Republicans Scrap Anti-Discrimination Auto Loan Guidelines, Set Precedent for More Rollbacks

Congress will rollback guidelines meant to protect against discrimination from auto lenders. JIM WATSON/AFP/Getty Images

President Donald Trump is expected to sign off on rollbacks of Obama-era auto-lending guidelines that worked to prevent racial discrimination, after the House voted to approve the removal Tuesday.

The resolution would eliminate a set of Consumer Financial Protection Bureau rules that outline how car dealers who facilitate auto loans should work to prevent racial discrimination. Critics of the guidelines said they were overreaching and cumbersome, but others believe their elimination could set a dangerous precedent in Congress.

The guidelines, enacted in March of 2013, went after "unlawful, discriminatory pricing" based on race amongst auto lenders, and issued guidance on how to enforce a 1970 law that prevented application discrimination.

In December of 2013, the CFPB worked with the Justice Department to fine Ally Financial about $98 million after finding that it charged higher interest rates to more than 235,000 nonwhite car purchasers between 2011 an 2013. Honda, Toyota, and Fifth Third Bank were also fined for violating the guidelines.

The rollbacks were done using an obscure law called the the Congressional Review Act, which allows Congress to revoke rules made by oversight agencies like the CFPB or EPA. In 2017, Republicans in Congress used this act to rollback 15 Obama-era rules. Prior to that, the act had been used once since it was created in 1996.

Typically, the act is used to revoke rules within 60 days of their submission to Congress. But last year, Republican Senator Pat Toomey successfully appealed to the Government Accountability Office that because guidelines are not officially submitted to Congress, lawmakers should be able to go back at any time to review them.

The worry is that Republicans could now rollback any set of guidelines intended to protect the environment, public lands, and consumers. "This is an inappropriate and misguided use of the Congressional Review Act," said Representative Maxine Waters Tuesday. "It sets a dangerous precedent."

"The rush to roll back a significant number of sensible safeguards isn't just irresponsible, it is downright reckless," said Center for Progressive Reform senior policy analyst James Goodwin. "It invites the sort of wholesale, mindless sell-out to special interests that we are seeing from Congress now, all at the expense of Americans' safety."

Using the Congressional Review Act, Congress has rolled back rules designed to keep guns away from those with mental illness, protect drinking water in parts of Appalachia, rules requiring employers to keep accurate records of workplace injuries and illnesses, and to prevent banks and other financial institutions from entering into unreasonable contracts with their clients.

Still, Republican lawmakers argue that these rules are inefficient and should be eliminated. "If Congress means what it says when it writes laws, then the bureau should not be allowed to willfully ignore that law and deny market participants due process in the offing," said House Financial Services Chairman Jeb Hensarling of the auto loan guidelines.

Autolenders backed the rollbacks of the guidelines.