Why it matters
Congress pushed back against multiple Consumer Financial Protection Bureau (CFPB) initiatives recently, passing legislation that would override the Bureau's policies with regard to auto lending and mortgage lending. Passed by a voice vote, the Reforming CFPB Indirect Auto Finance Guidance Act would repeal the Bureau's Compliance Bulletin 2013-02, which offered guidance to indirect auto lenders on compliance with federal fair lending laws. A second bill—the Portfolio Lending and Mortgage Access Act—was similarly passed by a voice vote. That measure would amend the Truth in Lending Act and Regulation Z to establish exemptions and safe harbors for depository institutions with regard to Qualified Mortgages and the Ability-To-Repay Rule. While both pieces of legislation have moved to the Senate for consideration, their passage is unlikely. In addition to facing Democratic opposition in the Senate, President Barack Obama has indicated his disapproval of the bills. After each proposal was passed, the White House released a statement expressing opposition to the legislation.
In 2013, the Consumer Financial Protection Bureau (CFPB) released Consumer Bulletin 2013-02, providing guidance to indirect auto financing companies and taking the position that the practice of "dealer markups" would be challenged by the Bureau under a disparate impact theory of discrimination. Critics charged the Bureau with overstepping its bounds, particularly as the CFPB released the guidance without a public notice and comment period. Or as Rep. Jeb Hensarling (R-Texas), Chair of the House Financial Services Committee, characterized it, the Bureau "went far beyond clarifying existing law and instead is attempting to make new policy through this guidance," which is "an affront to due process, an affront to the rule of law and an affront to basic fairness."
More than two years later, lawmakers responded with the passage of a bill in the House of Representatives, the Reforming CFPB Indirect Auto Financing Guidance Act. H.R. 1737 would nullify Bulletin 2013-02 and would require that the Bureau conduct a formal notice and comment period before it can issue any new guidance on the issue.
Pursuant to the bill, any new guidance would have to make publicly available "all studies, data, methodologies, analyses, and other information" relied upon and be based on consultation with other federal agencies, including the Federal Trade Commission, the Department of Justice, and the Board of Governors of the Federal Reserve System. In addition, the CFPB would need to conduct a study of the proposed guidance's impact on consumers as well as women-owned, minority-owned, and small businesses.
The legislation passed by a voice vote of 332 to 96 in the House of Representatives.
Now being considered in the Senate, the measure faces an opponent in the White House. "The Administration strongly opposes passage of H.R. 1737 because it would revoke important guidance designed to prevent discriminatory pricing of auto loans," according to the White House Statement of Administrative Policy. "The bill would create confusion about the existing protections in place to prevent discriminatory auto loan pricing, and effectively block CFPB from issuing related guidance in the near-term."
The same day, lawmakers took action against another CFPB policy, this time with regard to mortgage lending. The Portfolio Lending and Mortgage Access Act, H.R. 1210, would amend the Truth in Lending Act (TILA) to establish a safe harbor for depository institutions making residential mortgage loans held in portfolios to avoid certain requirements. For example, loans that appear on a depository institution's balance sheet could be treated as a Qualified Mortgage (QM) subject to certain limitations and could be able to take advantage of the Ability-to-Repay Rule's safe harbor.
By a vote of 255 to 174, the House passed the legislation and sent it to the Senate.
Again, the White House spoke out against the bill. "The Administration strongly opposes this bill because it would undermine critical consumer protections by exempting all depository financial institutions, large and small, from QM standards—including very basic standards like verifying a consumer's income—as long as the mortgage loans in question are held in portfolio by the institution. This bill would undermine the essential protections provided under the Qualified Mortgage rule," the White House said. "For these reasons, if the President were presented with H.R. 1210, his senior advisors would recommend that he veto the bill."
To read H.R. 1737, click here.
To read the White House statement about H.R. 1737, click here.
To read H.R. 1210, click here.
To read the White House statement about H.R. 1210, click here.