Senate Republicans have found a new way to cut back Obama-era financial regulations.
The chamber moved Tuesday to undo five-year-old rules applying anti-discrimination law to auto finance companies, using an unusual and never-before-seen multistep legislative process.
The Senate voted 50-47 on a first vote to strike down the Consumer Financial Protection Bureau’s rule through the Congressional Review Act, which allows for Congress to cancel rules implemented by agencies and prevent them from issuing similar regulations without congressional authorization.
Democratic Sen. Joe Manchin of West Virginia joined with Republicans to end debate on the resolution. The Senate then moved toward a final vote.
Republicans have used the CRA process to undo more than a dozen late Obama-era regulations. What makes Tuesday’s action new, though, is that the bureau’s auto lending rule wasn’t an official rule.
Instead, it was more informal “guidance” submitted in a 2013 bulletin informing auto financing companies that they were subject to the laws regarding discriminatory lending.
The 2010 Dodd-Frank law had excepted auto dealers from its new rules. But the CFPB effectively regulated dealers indirectly by imposing the discrimination rules on third-party banks and finance companies with which dealers worked to arrange financing for sales.
Recently, though, Sen. Pat Toomey, R-Pa., obtained a note from the Government Accountability Office concluding that the guidance is in fact a rule, subject to the CRA. Even though the guidance has been in place for years, it is subject to a CRA vote, which normally has to follow soon after the implementation of a rule.
Republicans have long criticized the CFPB’s auto lending rules — including in a 54-page 2015 report — on the grounds that it subjected auto financing companies to discrimination lawsuits on the basis of disparate impact, rather than on direct evidence of discrimination. And because lenders don’t identify the race or other characteristics of borrowers, the determination of disparate impact was based on whether specific borrowers’ addresses belonged to neighborhoods or ZIP codes that were disproportionately minority.
“Republicans are chopping away at the tangled mess of regulations the last administration left behind,” Majority Leader Mitch McConnell, R-Ky., said on the Senate floor Tuesday. “Our whole economy is getting a tune-up. And now it’s time for the front end of the auto industry to come along for the ride.”
The House also would have to vote to approve the resolution. In the past, the House has voted in overwhelming numbers, including with many Democrats, in favor of legislation to undo the guidance.
