Senate Republicans ventured into new territory Wednesday by voting to cancel an Obama-era regulation on auto lending through complicated procedural maneuvering.
The upper chamber voted 51-47 in favor of a resolution to cancel 2013 guidance from the Consumer Financial Protection Bureau that applied anti-discrimination law to auto finance companies. Sen. Joe Manchin of West Virginia was the only Democrat to side with Republicans.
If the House approves the resolution and President Trump signs it, it would be the 16th time that the Republican majorities and Trump combine to cancel an Obama-era regulation through the Congressional Review Act, which allows Congress to undo new rules via an expedited process.
What makes the auto lending CRA vote unusual, though, is that the regulation is not an official rule. Instead, it was a guidance bulletin that the CFPB issued five years ago.
In trying to rein in the CFPB via the resolution, Republicans may be setting a precedent for cutting out more agency regulations, including ones that might have been going on for long periods.
Sen. Pat Toomey, a Pennsylvania Republican on the Banking Committee, set up the maneuver by getting an analysis from the Government Accountability Office declaring that the five-year old bulletin constituted a rule that could be struck down by a CRA resolution.
So the GOP wouldn’t be be striking down a rule implemented by an agency regulating an industry. Instead, it would be striking down a notice that the bureau will enforce a law, the Equal Credit Opportunity Act that prevents discriminatory lending, on banks and financial firms that provide indirect lending through dealers. Those companies could be sued for discrimination if the dealers who arranged the financing marked up prices for minorities.
The aim of Republicans is to protect those firms from the CFPB. They have argued that the methods the bureau has used to lodge accusations of discrimination have been flawed and hurt the market. Also, they accused the CFPB of trying for backdoor regulation of auto dealers, which were explicitly exempted from regulation in the 2010 Dodd-Frank financial reform law.
“This was an end-run by the CFPB in two ways,” Senate Banking Chairman Mike Crapo said on the Senate floor, arguing that the agency went around Dodd-Frank and laws governing administrative procedures.
The bureau will maintain its broad authority to take action against financial firms for unfair or abusive lending. Republicans and the industry argue, though, that the resolution would prevent the agency from suing lenders for discrimination on the basis of what auto dealers do.
In a statement saying that the president would sign the regulation, the Trump administration said regulators would keep their authorities to hold auto dealers to the Equal Credit Opportunity Act.
Peter Welch, head of the National Auto Dealers Association, said that the action wouldn’t change the enforcement of any fair lending law, and called it a “measured response to the CFPB’s attempt to regulate the $1.1 trillion auto financing market, avoid congressional scrutiny by issuing ‘guidance,’ and impose a new policy without necessary procedural safeguards.”
The precedent set by the resolution raises the prospect that Congress, in theory, could reach back years to stop regulatory practices.
For example, Toomey was also successful last year in getting an analysis from the GAO declaring another five-year old agency guidance a rule. In this case, the guidance was from banking regulators, warning banks against excess lending for the purposes of corporate buyouts.
Rion Dennis, an advocate for the group Americans for Financial Reform, said in a statement that Wednesday’s vote would embolden financial firms to discriminate by charging minorities more for car loans, and added that “Lawmakers have also opened the door to challenging long-standing agency actions that are crucial to protecting workers, consumers, civil rights, the environment, and the economy.”
Wednesday’s resolution relating to auto lending faces good odds in the House, where similar legislation has been approved on a broad bipartisan basis in recent years. It also has the support of auto dealers and the U.S. Chamber of Commerce, which said that it would consider the vote in its scorecard for ranking senators.
