those things are already prepopulated on the contract. So a lot of buyers feel like they don’t have
room to negotiate on those things because they are already included. So letting them know what an add-on is, I
think, would be very beneficial to consumers as well. Judy. In response to ways to get this out, when
I started teaching law, I think there were two consumer law clinics in the country, mine
and Prentiss Cox, who you all know. Now, that is probably one of the fastest growing
areas, and we reach a lot of people across the country. And most of our clinical programs work very
closely with community groups. So getting this out to consumer law clinics
and there are some that actually specialize in auto financing. Virginia is one that comes to mind. But I think that that is a good outreach. It is a nice tool for students. And then once students have things in their
hand, they tend to pass it on to everyone they have ever met. So it is a good place to go. Julie. So Gene, you know there are literally thousands
of financial educators working around the country in a variety of venues, whether it
is nonprofit organizations, legal aid clinics, tax prep sites. Universities, extension services. I think they would all be natural avenues
for you to distribute this information. I think, given the mindset that many of these
educators or coaches would have, one thing that I would add into the tool. I know that you really want to focus on what
it takes to get the right loan. But I think the educators would be working
with consumers to look at the whole cost. So even just some very simple language, about,
make sure you are thinking about the cost of auto insurance and the cost of maintenance
when you are considering your purchase and your loan. Because that factors into the general financial
wellness of the consumer in this really important transaction. Don. So this may sound a little crude, but that
has never stopped any of us before. So one avenue, I think that could be very
valuable is philanthropy. Philanthropy that actually funds nonprofits
to actually interface directly with clients. That can be a way, I think, to kind of make
sure this tool is disseminated, not just this one, but other ones that the CFPB has developed,
that are consumer-facing. Raul. Will you sure. Maeve. Military, first paycheck. First paychecks, kids just want to buy a car. It is really unfortunate that the Bureau doesn’t
have the ability to advertise as widely or as entertaining a fashion as some of these
car dealerships do. I mean, you can’t turn on a television or
a radio without hearing this blasted at you. And certainly intended to appeal to people’s
emotional desire to buy a car and, you know, if Ellen’s comment earlier about being intimidated,
and having gone through this process is if Ellen is intimidated, you know, most people
would be paralyzed by the experience of, trying to buy a car. And also, it brings to mind for me, the differences
between being in an urban area, where public transportation and transportation doesn’t
put as much burden on you to own a car. But if you are in rural America, if you are
even in Little Rock, the public transportation is good, but it is limited. And so if you don’t have a vehicle, you are
unemployed. And so it really puts a burden on people. And so getting information out into these
communities in a way that is effective is critical. Not a day goes by when someone doesn’t walk
into one of our credit union branches with a story about being either they as Judge Rizzo
mentioned, they got into a situation, and they have lost the car has been repossessed,
or the payment is so large, that they shouldn’t have gotten that haul in the first place. And so we have been able to refinance those
loans into, in many cases, into something that is more affordable, but not always. And so getting this information out into communities
that this affects, and the way that they hear it is critical. I think grassroots groups, you know. We as a credit union, and many credit unions,
I appreciate the comments about the fact that there are products, both in the payday spaces
as well as the auto lending space that credit union can offer, that are more responsible
and affordable. But also nonprofits as Don mentioned, I think,
are aligned with this in a way that, if they were equipped with the information, and if
they have foundations or other resources made available to help them disseminate this information
effectively, they are going to reach many of the people in the communities where this
is the most devastating, where the abuse of practices are the most devastating. And so really reaching out to grassroots,
to faith-based organizations, to the nonprofits, I think are going to be very important as
we make sure this really impressive tool is available to those who need it most. Any other points? If there Josh. Yes. Just one small thing on deep local political,
local elected officials. City council members, assemblymen, they have
their constituent services. And I think it would be very open to having
these materials in their offices. And they have, a lot of them have storefront
offices and see a large flow of people. And are based in communities. So I think the more that this could get out
to that network, I think would be really helpful. Okay. If there are no more comments from the CAB,
I want to take us to lunch. But not before I really, again, echo the sentiments,
I think from this Board in really thanking you, Irene and Gene for the impressive work. And to the Bureau for again, I am constantly
impressed by the efforts to make sure that consumers know before they owe. And that education is power. And so thank you for all the work that you
do. And with that, we are going to adjourn for
lunch. We will return at two o’clock. At two o’clock. Thank you all for joining us.

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