Senate to vote on repeal of CFPB auto-loan guidance

Senate to vote on repeal of CFPB auto-loan guidance
© Greg Nash

The Senate will vote to repeal controversial regulatory guidance on how auto dealers finance loans to customers meant to curtail discriminatory lending, said Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellTrump 'no longer angry' at Romney because of Supreme Court stance On The Money: Anxious Democrats push for vote on COVID-19 aid | Pelosi, Mnuchin ready to restart talks | Weekly jobless claims increase | Senate treads close to shutdown deadline The Hill's Campaign Report: Trump faces backlash after not committing to peaceful transition of power MORE (R-Ky.).

McConnell said Tuesday the Senate will vote on a measure to repeal guidance from the Consumer Financial Protection Bureau (CFPB) targeting auto loan “dealer markups,” a practice in which additional interest is added by the dealer to a customer’s third-party car loan as compensation to the seller.

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The measure, filed by GOP Sens. Pat ToomeyPatrick (Pat) Joseph ToomeyAppeals court rules NSA's bulk phone data collection illegal Dunford withdraws from consideration to chair coronavirus oversight panel GOP senators push for quick, partial reopening of economy MORE (Pa.) and Jerry MoranGerald (Jerry) MoranLobbying world This World Suicide Prevention Day, let's recommit to protecting the lives of our veterans Hillicon Valley: Zuckerberg acknowledges failure to take down Kenosha military group despite warnings | Election officials push back against concerns over mail-in voting, drop boxes MORE (Kan.), would repeal the CFPB’s 2013 guidance warning that the bureau would penalize dealers who issue discriminatory markups.

The Senate voted to begin debate on the measure by a 50-47 margin, with Sen. Joe ManchinJoseph (Joe) ManchinSenate passes resolution reaffirming commitment to peaceful transition of power Hopes for DC, Puerto Rico statehood rise Manchin defends Supreme Court candidate Barrett: 'It's awful to bring in religion' MORE (D-W.Va.) the only Democrat to support the motion. The repeal only needs a simple majority of votes to pass, and a final vote is scheduled for Wednesday at noon.

“Republicans are chopping away at the tangled mess of regulations the last administration left behind,” McConnell said Tuesday. “Our whole economy is getting a tune-up. And now it’s time for the front end of the auto industry to come along for the ride.”

Under former Director Richard CordrayRichard Adams CordrayConsumer bureau revokes payday lending restrictions Supreme Court ruling could unleash new legal challenges to consumer bureau Supreme Court rules consumer bureau director can be fired at will MORE, the CFPB had used the guidance as the legal justification behind several enforcement actions against auto dealers they accused of charging minority customers higher dealer markups.

Republicans and the auto industry blasted the CFPB for using a policy that was not vetted or approved as a regulation and was, critics say, based on flawed analysis.

Now critics of the CFPB are using a December judgment from the Government Accountability Office (GAO) to target the 2013 guidance under the Congressional Review Act (CRA). Republicans have used the CRA to repeal more than a dozen regulations from the previous administration during Trump’s first year.

While the CRA gives Congress the power to repeal formal rules issued by federal agencies, it was unclear whether it could be used to overturn informal guidance, like the CFPB’s warning on dealer markups.

The GAO said in December that the CRA could be used to repeal guidance, responding to an inquiry from Toomey. That decision opened up a slew of repeal targets for Republicans eager to chisel away at regulations issued under former President Obama.

“We used the Congressional Review Act a record 15 times last year,” McConnell said. “Let’s join with our colleagues from Pennsylvania and Kansas and add another victory to that list.”

Consumer advocacy groups and progressive nonprofits aligned with the Cordray-era CFPB have defended the auto lending guidance and urged the Senate to preserve it. They’ve also expressed fears that Republicans would use the CRA to destroy other critical protections for vulnerable Americans.

Republicans repealed the CFPB's 2017 rule on forced arbitration clauses through the CRA in November and are targeting the bureau's rule on short-term, high-interest loans, commonly known as payday loans. 

More than two dozen consumer protection, civil rights and financial sector watchdog groups wrote in a Tuesday letter to McConnell and Senate Minority Leader Charles SchumerChuck SchumerPelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' 3 reasons why Biden is misreading the politics of court packing Cruz blocks amended resolution honoring Ginsburg over language about her dying wish MORE (D-N.Y.) that repealing the guidance “would send the wrong message to the auto industry and to the American people.”

“Discrimination in auto lending contributes to credit access disparities and to the racial and ethnic wealth gap,” wrote the groups, including the NAACP, Center for Responsible Lending, National Urban League, and American Federation of State, County and Municipal Employees. “We urge you to oppose [repeal] and keep the federal government’s commitment to rooting out racial discrimination clear.”

The National Automobile Dealers Association (NADA), which supports the repeal of the 2013 guidance, insisted that car sellers wouldn't be allowed to get away with discrimination.

The group said in a release opposing the guidance that “auto dealers take fair credit seriously, and all national dealer associations are firmly committed to promoting strong fair credit compliance through a robust voluntary fair credit compliance program.”

“Every customer, of every race, deserves to be treated fairly, and there is no place for discrimination in the auto retailing business,” NADA wrote.

Updated at 6:22 p.m.