Banking and Finance Law Daily CFPB’s 2013 indirect auto lenders bulletin nullified
Monday, May 21, 2018

CFPB’s 2013 indirect auto lenders bulletin nullified

By John M. Pachkowski, J.D.

On Monday, May 21, 2018, President Donald J. Trump signed S.J. Res. 57 into law. The action, under the Congressional Review Act (CRA), nullifies the Consumer Financial Protection Bureau’s 2013 bulletin regulating indirect auto lenders for compliance with the Equal Credit Opportunity Act (ECOA).

The CFPB issued the guidance to ensure compliance with the ECOA and to institute more rigorous oversight of the automobile financing process to eliminate discriminatory practices. However, Section 1029 of Dodd-Frank forbids the Bureau from regulating auto dealers. In addition, the bulletin was not issued pursuant to notice-and-comment rulemaking, and as a result, it was issued without allowing public comment. Some auto dealers feel that it threatens their ability to negotiate the terms of loans with their customers and that the guidance has been used to sanction auto financing companies.

The Senate approved the resolution by a 51-47 vote and the House of Representatives followed suit with a vote of 234-175 (see Banking and Finance Law DailyApril 18, 2018 and May 9, 2018).

Misguided actions. At the signing ceremony, Acting CFPB Director Mick Mulvaney stated, "I thank the President and the Congress for reaffirming that the Bureau lacks the power to act outside of federal statutes. As an executive agency, we are bound to enforce the law as written, not as we may wish it to be. In this case, the initiative that the previous leadership at the Bureau pursued seemed like a solution in search of a problem. Those actions were misguided, and the Congress has corrected them."

Future review welcomed. A CFPB press release also noted, "Today’s action also clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress. The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission."

"Gone are the days". House Financial Services Committee Chairman Jeb Hensarling (R-Texas), also attending the signing ceremony, commented, "Thanks to the hard work of Republicans in Congress, today is a good day for American consumers, who would have had to pay more for their auto loans under the Bureau’s flawed guidance, and the rule of law. Gone are the days of a rogue Bureau using its unchecked powers to sidestep due process and harm the very consumers it is charged with protecting. I look forward to continuing to work with President Trump, Acting Director Mulvaney, and my colleagues in Congress to ensure the Bureau, as well as all other federal regulatory agencies, are held accountable for their actions and act in a transparent manner."

MainStory: TopStory BankingFinance CFPB ConsumerCredit DoddFrankAct EqualCreditOpportunity FedTracker Loans

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