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House Passes Bill Revoking CFPB Auto Lending Guidance

Nov 20, 2015

The U.S. House of Representatives passed a bill on November 18, 2015 that would revoke the U.S. Consumer Financial Protection Bureau’s (CFPB) 2013 auto lending guidance. The legislation (H.R. 1737- the Reforming CFPB Indirect Auto Financing Guidance Act), passed by a 332-96 vote.

The CFPB’s 2013 guidance suggests lenders should either impose limits on or eliminate dealerships’ ability to adjust the amount of compensation they keep for arranging consumers’ auto loan. The CFPB claims the practice can lead to discriminatory loan pricing.

The bill still faces several hurdles before it could become law. The bill faces an uphill climb in the U.S. Senate and, even if it does pass, would likely face a veto from President Barack Obama, who opposes the bill. In that case, a two-thirds majority in both houses would be required to override the President’s veto.

The majority of New Jersey’s delegation supported the legislation with nine voting in favor [Donald Norcross (D-1), Frank LoBiondo (R-2), Tom MacArthur (R-3), Chris Smith (R-4), Scott Garrett (R-5), Leonard Lance (R-7), Albio Sires (D-8), Bill Pascrell (D-9), Rodney Frelinghuysen (R-11)] and only three voting against the measure [Frank Pallone, Jr. (D-6), Donald Payne, Jr. (D-10) and Bonnie Watson-Coleman (D-12)].

The auto retailing industry has been vocal in its opposition to the CFPB’s guidance. Industry groups and dealers across the country agree that there is no place for discrimination in auto financing, but feel the guidance, if fully implemented, would actually harm consumers because it would impede dealers’ ability to cut their own compensation to reduce a customer’s rate in order to meet or beat a competing offer.

The legislation will increase transparency and would NOT impede the CFPB’s ability to enforce fair credit laws. It would also require the Bureau to give notice and open a public comment period before issuing guidance and to make public the data, methodologies and other information the Bureau leans on, among other measures.