The Senate is on the verge of getting rid of a consumer protection measure meant to stop car dealers from charging more for car loans based on race. And the vote is just the start of lawmakers’ attempts to target years of federal agencies’ decisions through the Congressional Review Act, the GOP’s new favorite deregulatory toy.
Tuesday evening or Wednesday morning, the Senate is expected to vote on a resolution introduced by Sen. Jerry Moran (R-KS) that would undo the Consumer Financial Protection Bureau’s auto lending guidance meant to cut down on discrimination. The guidance targets “dealer markups,” where car dealers charge additional interest on top of what third-party lenders charge.
Research shows high dealer markups often disproportionately affect nonwhite people — in other words, car dealers charge black and Latino buyers higher interest markups than they do white buyers. The CFPB tried to curtail this by introducing the guidance, a sort of notice of how to apply and interpret a law, in 2013.
Congressional Republicans are using the Congressional Review Act (CRA) to scrap the guidance. Dating back to 1996, the law allows Congress to review federal regulations and, by joint resolution, overrule those regulations within 60 legislative days of their enactment. And once rules are scrapped via the CRA, agencies are prohibited from issuing “substantially similar” rules to be enacted — ever.
Prior to President Donald Trump’s election, the Congressional Review Act had been used successfully only once, under President George W. Bush in 2001 to roll back a Clinton-era rule to combat repetitive stress injuries at work. But since Trump has been in office, the GOP has used the CRA more than a dozen times to roll back Obama-era rules and regulations, including one to protect broadband consumer privacy, one to curb bribery and corruption in the energy industry, and one to stop coal companies from dumping waste into streams and waterways.
This latest effort to roll back the auto lending discrimination guidance is different. Republicans seem to have found a workaround to the CRA’s timeline that gives them just 60 days to review regulations and have potentially opened up years of agency decisions for review.
The CFPB’s guidance was meant to curb racial discrimination by auto dealerships, which remains a prevalent problem in the US
The CFPB in March 2013 released guidance holding lenders responsible for “unlawful, discriminatory pricing” in auto loans, outlining how to comply with a 1970s law that makes it illegal for creditors to discriminate against applications.
Then the bureau went after multiple auto lenders it caught discriminating. In December 2013, the CFPB and the Justice Department ordered Ally Financial to pay $80 million in damages and $18 million in penalties after finding more than 235,000 nonwhite buyers paid higher interest rates for auto loans between April 2011 and December 2013. The CFPB and the Justice Department also penalized Honda, Toyota, and Fifth Third Bank over car lending discrimination.
Sen. Pat Toomey (R-PA) last year asked the Government Accountability Office whether the CFPB’s auto lending guidance might qualify as a rule for the purposes of the Congressional Review Act and, if so, be possible to roll back. The GAO in December said it did, and so the clock began. The explanation is the CFPB never technically submitted the guidance to Congress as a formal rule under the Administrative Procedure Act for its review, and so lawmakers still have the right to take a look.
“It’s a hugely important precedent,” Toomey told Politico. “It’s potentially a big, big opening.”
Moran introduced the resolution to roll back the auto lending guidance in the Senate, and Rep. Lee Zeldin (R-NY) introduced the same one in the House. “Republicans are chopping away at the tangled mess of regulations the last administration left behind,” Senate Majority Leader Mitch McConnell said on Tuesday. “Our whole economy is getting a tune-up. And now it’s time for the front end of the auto industry to come along for the ride.”
Consumer advocates and anti-discrimination groups have come out in fierce opposition to the loan discrimination guidance rollback. A group of 64 organizations, including the Consumer Federation of America, the NAACP, and United Steelworkers, signed on to a letter opposing the resolution, warning that it could set a “dangerous precedent” and that it “sends a message to the public that Congress is more interested in giving narrow handouts to special interests” than helping American workers and families.
“This is an attempt by auto lenders and auto dealers to prevent the CFPB from monitoring fair lending issues and enforcing them, and to tie the hands of future CFPBs on discrimination issues,” Debbie Goldstein, who heads the federal policy team at the Center for Responsible Lending, told me.
A January report from the National Fair Housing Alliance found that racial discrimination by auto dealerships has hardly gone away. It sent buyers to eight dealerships in eastern Virginia and found that white borrowers with weaker credit profiles got less expensive financing options and more favorable treatment than their nonwhite counterparts who were more financially qualified.
Expanding the Congressional Review Act’s application could be a huge deal
Beyond the urgency of the discrimination guidance at hand, there is also a greater issue in play in that Republicans seem to have found a way to apply the Congressional Review Act to agency decisions dating back years. That could allow them to strike down or roll back decades of work.
“The Congressional Review Act is a pretense for the majority party in Congress to wipe rules off the books without ever talking about the merits the agency had in mind when it made the rule final,” Rena Steinzor, a law professor at the University of Maryland, said in an email. “I bet that the Republicans follow the short-term tradition of forgoing debate and simply voting to disapprove the rule, dumping years of work down the drain because an industry lobbyist asked them to.”
The CRA requires just a simple majority in the Senate, meaning 51 votes are needed to pass resolutions, not the normal 60. Given Congress’s broad inability to work on bipartisan legislation — well, beyond banking deregulation — Republicans might see the expanded CRA as a way to get something done, even if the result is destructive.
“It basically gives them this legislative gimmick to pass laws relatively easily,” James Goodwin, a senior policy analyst at the Center for Progressive Reform, told me. He said expanding the universe of laws possibly eligible for repeal under the Congressional Review Act could have “really dangerous consequences” and erode safeguards and guidelines that have been in place for decades. “Going forward, people aren’t going to know what to do with agency guidance because you have this cloud of uncertainty surrounding everything.”
As Politico notes, Republicans already appear to be looking at other applications. The GAO in November told Sen. Lisa Murkowski (R-AK) that a 2016 plan from the Bureau of Land Management could be reviewed under the Congressional Review Act.
The auto lending discrimination rollback is a trial balloon, and if it flies, the GOP has plenty more ideas in the making.
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