Car dealers again have flexibility in loans
Trump signs law that reverses regulations on lending practices
Post-Gazette Washington Bureau
WASHINGTON — Republicans say a bill that President Donald Trump signed into law Monday will prevent regulatory overreach when it comes to loans from car dealers.
Democrats, though, say the change will encourage unfair lending practices and open the door to racial discrimination by allowing dealers to return to a practice of offering different interest rates to different customers.
Dealers say they need that flexibility to beat competing loan offers or to meet customers’ budget constraints through discounted rates, but consumer advocates worry that the policy change will subject minority car shoppers to higher rates by unscrupulous dealers.
The measure, formally known as a resolution of disapproval, was written by U.S. Sens. Pat Toomey, RPa., and Jerry Moran, RKansas. Their legislation used the Congressional Review Act to reverse an Obama-era guidance set by the Consumer Financial Protection Bureau.
The guidance was set in 2013 after reports that minority car buyers were paying higher interest rates. It allowed the bureau to levy hefty fines on dealerships where the bureau found a significant disparity between interest rates offered to buyers of different races.
Mr. Toomey and Mr. Moran said the regulatory guidance had inhibited car dealers’ ability to negotiate. They said the bureau, under former director Richard Cordray, failed to follow formal rule-making procedures or seek sufficient public input.
“Throughout his tenure at the CFPB, Richard Cordray routinely thumbed his nose at the public and Congress by overstepping his authority,” Mr. Toomey said in a written statement. “This auto-lending guidance is a clear example of this.”
CFPB acting director Mick Mulvaney supports the roll-back, calling his predecessor’s actions misguided.
“I want to make it abundantly clear that the bureau will continue to fight unlawful discrimination at every turn,” said Mr. Mulvaney, who also is White House budget director.
“We will vigorously enforce fair-lending laws in our jurisdiction and will stand on guard against disparate treatment of borrowers.”