The U.S. Senate voted to repeal Consumer Financial Protection Bureau ("CFPB") regulatory guidance on auto-loan financing, which purported to regulate discriminatory dealer markups on car loans to consumers.
The CFPB's auto-lending regulatory guidance ("Bulletin"), although not a formal rule, allowed the CFPB to pursue legal claims against car dealerships that allegedly charged minority consumers higher interest rates on their auto loans. By enforcing regulatory guidance rather than developing a rule, the CFPB avoided the Administrative Procedures Act's rulemaking process and related requirements.
In remarks before the Senate, Committee Chair Mike Crapo (R-ID) criticized the regulation, which he stated was implemented as an end run around required rulemaking procedures. Mr. Crapo also questioned the agency's ability to enforce the rule, as Dodd-Frank does not authorize the CFPB to regulate auto-dealers. Citing an internal CFPB memo, Mr. Crapo referenced the CFPB's decision not to develop a rule because it had "no regulatory authority" over auto-dealers. By sidestepping the legal process, Senator Crapo said, the CFPB had denied individuals and businesses the "vital" opportunity to provide feedback on the potential impact of the regulation.
House Financial Services Committee ("FSC") Chair Jeb Hensarling (R-TX) supported the repeal, asserting the financial harm its enforcement has caused to credit-worthy consumers. The White House also commented on the matter, stating that the Bulletin reduces consumer choice and limits auto dealers' ability to offer loans to consumers. If it is continued, Mr. Hensarling stated, then banks, credit unions and finance companies holding outstanding loans would face significant liability.
Committee Ranking Member Sherrod Brown (D-OH) denounced the vote and warned that preventing the CFPB from issuing future fair lending guidance could "permanently weaken federal anti-discrimination laws."
The measure must now go to the House.