Senator Jerry Moran (R-Kan.) recently introduced a resolution to overturn guidance promulgated by the Consumer Financial Protection Bureau in 2013. The resolution seeks to invalidate the Bureau’s guidance under the Congressional Review Act, the same statute that permitted Congress to overturn the arbitration rule.
The guidance at issue is the CFPB’s highly controversial Bulletin 2013-02, which set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to pricing in the indirect automobile lending space. The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate by which an indirect lender is willing to purchase the consumer’s retail installment contract. The Bureau specifically expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination. Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to examine an indirect auto lender’s ECOA liability for prohibited pricing differences created by a dealer’s pricing strategies.
This is not the first time Bulletin 2013-02 has come under fire. In March 2017, Senator Pat Toomey (R-Pa.) asked the Government Accountability Office whether the Bulletin qualified as a rule. The GAO concluded that the Bulletin was indeed a rule and, as a result, should have been subject to Congressional review. While this likely was the death knell for the Bulletin, a formal invalidation of the guidance could occur if Moran’s resolution, co-sponsored by Toomey, is successful.
Troutman Sanders routinely advises clients on the compliance risks posed by direct and indirect auto lending. We will continue to monitor these regulatory developments.