On May 8, the U.S. House of Representatives passed a resolution officially disapproving Bulletin 2013-02, issued by the Consumer Financial Protection Bureau in early 2013. The Senate passed a similar measure on April 18, meaning the resolution moves to President Trump’s desk for signature. Though the Senate resolution passed narrowly in a party-line vote, the bill found bipartisan support in the House, passing 234 to 175. The bill is the latest in a line of agency guidance invalidated under the Congressional Review Act (“CRA”).
The bill was initially introduced by Senator Jerry Moran (R-Kan.) in an effort to overturn Bulletin 2013-02, which 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.
The resolution’s passage marks the likely end of the Bulletin’s checkered history. 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 is not legally binding. Specifically, the GAO found that:
The Bulletin provides information on the manner in which the CFPB plans to exercise its discretionary enforcement power. It expresses the agency’s views that certain indirect auto lending activities may trigger liability under ECOA. For example, it states that an indirect auto lender’s own markup and compensation policies may trigger liability under ECOA if they result in credit pricing disparities on a prohibited basis, such as race or national origin. It also informs indirect auto lenders that they may be liable under ECOA if a dealer’s practices result in unexplained pricing disparities on prohibited bases where the lender may have known or had reasonable notice of a dealer’s discriminatory conduct. In sum, the Bulletin advised the public prospectively of the manner in which the CFPB proposes to exercise its discretionary enforcement power and fits squarely within the Supreme Court’s definition of a statement of policy.
In conclusion, the GAO found that the Bulletin was subject to the requirements of the CRA because it served as “a general statement of policy designed to assist indirect auto lenders to ensure that they are operating in compliance with ECOA and Regulation B, as applied to dealer markup and compensation policies.” Because the CFPB did not present the Bulletin for Congressional review, it was, effectively, a nullity.
President Trump is almost certain to sign the bill into law when it reaches his desk, putting the final nail into the coffin of Bulletin 2013-02.