On May 21, President Donald Trump signed a bill repealing the Consumer Financial Protection Bureau’s Bulletin 2013-02, a controversial bulletin addressing auto finance. As we reported here, the House passed a resolution officially disapproving of the Bulletin in early May, following in the footsteps of the Senate, which passed the same resolution a few weeks earlier.
Bulletin 2013-02 set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to pricing in indirect automobile lending. The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate at which an indirect lender is willing to purchase the consumer’s retail installment contract. The Bureau expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination against protected groups, including women, African-Americans, and Hispanics. Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to hold an indirect auto lender liable for allowing prohibited pricing differences created by a dealer’s conduct.
In March 2017, Senator Pat Toomey (R-Pa.) asked the Government Accountability Office, Congress’ investigative wing, to determine whether the Bulletin qualified as a “rule.” The GAO concluded that the guidance did qualify as a rule, even though Bulletin 2013-02 was not legally binding. Senators Toomey and Jerry Moran (R-Kan.) introduced a resolution to overturn the Bulletin in March 2018, a resolution which passed narrowly along party lines. The bill fared better in the House of Representatives, passing 234 to 175.
House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) attended the signing ceremony at the White House and issued a statement hailing the measure: “Thanks to the hard work of Republicans in Congress, today is a good day for American consumers, who would have had to pay more for their auto loans under the Bureau’s flawed guidance, and the rule of law. Gone are the days of a rogue Bureau using its unchecked powers to sidestep due process and harm the very consumers it is charged with protecting. I look forward to continuing to work with President Trump, Acting Director Mulvaney, and my colleagues in Congress to ensure the Bureau, as well as all other federal regulatory agencies, are held accountable for their actions and act in a transparent manner.”