House Committee Passes Bill to Repeal CFPB’s Auto Lending Guidance
WASHINGTON, D.C. — On Wednesday, a U.S. House committee passed H.R. 1737, a bipartisan bill to repeal the Consumer Financial Protection Bureau (CFPB)’s 2013 guidance, which warned finance sources that they would be held liable for discrimination that was the result of policies allowing dealers to mark up the interest rate on retail installment sales contracts.
The bill, introduced by Reps. Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.) and passed in committee by a vote of 47 to 10, which included 13 Democrats. It currently has 126 co-sponsors in the full House, which includes 70 Republicans and 56 Democrats. “Discrimination in any form cannot be tolerated, and new-car dealers fully support the nation’s fair lending laws and the commitment of federal agencies to ensure fairness,” said Peter Welch, president of NADA. “But the CFPB’s policy of eliminating the ability of a consumer to get a discounted auto loan will restrict access to credit and hurt all consumers.
“Congressmen Guinta and Perlmutter have shown great bipartisan leadership to repeal the CFPB’s flawed guidance on indirect auto financing and protect the right of consumers to find the best credit possible when purchasing their vehicles,” Welch added. “Consumers have the right to find the best loan possible when purchasing a vehicle, the right to negotiate and the right to seek a better deal — and Washington shouldn’t try to deny that right.” A study by Charles River Associates, commissioned by the American Financial Services Association, found that the CFPB’s proxy methodology to determine alleged unintentional discrimination overestimates the African-American population by 41%. The CFPB’s own white paper on this subject also revealed errors as high as 20% in estimating an individual’s ethnicity.
H.R. 1737 would require the CFPB to study the consumer impact of its policy to eliminate consumer discounts in dealer showrooms, mandating public input and transparency, as well as ensuring the bureau works in consultation with other government agencies that Congress vested with regulatory authority.
The CFPB’s 2013 guidance urged auto lenders to move away from discountable compensation for auto dealers who arrange credit for their customers, and instead compensate dealers with non-negotiable payments like flat fees. Earlier this month, Honda Finance Corporation reached a $24 million settlement with the CFPB and Department of Justice, and agreed to cap the rate markup its allows dealers to make.
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