WASHINGTON (Reuters) – The U.S. Senate voted 51-47 on Wednesday in favor of a resolution undoing the Consumer Financial Protection Bureau’s 2013 guidance restricting how car dealers extend auto loans to consumers, in the latest move to weaken the agency.
The vote, to overturn the consumer watchdog’s indirect auto-lending rule, was preceded by 10 hours of debate on the Senate floor on Tuesday. The resolution must be approved by the House of Representatives before being sent to President Donald Trump for his signature.
The Senate’s action on the resolution, which was introduced by Republican Senators Jerry Moran and Pat Toomey, comes amid a broader attack on the consumer watchdog by the Trump administration for issuing rules that potentially restrict banks’ reach to consumers.
The agency was conceived under President Barack Obama to stamp out predatory lending.
“An ill-advised Obama-era auto-lending rule issued by the CFPB missed the mark on both process and substance,” said Moran.
An indirect auto loan is a loan made by dealer that in turn is sold to a third party, typically a bank.
In 2013, the CFPB implemented guidance that restricted the markup and compensation rates for dealers on auto loans – specifically on the basis of race, national origin or credit score.
“The CFPB developed a badly flawed methodology to allege discrimination on the part of lenders on the basis of race, despite the fact that the lenders didn’t know the race of the borrowers,” Toomey said in a statement.
At Toomey’s request, the Government Accountability Office reviewed the CFPB’s guidance and concluded in October 2017 that it actually qualified as a rule, making it eligible to be rolled back by majority vote in Congress.
Wednesday’s resolution scrapped the five-year auto-lending rule by allowing car dealers to use their own discretion in interest rates and compensation markups.
Advocacy groups, including the National Automobile Dealers Association, contested the CFPB’s guidance on the grounds of its oversight and supported the decision in the Senate.
“America’s franchised auto dealers strongly believe that every customer deserves to be treated fairly,” Peter Welch, president of the lobby group, said in a statement.
“There is no room for discrimination of any kind in auto retailing – period.”
David Rosen, spokesman for consumer-protection group Public Citizen, said the vote sets a dangerous deregulatory precedent.
“This allows Congress to overturn regulatory protections that have been in place for years or even decades,” Rosen said of the resolution.
The resolution does not introduce a new rule to counter the CFPB’s guidance. It merely blocks its enforcement.
You may be interested
The big comeback: Hedge fund managers at Milken predict industry reboundadmin - May 10, 2018
© Reuters. Dawn Fitzpatrick, Chief Investment Officer, Soros Fund Management, speaks at the Milken Institute's 21st Global Conference in Beverly…
Push for ‘Dreamer’ immigration bill gains steam in U.S. House of Representativesadmin - May 6, 2018
© Reuters. Activists and DACA recipients march up Broadway during the start of their 'Walk to Stay Home,' a five-day…
Is the dollar rally going further? Chartists think soadmin - May 5, 2018
© Reuters. FILE PHOTO: Illustration photo of a U.S. Dollar note By Saikat Chatterjee and Ritvik Carvalho LONDON (Reuters) -…