Four of the industry associations with significant presence on Capitol Hill celebrated on Wednesday after the U.S. Senate passed a Congressional Review Act Resolution (S.J. Res. 57) to repeal the 2013 Auto Finance Bulletin issued by the Consumer Financial Protection Bureau.
To recap, industry representatives maintained that the CFPB’s 2013 Bulletin on indirect auto financing and fair lending guidance was issued “without any public comment, consultation with other regulatory agencies or transparency." They added the 2013 bulletin created an “environment of uncertainty, where greater clarity is needed, and should have been provided as a formal notice and comment rulemaking, with appropriate input from all stakeholders.”
On Wednesday, the Senate approved S.J. Res 57 by a 51-47 vote. The vote on the resolution, under the Congressional Review Act (CRA), disapproves of the guidance.
“The vehicle finance market in the United States is a highly-competitive market, which benefits consumers as dealers and lenders discount pricing and loan rates to sell and finance new and used vehicles,” said Chris Stinebert, president and chief executive officer of the American Financial Services Association, a trade association representing vehicle finance companies. “The vote today is in the best interests of the car-buying public.”
The House of Representatives is expected to vote on its version of the bill soon, according to industry representatives.
“CBA member banks are strongly committed to ensuring fair lending policies and practices while fulfilling consumers’ financial needs. For that reason, it is critical to have clear rules and guidance from regulators so our member banks can be certain of compliance. The CFPB’s 2013 Auto Bulletin was a backdoor attempt at rulemaking without notice or comment and lacked the clarity needed by lenders,” Consumer Bankers Association President and CEO Richard Hunt said.
“We thank Senators Jerry Moran (R-Kan.) and Pat Toomey (R-Penn.) for leading the effort in the Senate and Majority Leader Mitch McConnell for bringing the resolution to the Senate floor for a vote,” Hunt continued. “We encourage the House to swiftly pass this resolution as well.”
From the dealer side, the sentiment poured in with similar tones, starting with National Automobile Dealers Association president and CEO Peter Welch.
“S.J.Res. 57 continues the bipartisan effort that began years ago to preserve the ability of local dealerships to offer discounted auto loans to their customers, and Sen. Moran is to be commended for his leadership on this issue,” Welch said.
“S.J.Res. 57 is a narrowly-tailored joint resolution that does not amend or change any fair credit law or regulation or impair their enforcement. The legislation is 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,” Welch continued.
“We hope this CRA resolution sees swift action in the House of Representatives, which has already demonstrated strong bipartisan support for repealing the CFPB’s flawed guidance and preserving important auto loan discounts for consumers,” Welch went on to say.
Cody Lusk, who is president and CEO of the American International Automobile Dealers Association, also shared his upbeat reaction.
“The CFPB, established to regulate Wall Street, never should have involved itself in dealership operations,” Lusk said. “Today’s vote is confirmation to dealers everywhere that the agency overreached when issuing its 2013 indirect auto financing guidance. The agency concluded, without accurate supporting data, that dealerships were using race as a determining factor when issuing loans. Today the senate has righted a wrong.”
Not all assessments about Wednesday’s developments were as rosy as what these four associations shared. For example, when asked about the Senate’s attempt to roll back the effort to prevent “discrimination” in auto-finance market, Buckley Sandler partner John Redding recently made these points.
“While the CFPB’s 2013 Bulletin on dealer markup is considered offensive by many in the industry, the Senate bill introduced last month to eliminate it is not going to change much,” Redding said.
“The pursuit to eliminate the bulletin may have more to do with the fact that the ‘industry has found it offensive that (lenders) be responsible at the finance source level for actions that they don’t undertake,” he continued.
“If you get rid of the bulletin,” Redding went on to say, “I’m not sure it changes a whole lot at the bureau except for the ability of industry to point at the bulletin and say, ‘I did everything you told me to do in your rule, and yet you are coming after me for doing exactly that.’”
Even more extreme was the negative reaction from Jerry Robinson, a former worker at Santander Consumer USA and a member of the Committee for Better Banks, which describes itself as a coalition of bank workers, community and consumer advocacy groups and labor organizations coming together to improve conditions in the banking industry.
“I worked in auto lending for almost six years,” Robinson said in a statement sent to SubPrime Auto Finance News. “Most of my customers desperately needed a car to drive to work and support their family, and Santander Consumer was all too willing to capitalize on that desperation — with tricks like impossibly high interest rates and discriminatory loans.
“The Senate’s actions today were a big win for injustice and inequality — and they endanger working communities across the United States,” Robinson added.