President Trump has signed into law legislation which significantly limits the scope of the Consumer Financial Protection Bureau (CFPB) and curtails the federal agency’s attempts to increase its regulation of the auto lending market.
S.J. Res. 57 is a measure passed by Congress to prevent the CFPB’s challenge to the ability of car dealerships to discount loans for their customers.
Specifically, it cancels controversial guidance issued by the CFPB about indirect auto lender compliance with the Equal Credit Opportunity Act (ECOA).
Peter Welch, president and CEO of the National Automobile Dealers Association (NADA), said: “This is a great day for consumers, as Congress and the President have helped to preserve their ability to receive auto loan discounts from local dealerships. NADA congratulates the US House and Senate for their focus and perseverance on this issue, and the President for signing the new law to protect consumers.”
NADA has been at the forefront of the opposition to the CFPB’s efforts to regulate the auto finance market, which began in 2013 when the agency issued its first guidance to auto lenders.
The CFPB claimed its in-depth analysis of finance offers made by dealerships showed evidence of discrimination, because a disproportionate number of ethnic minority consumers paid higher rates.
It used equal opportunity rules to tackle variations in loan offers and also indicated it wanted to have wider oversight of the auto lending market.
NADA argued that the methodology used to assess the way loans were distributed was flawed.
It mobilized a campaign to reduce the CFPB’s reach and argued that the bureau’s guidance could have ended the practice of dealer discounts by pressuring auto lenders to eliminate discountable loans, increasing the cost of auto credit for consumers everywhere.
Trump’s election as president saw the departure of the agency’s first head, Richard Cordray.
Mick Mulvaney, who is close to the President, was installed as the acting director instead of Cordray’s chosen internal replacement.
Following the announcement of the rule change, Mulvaney said: “As an executive agency, we are bound to enforce the law as written, not as we may wish it to be. In this case, the initiative that the previous leadership at the bureau pursued seemed like a solution in search of a problem. Those actions were misguided, and the Congress has corrected them.
“I am heartened that the people, through their elected representatives, have corrected this instance of bureau overreach. I look forward to working with the Congress to bring much-needed structural accountability to the bureau so that our cherished democratic principles are supported and the rights of every American consumer are always protected.”
In its response, the CFPB points out that the enactment of this Congressional Review Act (CRA) resolution does more than just undo the Bureau’s guidance on indirect auto lending. It also prohibits the bureau from ever reissuing a substantially similar rule unless specifically authorized to do so by law.
The latest action also clarifies that a number of bureau guidance documents may be considered rules for purposes of the CRA, and therefore the bureau must submit them for review by Congress. The CFPB says it welcomes the review and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission.