On April 18, the Senate narrowly passed a resolution to roll back certain guidance issued by the Consumer Financial Protection Bureau in 2013 pertaining to auto lending. As previously written about on a Foley & Lardner LLP blog, the CFPB issued the specific guidance through a bulletin regarding compliance with fair lending requirements for auto lenders involved in indirect lending.
The guidance addressed circumstances where buyers sought financing through the auto dealer. Potential indirect auto lenders would provide a minimum interest rate, and in some instances, provide the ability for dealers to mark up the interest rate or otherwise adjust the interest rate (known as a “dealer reserve”). The CFPB bulletin stated this practice ran “a significant risk that they will result in pricing disparities on the basis of race, national origin, and potentially other prohibited bases.” The guidance suggested the indirect auto lenders limit or eliminate the dealer discretion.
As a result of the guidance, some lenders eliminated the discretionary markups. However, dealers said the guidance made it more difficult to offer consumer discounts, in fear of claims of discrimination. Others in the auto industry raised concerns about the lack of clarity in the bulletin, as well as how and when the guidance would be enforced. The effort to roll back the guidance included significant support from certain industry groups, and opposition from certain consumer groups.
The measure now goes to the House, where it is expected to pass. The White House has also indicated support for the measure. Although the resolution would roll back the CFPB guidance, it does not change any existing fair lending laws or regulations, or the ability of the CFPB to enforce fair lending laws.