The Senate is set to vote to rescind the Consumer Financial Protection Bureau’s rule on auto lending as early as this coming Tuesday.
The rules were created to protect drivers who use indirect auto loans financed through a dealership, which are backed by banks. In March 2013, the CFPB put limits on loan markups and compensation for dealers on these auto loans, specifically on the basis of race, national origin, or credit score.
As a result, Ally Financial, one of the nation’s largest auto lenders, paid $98 million after being accused of charging minority borrowers higher rates. American Honda agreed to pay $24 million to settle its case, and Fifth Third Bank paid $18 million.
While some lenders eliminated discretionary dealer markups, others complained that the regulations made it more difficult to offer discounts on car purchase due to the fear of being accused of discrimination.
In October 2017, the Government Accountability Office supported Republican Pat Toomey’s position that Congress has the power to eliminate the CFPB’s auto rules.
According to The Los Angeles Times, the auto lending rule is the latest example of “runaway regulations,” Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday (April 17). He added that repealing it “will protect consumers from a brazen attempt by the past director of the Consumer Financial Protection Bureau to stretch his authority and interfere in the auto industry.”
The legislation, which has more than a dozen Republican sponsors, needs 51 votes to pass. It also has support from some Democrats.
This week, however, 64 consumer groups said that they opposed the Senate vote, explaining that Congress should have reviewed the guidance when it was first issued by the CFPB in 2013.
“We oppose such a vote, as it would contravene the clear intent of the CRA to allow Congress to review and challenge recently finalized agency actions,” the letter stated. “This would set a dangerous precedent that would open the door for Congress to stretch the CRA to challenge a wide variety of settled agency actions that have been in effect for years or decades, particularly ‘guidance documents’ that are not only crucial to protecting workers, consumers, minorities, the environment, and the economy but also to providing regulatory certainty for businesses and the public.”