1、外文题目： AUTO RACE TO THE BOTTOM: Free Markets and Consumer Protection in Auto Finance 出 处： Research Note November 16, 2009 作 者： Raj Date and Brian Reed 原 文： AUTO RACE TO THE BOTTOM: Free Markets and Consumer Protection in Auto Finance Raj Date and Brian Reed 1.0 Introduction Over the past several mont
2、hs, the Federal Reserve, Congress, and the Administration have been considering ways to strengthen and rationalize consumer protection in financial services. Central to that debate is the proposed creation of a new agency focused exclusively on this issue, the Consumer Financial Protection Agency (t
3、he “CFPA”). Despite pronounce industry opposition, a consensus appears to be developing among policy-makers that the proliferation of dubiously structured and marketed consumer financial products helped fuel an unsustainable bubble in credit and asset values prior to the financial crisis, and visite
4、d widespread distress among households thereafter. Proponents of the CFPA argue that it would help prevent similar problems in the future. Even among proponents, however, there are varying conceptions of the scope and function of the CFPA. One of the most significant variations is in the treatment o
5、f auto finance. Specifically, the CFPA as envisioned by the House Financial Services Committee would exclude auto dealers from the CFPAs coverage. The Administrations original proposal would have included them. This research note does not address the issue of whether the CFPA itself is advisable. In
6、stead, it is meant to inform debate on, assuming there is a CFPA, whether auto dealers should be included in its mandate. In particular, it (a) summarizes the structure of the auto finance industry, and the role of dealers within it； (b) identifies the analytical premises for excluding financial ser
7、vices activities from the CFPAs scope； (c) evaluates, in light of that analytical framework, whether dealers should be exempted； and (d) highlights the likely competitive implications in the industry if the exemption becomes law. 2.0 Executive Summary The exemption of auto dealers from the CFPA is c
8、onceptually flawed. It is logically discordant with the basic premises underpinning the CFPA； it further fuels long-term instability in U.S. financial services by discriminating against community banks and credit unions； it intervenes with the free market in a way that is both distorting and inequit
9、able. Notably, analysis of the dealer exemption need not even first evaluate whether the CFPA itself is advisable. One need only acknowledge that, if Congress ultimately chooses to create the CFPA, it will be because it believes (1) that consumer protection is a materially important objective in fin
10、ancial services； (2) that comprehensive rule-making will prevent problematic opportunities for regulatory arbitrage； and (3) that centralized supervision of consumer protection is more effective than a decentralized approach that is tied to prudential regulation. Those logical premises are clearly r
11、elevant to auto dealers financing activities. Dealers are not a niche part of an immaterial market； they are the single largest channel (with 79% market share) in the origination of auto loans and leases, a business that (at more than $850 billion in out standings) is larger than the entire credit c
12、ard industry. Moreover, auto finance is demonstrably susceptible to unfair and deceptive practices, and those practices are demonstrably not held in check by private market forces alone. Intentionally creating a fragmented approach to regulation in auto finance - one set of rules for auto dealers, a
13、nother set for banks and credit unions would invite the kind of “race to the bottom” in consumer practices that was manifest during the credit bubble. At the same time, the exemption discourages a “race to the top”: by granting the dominant players in the business a specially permissive regulatory r
14、egime, policy-makers would tilt the field against more customer-friendly business models, principally at community banks and credit unions. The exemption would also encourage long term instability in the markets structure. The auto finance market consists of two basic distribution channels: the deal
15、er (or “indirect”) channel, which is generally funded by a handful of large national banks and Wall Street capital markets platforms； and the retail (or “direct”) channel, which generally consists of credit unions and community and regional banks. By artificially distorting the auto finance market i
16、n favor of the dealers distribution channel, the exemption encourages the primacy of Wall Street funding sources over traditional bank deposit funding. As evidenced by the crisis, intentionally chasing businesses from traditional banks and credit unions into Wall Street funding models creates the re
17、al potential for disruptive volatility over time. 3.0 Auto Finance Primer Auto finance is big business in the United States. Although American households credit obligations are dominated by mortgage and home equity debt, auto finance - which includes both loans and leases - constitutes the next larg
18、est category, edging out even revolving credit card balances. (See Figure 1). Despite its size, the industry is not especially complex. That said, evaluating policy alternatives for the business does require a basic understanding of the industrys (1) distribution channels, (2) funding models, and (3
19、) key changes during the credit bubble and crisis. 3.1 Distribution channels As in the mortgage business, auto loans are originated through both direct and indirect channels. (See Figure 2). “Direct channels” - which include branch-based, telephone-based, and online models - involve lenders interact
20、ing with borrowers themselves. Although direct channels have become more efficient over time, their share of overall originations remains stubbornly low, at only a fifth of the market. “Indirect” channels involve some manner of intermediation - a middleman between the lender (like a bank or finance company) and the borrower. In auto finance, the finance and insurance staff at auto dealers (typically called the
