Senate Votes Down Unfair CFPB Auto Lending Rule

CEI praised the Senate today for voting down the Obama-era Consumer Financial Protection Bureau rule that unfairly penalized auto lenders for any unintentional disparate impact in loans to minority consumers. CEI senior fellow John Berlau criticized the Bureau for unleashing a rule that does more harm than good to consumers and flouts the rule of law.

Kudos to Sen. Jerry Moran (R-KS) and the co-sponsors of this joint resolution to overturn this harmful “guidance” by an unaccountable government entity. Even though the Democrat-controlled Congress that drafted the Dodd-Frank financial overhaul expressly forbid the Consumer Financial Protection Bureau from regulating financing by auto dealers, the CFPB went around the law through this enforcement action on the banks and credit unions that work with dealers. Through a guidance document not even subject to the safeguards of a proposed regulation, such as the notice-and-comment process, the CFPB effectively banned discounts in auto financing. Using flawed statistical models, the CFPB made the dubious claim that discounting per se leads to discrimination and ignored evidence that banning discounts would raise costs for many minority consumers. This guidance will harm all consumers with good credit, including minority consumers, by effectively denying them the discounts they deserve when financing a car. Congress should swiftly pass this measure and then make the CFPB accountable to our elected representatives by making the Bureau’s funding subject to Congressional appropriations and giving the president the power to remove the director at will.

CEI regulatory policy expert Wayne Crews meanwhile argues that such agency guidance documents should already have been deemed invalid because it was not submitted to Congress for an opportunity to review and disapprove. See: Most Federal Agency Regulatory Guidance May Be Invalid, So Now What?

Related:

The Myth of Independence at the Consumer Financial Protection Bureau

Five Ways CFPB Regulations Harm the Middle Class