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Senate Votes to Repeal CFPB Auto Lending Rule

On Wednesday, April 18, 2018, the Senate passed a measure to repeal the Consumer Financial Protection Bureau’s (“CFPB's”) 2013 guidance prohibiting discrimination in auto lending (the “2013 Guidance”).  In 2013, the CFPB issued a bulletin regarding compliance with the fair lending requirements of the Equal Credit Opportunity Act (“ECOA”) and its implementing regulation, Regulation B, for indirect auto lenders that permit dealers to increase consumer interest rates and that compensate dealers with a share of the increased interest revenues. The 2013 Guidance noted that that some indirect auto lenders had policies that permitted auto dealers to mark-up rates and that compensated dealers for those mark-ups.  As a result of the policy incentives and the discretion permitted in the mark-ups, the CFPB concluded that there was a significant risk of pricing disparities on the basis of race, national origin, and other prohibited bases, in violation of ECOA.

Prompted by a Republican request, the Government Accountability Office reviewed the 2013 Guidance and ruled that the CFPB had erred by implementing the auto-lending policy through guidance instead of issuing a formal rule.  As a result, the 2013 Guidance was subject to the Congressional Review Act, which permits lawmakers to repeal regulations with a simple majority and bypass regular congressional procedure.  Critics of the 2013 Guidance argued that the CFPB overstepped its authority in issuing the guidance, alleging that it circumvents a restriction in the Dodd-Frank Act on regulating auto loans.  Backers of the 2013 Guidance argued that it attempted to remedy discrimination in auto lending mark-ups and the repeal will leave consumers open to discrimination. 

The vote approved the repeal largely along the party lines, with most Democrats voting against the repeal of the 2013 Guidance, and most Republicans voting in favor.  Overturning the 2013 Guidance still requires approval by the House and the President.

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