Republican Members of the House of Financial Services Committee Allege that CFPB Used "Aggressive Efforts" against Vehicle Financing Business

The Committee on Financial Services of the U.S. House of Representatives issued a report alleging that the Consumer Financial Protection Bureau ("CFPB") engaged in an "aggressive effort" to enforce the Equal Credit Opportunity Act ("ECOA") against vehicle finance companies using a controversial theory of liability known as "disparate impact." The report, titled "Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending,” includes internal CFPB documents that were obtained by the committee during its investigation of the CFPB’s “pressure campaign” against the vehicle finance companies.

According to the report, the internal documents reveal that the senior CFPB officials advised Director Richard Cordray concerning the weakness of their legal theory, including warnings that (i) the practice which the CFPB publicly maintained caused discrimination - allowing auto dealers to charge retail interest rates to customers - may not be recognized as actionable by the Supreme Court, (ii) it knew that the controversial statistical method employed by the Bureau to measure racial disparities is less accurate than other available methods and prone to significant error, and (iii) the CFPB knew that factors other than discrimination caused the racial disparities that it observed, but refused to use controls for such factors in its statistical analysis.

The report includes significant quotes from internal CFPB documents, including the following: Finally, publicizing our [statistical] methodology in the short term opens our methodology up to attack and further questions. News reports are already labeling it as racial profiling and junk science, and these aspersions may increase if we reveal greater specificity. . . . (at page 28).