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 McConnellThe Hill's 12:30 Report: Trump orders more troops to Mideast amid Iran tensions What if 2020 election is disputed? Immigration bills move forward amid political upheaval 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.

ADVERTISEMENT
The measure, filed by GOP Sens. Pat ToomeyPatrick (Pat) Joseph ToomeyOvernight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns Top GOP candidate drops out of Ohio Senate race MORE (Pa.) and Jerry MoranGerald (Jerry) MoranOn The Money: Judge upholds House subpoena for Trump financial records | Trump vows to appeal ruling by 'Obama-appointed judge' | Canada, Mexico lift retaliatory tariffs on US | IRS audit rate falls GOP senator calls for resolution of trade dispute: 'Farmers and ranchers are hurting' Frustrated GOP senators want answers from Trump on Iran 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 Democrats to House: Tamp down the impeachment talk The Hill's Morning Report - Trump says no legislation until Dems end probes Senate panel approves Interior nominee over objections from Democrats 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 CordrayHouse rebukes Mulvaney's efforts to rein in consumer bureau The road to the White House still goes through Ohio Rep. Tim Ryan announces presidential run 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 SchumerCharles (Chuck) Ellis SchumerNo agreement on budget caps in sight ahead of Memorial Day recess Ex-White House photographer roasts Trump: 'This is what a cover up looked like' under Obama Pelosi: Trump 'is engaged in a cover-up' 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.