Sen. Elizabeth WarrenElizabeth WarrenThe Trojan Horse of protectionism Federal Reserve officials' stock trading sparks ethics review Manchin keeps Washington guessing on what he wants MORE is drafting legislation that would give regulators more authority to go after auto dealers, picking a fight with the powerful industry, congressional Republicans and even some within her own party.
The Massachusetts Democrat argues that auto dealers engage in selling financial products and loans just like banks, and unsuspecting consumers can easily be taken for a ride with bad deals. She wants to give the Consumer Financial Protection Bureau (CFPB) the authority to supervise the industry.
In a speech last month, Warren equated the auto-loan market to the pre-2008 recession housing industry, which many economists say led to the sharp economic downturn. The Dodd-Frank financial reform law passed in response to the crisis and created the CFPB, thanks in large part to Warren, the agency’s chief architect.
But to her chagrin, the law precluded the new agency from regulating car loans.
"Auto dealers got a specific exemption from CFPB oversight, and it is no coincidence that auto loans are now the most troubled consumer financial product," she said in the speech. "Congress should give the CFPB the authority it needs to supervise car loans."
Warren's staff has met with senior Democratic staffers, including aides who work for Sens. Charles SchumerChuck SchumerBiden discusses agenda with Schumer, Pelosi ahead of pivotal week CEOs urge Congress to raise debt limit or risk 'avoidable crisis' If .5 trillion 'infrastructure' bill fails, it's bye-bye for an increasingly unpopular Biden MORE (D-N.Y.) and Mark WarnerMark Robert WarnerAdvocates call on top Democrats for 0B in housing investments Democrats draw red lines in spending fight Manchin puts foot down on key climate provision in spending bill MORE (D-Va.), according to a source familiar with the discussions. Schumer, Warren and Warner all serve on the Democratic leadership team.
Representatives for the three senators did not respond to requests for comment.
The bill is certain to draw intense criticism from the GOP and some Democrats, who contend that auto dealers shouldn't be overseen by an agency designed to regulate the financial services industry, noting that the Federal Trade Commission (FTC) already monitors the industry.
The nation’s car dealers, who are now steeling for a fight against the proposal, have deep ties in Washington. During the 2014 election cycle, the National Auto Dealers Association (NADA) donated about $2 million to Republicans and $803,000 to Democrats, according to financial disclosures from the Center for Responsive Politics.
Warren’s effort comes as Democrats are increasingly divided about how the industry should be regulated.
Legislation introduced last month by Rep. Frank Guinta (R-N.H.) would nullify recent CFPB regulations against the auto-lending industry, arguing that they overstep the auto-dealers' exemption from CFPB rules.
Guinta's bill has 40 sponsors. Among them are 19 Democrats, including Rep. Earl Perlmutter (Colo.). Perlmutter and Guinta sent a letter to their colleagues earlier this month arguing against expanded regulations for auto dealers.
“[Dodd-Frank] exempts the CFPB from directly regulating auto dealers. However, the CFPB’s guidance is attempting to regulate auto dealers,” Perlmutter and Guinta wrote in the letter, obtained by The Hill.
One senior Democratic House aide said the letter indicated "Warren has an uphill battle" in attracting Democrats to support her initiative.
Given that Republicans control both chambers of Congress, passage of the bill anytime soon is highly unlikely. However, Warren’s stature within her party could raise the profile of the issue ahead of the 2016 presidential election.
"This is not going to go anywhere," said one lobbyist familiar with the congressional discussions on the issue. "However, if she can bring on a Democrat who is more credible than her, like Sen. Schumer, then she can elevate it as a political wedge issue within the party."
Warren has proven adept at taking wonky policy issues and activating progressive grassroots campaigns to elevate her causes.
Chris Kukla, senior counsel for government affairs at the left-leaning Center for Responsible Lending, lauded Warren's effort, calling the House legislation a "pro-dealer bill."
"It's an attempt to keep the CFPB from enforcing the law," Kukla said. "We strongly support Sen. Warren's bill for the CFPB to have oversight over auto dealers and their lending."
NADA spokesman Jared Allen said the group is "extremely supportive of the continued bipartisan efforts in Congress to rescind a flawed guidance from the Consumer Financial Protection Bureau that would harm consumers by limiting their ability to obtain discounted auto financing."
The cause is personal for Warren, who was instrumental in forcing lawmakers to create the CFPB as part of Dodd-Frank back when she a Harvard Law School professor. The auto-dealer exemption was predicated on a view among some negotiators that the industry is separate from the financial sector.
Now Warren is looking to expand the CFPB, even as many Republican lawmakers assail it as "a rogue regulator" that already has too much authority and not enough accountability.
Rep. Randy NeugebauerRobert (Randy) Randolph NeugebauerCordray announces he's leaving consumer bureau, promotes aide to deputy director GOP eager for Trump shake-up at consumer bureau Lobbying World MORE (R-Texas), a co-sponsor on the House bill, said CFPB officials are "a prime example of overreach."
"Sen. Warren wants to ignore bipartisan recognition that the CFPB is overstepping its bounds with respect to auto dealers," Neugebauer said. "Unfortunately, this latest push is symptomatic of Sen. Warren’s desire to micromanage the financial choices of the American consumer."