WASHINGTON – The Senate voted today to begin consideration to undo an overstep by the Consumer Financial Protection Bureau (CFPB) to regulate car loans issued at auto dealerships. The measure, formally known as a resolution of disapproval (S.J. Res. 57) under the Congressional Review Act (CRA), is being offered by U.S. Senators Jerry Moran (R-Kan.) and Pat Toomey (R-Pa.). At issue is a 2013 guidance document on “indirect auto loans” issued by the CFPB. An indirect loan is financing offered to a consumer through an automobile dealer, instead of directly from a consumer’s bank or credit union.
In the 2010 Dodd-Frank financial reform law creating the CFPB, Congress specifically prohibited the new agency from regulating auto dealers. However, in 2013 the CFPB found a way around the ban. Without going through the customary rulemaking and public input processes, the CFPB published a “bulletin” which threatens auto dealers’ ability to negotiate the terms of these loans with their customers and has been used to sanction auto financing companies.
“An ill-advised Obama-era auto-lending rule issued by the CFPB missed the mark on both process and substance,” said Senator Moran. “This resolution of disapproval provides Congress the opportunity to reverse this overreaching rule to return a sense of stability to the auto marketplace, ultimately providing a path to lower costs for all car purchasers. I encourage my colleagues on both sides of the aisle to support this resolution.”
At the request of Senator Toomey, the Government Accountability Office (GAO) last year reviewed the CFPB’s guidance and concluded that it qualified as a rule under the CRA, thereby making the bulletin eligible to be rolled back by simple majority vote in Congress. To ensure agencies adhere to congressional intent, the CRA requires any rule to be transmitted to Congress for review. The CFPB never satisfied this statutory requirement despite the significant ramifications of a back-door regulation aimed at auto dealers.
“The CFPB, under Richard Cordray, frequently overstepped its authority while snubbing Congress and the public in the process. This auto lending guidance is an example,” said Senator Toomey. “I appreciate the GAO’s decision in this matter and encourage my colleagues to support this CRA resolution.”
In 2015, similar legislation to S.J.Res.57 that would have repealed the guidance was overwhelmingly approved by the U.S. House of Representatives, with 88 Democrats supporting passage.
“S.J.Res. 57 continues the bipartisan effort that began years ago to preserve the ability of local dealerships to offer discounted auto loans to their customers, and we thank Senator Toomey and Senator Moran for their leadership on this issue,” said Peter Welch, President and CEO of the National Automobile Dealers Association (NADA). “America’s franchised auto dealers strongly believe that every customer deserves to be treated fairly, and that there is no room for discrimination of any kind in auto retailing -- period. This is a narrowly tailored resolution that in no way modifies or affects the enforcement of any fair credit laws or regulations. But it does take the important step of ensuring that consumer discounts in auto lending are safeguarded for every consumer.”
In no way does the CRA resolution impact or amend the Equal Credit Opportunity Act. Companion legislation to S.J. Res. 57 also exists in the House (H.J. Res. 132).
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