UPDATED: House passes measure repealing CFPB indirect auto lending guidance

The House, voting 234 to 175, on Tuesday adopted a Senate-passed resolution to repeal 2013 guidance from the Bureau of Consumer Financial Protection (BCFP) on indirect auto lenders’ compliance with federal fair lending requirements.

The measure, S.J. Res. 57, utilizes authority under the Congressional Review Act (CRA), which provides for congressional review of all federal rules and authorizes Congress to overturn a rule within a brief time frame.

The consumer bureau’s guidance, issued in Bulletin 2013-02, gives the bureau’s views on the applicability of federal fair lending laws to “indirect” auto lending (indirect financing facilitated by a car dealer through a third-party lender). The bulletin outlines indirect auto lenders’ compliance with the fair lending requirements contained in the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. It relates to policies used by some indirect auto lenders that allow dealers to mark up the interest rate charged to the consumer above the indirect auto lender’s “buy rate.”

This arrangement allows lenders to compensate the auto dealer based on the difference in interest revenues between the buy rate and the actual rate charged to the consumer in the contract executed with the auto dealer. According to the bureau’s 2013 bulletin, the incentives created by such policies allow for a significant risk for pricing disparities on the basis of race, national origin or other prohibited bases.

Late last year, in response to a letter from Sen. Patrick Toomey (R-Pa.), the Government Accountability Office (GAO) found that the guidance was, in fact, a rule – and thus subject to the 1996 CRA. CRA allows Congress to overturn a rule within 60 business days of its effective date.

The Senate last month passed S.J.Res. 57 on a vote of 51-47.

It will be the first time Congress has successfully used to the CRA to block an agency action taken years ago and outside of the window provided by law. The president is expected to sign the measure.

GAO letter to Sen. Patrick Toomey re: CFPB bulletin/guidance on indirect lending and CRA coverage

Statement of Administration Policy on S.J.Res. 57

CFPB Bulletin 2013-02