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Senate repeals auto-loan guidance in precedent-shattering vote

The Senate on Wednesday repealed a controversial Consumer Financial Protection Bureau (CFPB) decree on auto-loan financing in a vote that could set a precedent for Republicans to repeal a broad range of regulations.

Senators generally fell along party lines in the 51-47 vote to repeal 2013 guidance from the CFPB on "dealer markups" — the interest a dealer adds to a customer's third-party loan as extra compensation. 

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Assuming the House passes the measure, the CFPB auto-lending guidance will likely be the first informal regulation to be repealed by Congress through the Congressional Review Act.

While Congress has used the Congressional Review Act more than a dozen times since 2017 to repeal formal rules issued under former President Obama, it has never before used the law to repeal guidance. Republicans are now looking to do so, and could go after a range of regulatory actions that had been considered off-limits. 

Efforts to repeal rules under the Congressional Review Act cannot be filibustered, giving Republicans a powerful tool to slash regulations with only a majority vote in each chamber. The act also bans agencies from issuing rules similar to those overturned under the law. 

Sen. Joe ManchinJoe ManchinManchin touts rating as 'most bipartisan senator' Bowser on Manchin's DC statehood stance: He's 'not right' It's Joe Manchin vs the progressives on infrastructure MORE (W.Va.) was the only Democrat to vote in favor of repealing the CFPB guidance, while Sens. John McCainJohn Sidney McCainDOJ: Arizona recount could violate civil rights laws Cheney fight stokes cries of GOP double standard for women Conservative Club for Growth PAC comes out against Stefanik to replace Cheney MORE (R-Ariz.) and Tammy DuckworthLadda (Tammy) Tammy DuckworthSu's track record make her an excellent pick for Labor Department post Senate passes bipartisan B water infrastructure bill Senate panel advances Biden's Postal Service nominees MORE (D-Ill.) missed the vote.

The resolution is expected to easily pass the House, and the White House announced Tuesday that aides to President TrumpDonald TrumpVeteran accused in alleged border wall scheme faces new charges Arizona Republicans to brush off DOJ concern about election audit FEC drops investigation into Trump hush money payments MORE would recommend that he sign it.

“The goal here is simple: We want to protect consumers and job creators from needless interference by the federal bureaucracy,” said Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellMcConnell: Taliban could take over Afghanistan by 'the end of the year' McConnell alma mater criticizes him for 1619 comments McConnell amid Trump criticism: 'I'm looking forward, not backward' MORE (R-Ky.).

“We can nullify a particularly egregious overstep by [the CFPB] and notch another victory in this Congress’s record of rolling back overregulation.” 

It did not initially appear that the Congressional Review Act could be used to cover informal policies like the CFPB auto-lending guidance. 

That changed in December, when the Government Accountability Office ruled that unofficial regulations were covered under the law. Sen. Pat ToomeyPatrick (Pat) Joseph ToomeySasse rebuked by Nebraska Republican Party over impeachment vote Philly GOP commissioner on censures: 'I would suggest they censure Republican elected officials who are lying' Toomey censured by several Pennsylvania county GOP committees over impeachment vote MORE (R-Pa.), who requested the analysis, and Sen. Jerry MoranGerald (Jerry) MoranBottom line Hawley votes against anti-Asian hate crime bill Senate passes anti-Asian hate crimes bill MORE (R-Kan.) introduced the resolution repealing the guidance. 

The CFPB had sought to eliminate dealer markups over concerns that black and Latino customers were often charged higher rates than whites with identical credit profiles, citing several analyses — including their own — of auto loan data. 

The bureau in March 2013 released regulatory guidance warning auto dealers about the legal risks of dealer markups and how the CFPB would crack down under the Equal Credit Opportunity Act on sellers who offer discriminatory rates.

“Lender policies that provide dealers with this type of discretion increase the risk of pricing disparities among consumers based on race, national origin, and potentially other prohibited bases,” the CFPB said in a statement announcing the policy. 

The auto-lending policy was not issued as a formal rule, but served as the legal justification for a slew of CFPB lawsuits against car dealers.

The CFPB and Justice Department sued Ally Financial in December 2013 for close to $100 million in fines and damages for minority customers. They alleged that black, Hispanic, Asian and Pacific Islander borrowers paid higher interest rates for their auto loans between April 2011 and December 2013. 

The CFPB also sued Honda and Toyota for ten of millions of dollars over similar charges

Car dealers, their Republican allies in Congress and business groups defended the dealer markups as a standard financing practice and said concerns of discrimination were unfounded. 

Critics of the CFPB guidance said the bureau rushed ahead with overbearing policy based on flimsy evidence without going through the proper administrative checks, seeking to exploit a loophole.

The National Automobile Dealers Association (NADA), which supports the repeal of the 2013 guidance, said car-sellers are still subject to strict federal oversight to prevent racial disparities.

NADA called the repeal “a measured response to the CFPB’s attempt to regulate the $1.1 trillion auto financing market, avoid congressional scrutiny by issuing ‘guidance,’ and impose a new policy without necessary procedural safeguards.”

The successful Senate repeal vote alarmed a slew of progressive and consumer advocacy groups who had praised the CFPB’s action on auto loans. 

Lauren Saunders, associate director of the nonprofit watchdog National Consumer Law Center, said the Senate set “a horrible precedent to use this really crude, fast track procedure to undo guidances.”

“Guidances are used to help fill in the gaps and help people understand regulations and laws,” Saunders said. “Using this crude process to not only repeal guidance but chill agencies through the ban on substantially similar rules makes it harder for agencies to serve the public.”

Others tied the Senate vote to the broader GOP effort to weaken the CFPB and undo its rules. 

Karl Frisch, executive director of liberal nonprofit Allied Progress, blasted “D.C. politicians from both parties … who have their sights set on reversing much of the important work the CFPB has accomplished over the years.”

“Today's vote to gut consumer protections from discriminatory auto lending practices did not happen in a vacuum,” Frisch said.

Updated at 7:20 p.m.