The U.S. House of Representatives passed a bill Wednesday to rescind industry “guidance” the Consumer Financial Protection Bureau issued in March 2013, to compel the CFPB to follow what the bureau’s critics call a more “transparent” rule-making process.
Congress specifically exempted franchised, new-car dealers from the CFPB’s jurisdiction when the bureau was set up in 2010, but the CFPB has indirectly affected dealer business by clamping down on lenders.
The bill passed on Wednesday goes to the Senate next, but Attorney John Redding, a partner at BuckleySandler LLP, told Auto Finance News that Senate passage could be tougher.
“While industry remains hopeful that the bill will have similar broad, bipartisan support in the Senate to what we saw in the House,” he said. “Moving legislation through the Senate has been difficult, even where bipartisan support appears to exist.”
Assuming the Senate votes in favor of the bill, Redding said, it would then be presented to President Obama for his consideration, at which time, he would be presented with the choice of signing the bill into law or, alternatively, issuing a veto.
“There have been some recent statements made that the President would veto the bill if it were in front of him,” Redding said. “But hope that if the bill receives broad bipartisan support in the Senate, similar to the House, he will sign it into law.”
The CFPB industry guidance accused auto lenders of tolerating discrimination by allowing dealers to mark up customer interest rates. The guidance also spelled out the CFPB’s use of the “disparate impact” theory to establish discrimination.
That is, if members of legally protected classes of borrowers such as minorities pay higher dealer markup, that’s sufficient to show discrimination, even if the disparity is unintentional, the bureau said.
However, Redding points to comments made on the House floor Wednesday, which suggests concern that actions taken to date may have the impact of limiting access to credit, and otherwise raising credit costs to consumers.
“Those impacts may affect those most in need of access to credit to purchase vehicles to get to work and support their families,” he said.
The dealer association and their allies in Congress want the CFPB to follow what the critics consider a more transparent process, giving industry and the public time to comment on CFPB proposals, and compelling the CFPB to provide access to documents supporting the CFPB’s guidance.
