Industry Favors Bill to Stop Related CFPB Enforcement
Special to the NNPA from The Washington Informer
When it comes to public policy, most citizens tend to think in terms of what government can accomplish on their behalf. Multiple civil rights laws and the Americans with Disabilities Act are but a few such examples.
Then there is also another side to public policy reforms: attempts to roll back or take away regulations that are often favored by industry and championed on Capitol Hill by paid lobbyists. Just last week, a U.S. House committee moved a bill that will stop the Consumer Financial Protection Bureau (CFPB) from taking action against discriminatory practices in auto lending.
This legislative development is an example of how Washington often responds to industry and its lobbyists.
The proposed rollback in consumer protection in auto financing has the support of more than 170 Members of Congress, including a number of Democrats. H.R. 1737, co-sponsored by House Members Frank Guinta of New Hampshire and Ed Perlmutter of Colorado, recently passed in the House Financial Services Committee.
So what does this legislation do?
H.R. 1737 would require the CFPB to drop guidance it issued in 2013 that called for auto lenders to comply with anti-discrimination laws. The bill would also require the Bureau to gather public comment before issuing any other guidance related to auto lending. Supporters say it is simply about proper process.
No — it is not. The bill would condone discrimination in auto lending — and all of its supporters should be ashamed.
The 2013 CFPB guidance took direct aim at a specific practice in auto lending. Auto dealers get bonuses from lenders for selling consumers a higher interest rate than that for which they qualify. These bonuses add up to billions of dollars in added dealer compensation. On top of these lucrative deals, this practice is completely hidden from consumers.
Research by the Center for Responsible Lending (CRL) found that consumers who took out loans in 2009 paid $25.8 billion in more interest over the lives of their loans — all due to dealer interest rate markups.
For the past two decades, this lending practice has resulted in a series of lawsuits and more recent enforcement actions that all alleged discrimination resulting from this practice. The data from these lawsuits and related enforcement actions consistently show that borrowers of color pay higher interest rates than white borrowers, solely because of this dealer kickback.
Recent CFPB enforcement actions total more than $176 million in fines and restitution to consumers. By utilizing the Equal Credit Opportunity Act (ECOA), CFPB has taken steps that no regulator to date has taken to end discrimination in auto lending.
Fortunately, just as a coalition of interests pushed for and won passage of reforms that created CFPB, several consumer and civil rights groups are now simultaneously pursuing preservation of the Bureau’s pro-consumer actions. A late July letter sent to the entire 465-member House of Representatives on behalf of the NAACP, the National Council of La Raza. Americans for Financial Reform, the Center for Responsible Lending (CRL) and other organizations, reminded lawmakers of the history and scale of discriminatory auto lending finance.