Trump Defangs CFPB’s Fair Lending Unit That Targeted Auto Lenders

  • William Hoffman
  • February 2, 2018
  • 0

Via Wikimedia Commons

The White House is stripping enforcement power from the Consumer Financial Protection Bureau’s Office of Fair Lending and Equal Opportunity, which has been the chief driver of discrimination lawsuits in the auto finance space.

Employees in the fair lending unit have been moved into the office of the director, will no longer have enforcement capabilities, and will be focused on “advocacy, coordination, and education,” Acting Director Mick Mulvaney said in a letter to employees this week.  

The office pursued payouts from many auto lenders who were accused of charging minorities and protected communities higher interest rates than their Caucasian counterparts with equal credit standing.

The industry has long argued that these enforcement actions under former Director Richard Cordray’s leadership were an overreach because lenders do not see race and ethnicity information on loan applications. However, the CFPB had argued that lenders allowed dealers to markup fees too high, and that policy resulted in unintentional discrimination under the Equal Credit Opportunity Act. It’s unclear at this time what the bureau’s new guidance on dealer markup is following this change as a spokesman was not able to respond to AFN by press time.

Consumer and civil rights groups argue that these actions weaken protections for consumers.

“These changes … threaten effective enforcement of civil rights laws, and increase the likelihood that people will continue to face discriminatory access and pricing as they navigate their economic lives,” Lisa Donner, executive director of Americans for Financial Reform, said in a statement to the Washington Post.

Mulvaney’s office said it will continue to pursue fair lending in a statement to The Post.

Some of the auto lenders who have been hit with charges for discriminatory practices over the years include Toyota Motor Credit Corp. in 2016 with a $21.9 million fine; Fifth-Third Bank in 2015 with an $18 million remediation payment to affected consumers; and the largest payment to date from Ally Financial Inc. in 2013 of $80 million.  

The change to the fair lending unit comes the same week that the Trump Administration lost a battle over the constitutionality of the CFPB’s leadership structure. A federal appeals court upheld the single-director structure of the bureau, which opponents have long looked to turn into a bipartisan committee or eliminate altogether.

The ruling sets it up for a possible appeal to the Supreme Court, or it could spur a Congress — currently deadlocked over budget negotiations — to take action.

“While the Court ruled the CFPB’s governing structure was not unconstitutional, it does not mean the current structure is appropriate for the bureau’s long-term credibility,” Richard Hunt, president and chief executive of the Consumer Bankers Association, said in a statement. “Congress should create a bipartisan commission at the CFPB, in place of a sole director, to uphold the Bureau’s mission of consumer protection and would establish transparency, and diversity of thought.”

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