House Votes to Dismantle Bias Rule in Auto Lending
Posted May 8, 2018 10:35 p.m. EDT
WASHINGTON — The Republican regulatory rollback took a step forward Tuesday as the House voted to scrap an Obama-era rule intended to prevent discrimination by auto lenders and as lawmakers inched closer to a bipartisan agreement to alter portions of the 2010 Dodd-Frank Act.
In a 234-175 vote, the House nullified 2013 guidance issued by the Consumer Financial Protection Bureau aimed at preventing auto lenders from charging minorities higher fees when taking out car loans. The move followed a similar vote last month by the Senate to void the anti-discrimination guidance and the resolution to strike down the rule will now go to President Donald Trump, who is expected to sign off on it.
Both the Senate and House voided the consumer rule using the Congressional Review Act, a 1996 law that gives Congress the power to expunge rules that were created by government agencies.
The auto-lending guidance has divided lawmakers along party lines, with Democrats arguing the policy protected consumers from unfair discrimination and Republicans making the case it was an example of overreach by the consumer bureau that was squeezing the lending industry. Eleven House Democrats supported the measure Tuesday.
Consumer advocates warned that doing away with anti-discrimination protections would drive up fees for those seeking auto loans and said that other consumer protections could soon be targeted.
“Companies will put millions of people into more expensive car loans simply because of the color of their skin,” said Rion Dennis, an advocate of financial overhaul at Americans for Financial Reform. “By using the Congressional Review Act to wipe out straightforward regulatory guidance, the congressional majority has also opened the door to challenging long-standing efforts to protect workers, consumers, civil rights, the environment and the economy.”
The Center for Responsible Lending analyzed loan level data in 2011 and found that black and Latino consumers were receiving higher numbers of interest rate markups on their car loans than white consumers. The bureau issued guidance in 2013 urging auto lenders to curb discriminatory lending practices and used that guidance to justify lawsuits they brought against auto finance companies.
On Tuesday, Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, said the consumer bureau used faulty methodology when producing an analysis to justify its auto-lending rule.
“They claimed that somehow there was unconscious discrimination,” Hensarling said. “They made it up. They had no data.”
Last year, the Government Accountability Office determined that the bureau’s guidance was technically a rule, a decision that gave Congress authority to use the Congressional Review Act to kill it. While several rules developed toward the end of the Obama administration have been nullified by this Congress, rescinding the auto financing rule was considered unusual since it is an older provision that has been in place for years.
Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, warned Tuesday that Republicans were opening a Pandora’s box that could herald the repeal of rules that have been in place for years, potentially harming consumers in a variety of ways. She pushed back against the suggestion that the consumer bureau rule relied upon bad data and said killing it would hurt minorities.
“This is about discrimination,” Waters said.
Republican and Democrats have long been at odds over the mandate of the Consumer Financial Protection Bureau, which was created from the 2010 Dodd-Frank Act. Republicans have long derided the agency for overstepping its bounds and last year, Trump installed Mick Mulvaney, his budget director, to run the bureau on an interim basis. Since then, Mulvaney has worked hard to scale back its ambitions and freeze much of its enforcement activities.
While lawmakers continue to disagree over portions of the Trump administration’s regulatory agenda, Republicans and Democrats are nearing agreement on the first significant bipartisan bill to alter the Dodd-Frank Act.
House Republicans, who had been pushing for a more expansive financial overhaul bill that would eliminate the Consumer Financial Protection Bureau and make other sweeping changes, appear ready to accept the more limited Senate bill that passed this year. That bill would largely ease regulations that largely apply to community banks.
Rep. Paul Ryan, R-Wis., the House speaker, said Tuesday that he had reached an agreement with the Senate majority leader, Mitch McConnell, to move forward with a vote on the Dodd-Frank bill in the House. He said the House would also send to the Senate a package of other pieces of financial overhaul legislation the House has been working on that they believe would add to that bill.
Additional pieces of legislation that stray too far from what the Senate passed on a bipartisan basis are unlikely to pass in the Senate, where Republicans have a very slim majority.
Ryan did not indicate when he planned to hold a vote, but lawmakers and administration officials have signaled that it could be in the coming weeks.