Senate Votes To Kill Controversial CFPB Auto Lending Rule

Senators voted on Wednesday (April 18) to remove a 2013 piece of consumer protection legislation that was designed to stop discrimination in the auto lending market. By a vote of 51 to 47, Senators have officially unmade the CFPB guidance of a latter year, on the argument that its strictures were an unreasonable burden on auto dealers and auto lenders.

The House is expected to pass the measure soon, and President Donald Trump will likely sign it.

“It’s important for Congress to reassert its role in policymaking from the executive branch,” said Sen. Jerry Moran (R-Kan.), who introduced the bill that would undo the regulation.

The bill was a heretofore unseen expansion of the 1996 Congressional Review Act (CRA), which generally limits the window Congress has to strike down agency actions to 90 days. According to Politico reports, this also marks a shift in how the CRA is used, expanding it to regulatory guidance in addition to the formal agency rules that were recently issued.

“If this rule stands, banks, credit unions and finance companies holding nearly $1.1 trillion in outstanding loans will needlessly face significant liability, and the ability of auto dealers to play a valuable role by matching buyers and lenders will be diminished,” said Senate Banking Chairman Mike Crapo (R-Idaho).

The rule is designed to prevent racial discrimination in how auto loans are handed out, though Sen. Joe Manchin (D-W. Va.) – the lone Democrat to favor the rollback – noted that he sees no evidence in his home state of the kind of discriminatory behavior the rule is meant to prevent.

“I have a great relationship with all the car dealers back in the state of West Virginia, and I have checked with every one of them,” Manchin said in an interview. “If I thought that any one of them — and these are people I’ve known all my life — would ever discriminate against anybody, for any reason whatsoever, I would have been coming after them. I’ve never had a complaint on that, never once.”

The rule was brought down largely due to the efforts of Senator Pat Toomey of Pennsylvania, who managed to bring CFPB guidelines under the scope of the Review Act via a ruling by the Government Accountability Office, which said guidance by the agency fell under the definition of a “rule” for the purposes of the law. Because the guidance was never presented as a formal rule – and was never published in the Federal Register – opponents were also able to sidestep the timetable that normally limits how long Congress has to strike a rule they don’t like.

Democrats and consumer advocates warned that the maneuver set a dangerous precedent that could put a wide universe of regulatory actions at risk and may have a lasting impact on how agencies craft rules.

“They can go back 20 years,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, noted of the expansive repeal powers claimed by the GOP.

Republicans, for their part, noted that Democrats had attempted a similar move in regard to entitlement spending some years ago.

“The use of the Congressional Review Act to repeal a guidance is well-established,” Toomey said. “It is consistent with any plain reading of the law. It is consistent with the intent of the authors at the time. Congress has attempted to do so in the past. Democrats have attempted to do it.”

Toomey also noted that there is “no evidence” that a tidal wave of repeals is about to sweep through Washington, D.C.

“Any guidance, in fact any rulemaking, I think ultimately should be subject to congressional review because, after all, it’s our authority in the first place that is used to generate it,” he said.