GAO Says CFPB Auto Lending Bulletin Subject to Congressional Review
The Government Accountability Office (GAO) recently issued a report finding that the CFPB’s 2013 Bulletin on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act constituted a “rule” that could be reviewed and potentially overturned by Congress under the 1996 Congressional Review Act (CRA). The GAO determined that the CFPB’s Bulletin should have been submitted to Congress for review because it was an agency statement that had a future effect on all indirect auto lenders and was designed to establish a new policy. Despite the CFPB’s assertion that the Bulletin had no legal effect on regulated entities, the GAO concluded that CRA requirements also apply to nonbinding general statements of policy. The GAO’s determination would now allow Congress to repeal the guidance using the mechanism of the CRA, which allows a simple majority in both houses to pass resolutions that would overturn regulations if they are signed by the President.
As background, the CFPB 2013 Bulletin aimed to prevent disparities in pricing in auto lending and would hold indirect auto lenders responsible for the potential fair lending violations of auto dealers when originating auto loans, such as charging higher variable interest rates to minorities, women or other protected classes of buyers. Car buyers frequently obtain auto loans through dealerships, and auto dealers often had the ability to “mark up” interest rates at their own discretion, beyond that required by a lender, and to profit from the difference. However, the Bulletin was criticized because the CFPB does not have jurisdiction over most auto dealers, which were explicitly carved out from the CFPB’s jurisdiction pursuant to the Consumer Financial Protection Act (Title X of Dodd Frank).
The GAO decision comes after Congress used the CRA in October to overturn the CFPB’s arbitration rule that would have eliminated class actions bans in arbitration agreements, which we covered previously here.
