US regulators are expected to examine how payments to auto dealers are structured to avoid scrutiny, a Reuters report said on Thursday.
The report said the Financial Stability Oversight Council, the nation’s top regulators, will convene on Thursday to review how payments made to auto companies are structured and what regulators should do to stop them.
The Council will look at how auto companies can improve the way they structure payments to dealers, the report said, adding that some of the concerns raised by the Council’s panel could be addressed at the next meeting of the Financial Services Task Force (FSTF).
The Financial Stability Council, which is led by US Treasury Secretary Steven Mnuchin, is made up of seven agencies including the Securities and Exchange Commission (SEC), the Federal Reserve, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB), and the Office for Financial Research (OFR).
A Reuters review of filings filed with the SEC and OFR last year found the payments were often made to firms outside of their jurisdictions.
“There’s been an alarming trend of auto companies making payments that were outside of states, where there’s been a lot of consumer scrutiny, and so they’re very likely to be exempt,” said Daniel Koval, director of the University of Michigan Center for Automotive Finance, which monitors payments to and from dealers.
The Financial Services task force was established in 2015 to oversee the financial markets.
Last month, Congress passed a law to regulate car payments and was expected to take action to overhaul how the industry works in the coming months.
Earlier this month, the Financial Crisis Inquiry Commission, a bipartisan panel, recommended that regulators should start regulating auto-dealers on a much broader basis, rather than focusing only on payments made by a single company.
“If the industry is going to be held accountable, they need to start regulating them like banks and credit unions,” said Koval.
“We’ve been saying that for years and we’re seeing some momentum from the regulators and they need a lot more action.”