WASHINGTON—Credit unions and a consumer group have again found themselves on opposite sides of an issue. Both credit union trade groups have expressed support for congressional action that would dial back CFPB rules around indirect auto loans.
The Senate, by a 50-47 vote, adopted a motion to proceed to a measure that would repeal the CFPB's 2013 bulletin regarding indirect auto lending under the Congressional Review Act (CRA). The House has supported a similar move with its Joint Resolution 132.
Use of the CRA in this way could potentially open up more opportunities for credit union regulatory relief down the road, NAFCU said.
“Even though the CFPB bulletin was issued in 2013, Republicans are invoking the CRA based on a Government Accountability Office (GAO) finding that the CRA can be used in this case because the CFPB's bulletin was generally enforced by the bureau the same way as a rule yet was never submitted to Congress for review as is protocol for all rules created by regulators. Because Congress never reviewed the bulletin, the CRA's 60-legislative-day clock never started, thus never expired,” NAFCU explained.
When the bulletin was issued, NAFCU argued that it potentially set the stage for making indirect lenders, including credit unions, liable for fair lending violations by auto dealers.
“The CFPB fair lending guidance bulletin was unsupported by research or data,” wrote CUNA President Jim Nussle in a letter in support of the joint resolution. “Credit unions support the goal of fair lending and strongly oppose any discriminatory policies. However, this guidance bulletin was also not issued through the normal course of the Administrative Procedures Act (APA) or the public rulemaking process,” wrote CUNA President/CEO Jim Nussle. “As such, we support S.J.Res.57. Policymaking in this area should be open to the public input and responsive to those comments.
According to CUNA, the CRA has been one tool used to combat the poorly tailored rules that unnecessarily apply to credit unions. The trade group further raised these points in its letter:
- There are many small credit unions serving consumers, and they are harmed most by poorly tailored rules and policymaking
- CFPB bulletins should be subject to the CRA
- Credit unions support using the CRA for indirect auto lending guidance
The Consumer Federation of America, however, is opposing the rollback, arguing it’s bad for consumers and potentially racist.
Christopher Peterson, senior fellow at the Consumer Federation of America (CFA) and a University of Utah law professor, has produced a new policy paper: “Auto Dealer Markups, Jim Crow Finance, and the Congressional Review Act: How Congress May Bend the Rules to Facilitate Overpriced and Discriminatory Auto Lending.” The paper has been accompanied by a letter to Senate Majority Leader Mitch McConnell and Senate Minority Leader Charles Schumer as well as House Speaker Paul Ryan and House Minority Leader Nancy Pelosi urging Congress to “reject this dangerous expansion of the Congressional Review Act.”
“The CFPB’s 2013 auto lending guidance explained that discriminatory dealer markups are illegal under the Equal Credit Opportunity Act,” the CFA said. “Dealer markups let car dealers trick customers into paying interest rates higher than those for which they otherwise qualify. Evidence suggests dealer markups can be discriminatory because they may result in minority groups paying higher interest rates than similarly qualified white borrowers.”
Senate Joint Resolution 57 is sponsored by Senator Jerry Moran (R–KS) and House Joint Resolution 132 is sponsored by Rep. Lee Zeldin (R-NY).
If passed by the Senate, the joint resolution would go to the House for approval, and if approved there, would go to President Donald Trump for his signature.