The U.S. House of Representatives voted today to repeal the Bureau of Consumer Financial Protection’s (CFPB) controversial 2013 guidance on indirect auto lending, a move praised by the RV Dealers Association, RV Industry Association, and National Independent Automobile Dealers Association.
The House approved S.J. Res. 57, which would overturn the much-criticized guidance document under the authority of the Congressional Review Act, by a bipartisan 234-175 majority. The Senate had already passed the joint resolution on April 18 by a 51-47 margin.
The resolution also is supported by other industry allies.
“The CFPB’s 2013 indirect auto lending guidance was a harmful, ill-advised solution that purported to solve the problem of a disparate impact theory that only existed in some mythical CFPB fairyland,” said NIADA CEO Steve Jordan. “The reality is automobile dealers had a rich history of using indirect lenders to provide financial transactions in the best interests of the driving public long before the CFPB decided to interfere. NIADA is thrilled Congress has removed the CFPB from that equation.”
The guidance, issued in March 2013, claimed dealer discretion on interest rates creates a “significant risk” of unintentional disparate impact discrimination and spelled out the bureau’s intention to pursue enforcement actions on that basis.
Its repeal will once again allow auto dealers to set loan terms and rates for third-party financing without being subject to CFPB enforcement.
Critics have pointed out the CFPB’s theory is based on shaky methodology for determining disparate impact and the guidance was put in place without comments from stakeholders, public hearings or studies of its effect on the cost of credit to consumers.
“Without seeking any public comment or studying the impact on consumer credit,” said Shaun Petersen, NIADA senior VP of legal and government affairs, “and with no evidence to back up its claim, the bureau issued a rule under the guise of guidance to limit dealers’ ability to meet their customers’ needs when shopping for credit.”
The resolution followed a December opinion from the Government Accountability Office that defined the guidance document as a CFPB rule for the purposes of the CRA, which meant it could be struck down by a simple majority vote of both houses of Congress.
The White House has issued a statement in support of the resolution and President Trump is expected to sign it into law.
In a statement issued Tuesday, RVDA said rejecting the CFPB guidance is necessary because:
- The CFPB guidance was issued without any prior notice, opportunity for public comment, or consultation with the federal agencies Congress authorized to regulate dealers.
- The vehicle finance industry strongly supports fair-lending protections and has promoted a fair-credit compliance program based on a DOJ model that effectively manages fair-credit risk while preserving discounts on credit for consumers. S.J. Res. 57 would not affect fair lending statutes or implementing regulations.
- Preserving discounts for consumers keeps RV and auto loans accessible and affordable. The CFPB admits it never analyzed the impact of its guidance on consumers. Subsequent analysis revealed that the guidance would increase vehicle financing costs.