House votes to dismantle bias rule in auto lending
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 DoddFrank 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 agen- cies.
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 mil- lions of people into more expensive car loans simply
because of the color of their skin,” said Rion Dennis, an advocate of financial over- haul 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 challeng- ing longstanding efforts to protect workers, consum- ers, civil rights, the envi- ronment and the economy.”
The Center for Responsible Lending analyzed loan level data in 2011 and found that black and Latino consum- ers 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 some- how 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 guid-
ance 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 administra- tion 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 Cal- ifornia, 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 harm
ing 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 discrimina- tion,” Waters said.