Banking & Credit

Congressional Review Act Reversal of CFPB Auto Lending Guidance Would Be Bad for Consumers, Bad for the Country

Consumer Finance Expert says Congressional Invalidation of the CFPB’s Auto Lending Guidance Would Grant Car Dealers Free Reign to Discriminate Against Minority Borrowers and Set a Dangerous Precedent for Future Guidance

Washington D.C. – In response to Senate Joint Resolution 57 and House Joint Resolution 132, a proposal to roll back the Consumer Financial Protection Bureau’s guidance clarifying the illegality of discriminatory “dealer markups” in auto lending, Christopher Peterson, Senior Fellow at the Consumer Federation of America (CFA) and a University of Utah Law Professor produced a new policy paper: “Auto Dealer Markups, Jim Crow Finance, and the Congressional Review Act: How Congress May Bend the Rules to Facilitate Overpriced and Discriminatory Auto Lending”. This paper is accompanied by a letter to Senate Majority Leader Mitch McConnell and Senate Minority Leader Charles Schumer as well as House Speaker Paul Ryan and House Minority Leader Nancy Pelosi urging Congress to reject this dangerous expansion of the Congressional Review Act.

Senate Joint Resolution 57, sponsored by Senator Jerry Moran (R–KS) and House Joint Resolution 132, sponsored by Rep. Lee Zeldin (R-NY) would invalidate the Consumer Financial Protection Bureau’s (CFPB) 2013 auto lending guidance using the Congressional Review Act.

The CFPB’s 2013 auto lending guidance explained that discriminatory “dealer markups” are illegal under the Equal Credit Opportunity Act. Dealer markups let car dealers trick customers into paying interest rates higher than those for which they otherwise qualify. Evidence suggests dealer markups can be discriminatory because they may result in minority groups paying higher interest rates than similarly qualified white borrowers.

The Congressional Review Act is a law that allows Congress to invalidate agency regulations with a simple majority vote in both houses. Congress has never used this power to invalidate an action, such as the CFPB’s auto lending guidance, that a regulatory agency does not itself characterize as a regulation.

According to Professor Peterson’s report, using the Congressional Review Act to overturn this protection against potentially racist auto lending is a problem for two reasons. First, dealer markups are a harmful practice that inflate the price of car loans and hurt poor and minority borrowers. Second, S.J. Res. 57 and H.J. Res. 132 are a dangerous expansion of the Congressional Review Act that could lead to further gridlock in Washington and uncertainty in markets across the country.

The report also offers advice to consumers seeking to avoid paying inflated interest rates on auto purchase loans.

Contact: Christopher L. Peterson, 202-387-6121 x1020