Americans will soon get relief from a rule that at its founding used controversial methods to determine if customers were discriminated against, as the Senate voted this week to overturn the rule.
Last month, Sen. Jerry Moran (R-Kan.), with the support of Sen. Pat Toomey (R-Pa.), introduced legislation to overturn the Consumer Financial Protection Bureau’s 2013 “Indirection Auto Lending and Compliance with the Equal Credit Opportunity Act” Bulletin. This comes in response to Toomey’s request last year which asked the Government Accountability Office to examine whether the bulletin qualifies as “guidance” or a “rule” with enforcement actions.
Under Obama-era director Richard Cordray, the bureau’s 2013 rule set out to address a common lending arrangement between auto dealerships, customers and third-party lenders. If an indirect or third-party lender wishes to finance the loan, the lender provides a loan interest rate (buy-rate) to the customer and commonly allows the dealer to mark up the interest rate for themselves on top of the buy-rate. The buy-rate and dealer interest rate remain competitively priced as there typically are multiple lenders competing for the loan and the customer searching for the best priced interest rate. The CFPB has expressed concern that the dealers will manipulate the pricing in a way that unfairly discriminates minority borrowers with higher interest rate, thus violating the Equal Credit Opportunity Act.