For the vast majority of Americans, it’s hard to imagine life without an automobile. Even in states with advanced public transportation — including in Massachusetts — it’s nearly impossible, outside of metropolitan areas, to accomplish the necessary tasks of life like getting to work, purchasing food, and going to medical appointments without a vehicle. Automobiles make our modern lives possible.
This, coupled with the fact that the vast majority of new and used vehicles purchased in the U.S. will be financed or leased, means most of us will find ourselves at a car dealership looking for financing so that this major purchase can move forward.
It is essential, to both prospective automobile owners and our way of life, that the financial services industry be transparent, fair and highly competitive to the benefit of all consumers. That is why the American Financial Services Association (AFSA), in Boston this week for its 99th Annual Meeting, has developed a set of principles supporting an industry-wide, pro-consumer environment with an emphasis on fair lending practices.
Discriminatory practices should never be tolerated. We support the efforts of the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ) to ensure that predatory lending and discrimination do not occur because they have no place in our society. But fairness can be accomplished without sacrificing the competitive atmosphere that is so critical to providing consumers with the lending options they need.
Unfortunately, some of the changes being suggested to address alleged discriminatory lending issues will have a negative effect on consumers, ultimately increasing their total financial costs by reducing competition and flexibility in the industry. This would make credit options completely unavailable or less available to consumers — particularly those who are in low-to-moderate income brackets. It’s a classic example of unintended consequences.
Moreover, any piecemeal solution to fair lending concerns harms consumers. And that is why a pro-consumer, comprehensive, uniform, industry-wide solution using a single set of standards is necessary.
AFSA, along with its member companies, has developed a set of Fair Lending Principles which support a pro-consumer, industry-wide solution to this issue (Available HERE).
Government and industry should also partner in the financial education of consumers to help ensure they are prepared to make smart choices when making credit-related decisions. Several lenders have already taken critical steps in this area, and we are encouraging others to follow suit. The AFSA Education Foundation (AFSAEF.org) is also leading the charge to ensure consumers are well-prepared for life’s financial decisions.
It is clear that consumers drive America’s economy — and treating them fairly and equitably when they look to finance a major purchase is not only the law of the land, it is our top priority. We share the government’s commitment to ensure there is no unintended discrimination.
By practicing the Fair Lending Principles we developed as an industry, we have the tools to ensure that all Americans are treated fairly when applying for credit.
We’re making this case on Capitol Hill where we’ve distributed these principles to every member of Congress. Because driving and obtaining the necessary financing for vehicle purchases is woven into the fabric of America.
