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FINANCE

Reuters: U.S. Senate Panel Plans to MET

Scrap CFPB’s Dealer Participation

Guidance US

Less than five months after the Govern- rate impact discrimination. It also warned
ment Accountability Office (GAO) agreed lenders active in the indirect auto finance
with his view that Congress has the power channel that they would be held liable for
to repeal two Consumer Financial Pro- unlawful, discriminatory markups.
tection Bureau (CFPB) rules, including its THERE
controversial guidance on dealer partici- Auto finance trade groups have argued
pation, U.S. Senator Banking Committee that the bureau used its guidance to in-
Republican Pat Toomey said the panel directly regulate the activities of dealers,
plans to do just that in the coming weeks, which are mostly exempt from the bureau’s
according to a Reuters report. oversight under the Dodd-Frank Act.
Since issuing its guidance, the bureau has GIADA
Toomey, who was addressing community imposed millions of dollar in fines on auto
bankers in Washington to lobby lawmak- finance sources, including Ally Financial, Convention
ers to vote in favor of a bill that would re- American Honda Finance Corp., and Fifth
duce compliance obligations for smaller Third Bank. & Trade Expo
financial institutions, had asked the GAO
last March whether the CFPB’s guidance Congress has attempted to kill the bureau’s July 12-14
on dealer participation and leveraged lend- guidance through the legislative route. In
ing falls under the Congressional Review November 2015, the House of Representa- Hyatt Regency
Act. The GAO said they did, setting the tives approved the Reforming CFPB Indi-
table for the Republican-controlled Con- rect Auto Finance Guidance Act by a 332- Savannah
gress to pass joint resolutions of disapprov- 96 vote. The bill, however, was not acted Savannah, GA
al under the CRA to repeal both rules — a upon by the Senate before the end of the
process similar to the one used to repeal 114th Congress.
the bureau’s rule on forced arbitration last
October. When it initially issued its guidance, the
bureau argued that because it had no legal
“GAO’s decision is an important remind- effect on regulated entities, the CRA does
er that agencies have a responsibility to not apply. The GAO, however, stated in
live up to their obligations under the law. its response to Toomey’s request that the
When they don’t, Congress should hold bulletin “fits squarely within the Supreme
them accountable,” Toomey said in De- Court’s definition of a statement of pol-
cember after the GAO delivered its re- icy,” because it provides information on
sponse. “I intend to do everything in my the manner in which the bureau planned
power to repeal this ill-conceived rule us- to exercise its discretionary enforcement
ing the Congressional Review Act.” power.
On Tuesday, according to the Reuters’ And according to the GAO, the CRA “es-
report, Toomey said the Senate Banking tablishes special expedited procedures
Committee would scrap the rule, referring under which Congress may pass a joint
to the bureau’s March 2013 auto lending resolution of disapproval that, if enacted
rule. into law, overturns the rule. Legal insiders,
however, say the GAO’s findings give the
The CFPB alleged in its five-page fair lend- bureau’s acting director all the authority he
ing guidance that bank policies which al- needs to rescind the guidance. Mick Mul-
low auto dealers to mark up interest rates vaney, who was appointed acting director
on retail installment sale transactions as this past November after Richard Cordray
compensation for services rendered create stepped down as the bureau’s director, has
a significant risk of unintentional, dispa- yet to act on that authority. n

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