On May 21, 2018, President Trump signed into law a resolution disapproving the Consumer Financial Protection Bureau’s (“CFPB”) guidance on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act (“Indirect Auto Lending Guidance” or “Guidance”). In that Guidance, the CFPB expressed the view that certain indirect auto lenders—that is, lenders that coordinate with dealerships to provide auto loans to consumers—are subject to the Equal Credit Opportunity Act and its anti-discriminatory provisions.
The CFPB issued the Indirect Auto Lending Guidance in 2013 as a bulletin, not a formal rule, and did not submit it to Congress for review under the Congressional Review Act (“CRA”), which would have allowed Congress sixty days to disapprove the Guidance by simple majority vote in both houses. However, in March 2017, Senator Patrick Toomey of Pennsylvania requested that the Government Accountability Office (“GAO”) determine whether the Indirect Auto Lending Guidance is a “rule” under the CRA and therefore subject to the disapproval procedures. In an opinion issued on December 5, 2017, the GAO concluded that the Guidance is indeed a “rule” under the CRA—this was effectively treated as a trigger for the sixty-day clock, enabling Congress to exercise its powers under the CRA even though the Guidance was never submitted to Congress or published in the Federal Register. In its opinion, the GAO expressed a broad stance on the reach of the CRA over agency guidance, stating that “CRA requirements apply to general statements of policy which, by definition, are not legally binding.” This holds open the door for the CRA to be used to disapprove agency guidance that is much older than sixty days, as was the case with the Indirect Auto Lending Guidance.
While the Indirect Auto Lending Guidance did not survive, the CFPB’s recent Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (“Payday Lending Rule” or “Rule”) remains in place. Indeed, five days before the Indirect Auto Lending Guidance was disapproved, on May 16, 2018, the deadline for Congress to disapprove the Payday Lending Rule passed, closing off one avenue by which the Rule could be curtailed or upended. While resolutions to disapprove the Rule were introduced in both houses of Congress, neither resolution made it out of committee. Thus, the Rule—which aims to implement ability-to-repay protections on loans that require repayment mostly or completely at once—lives to fight another day. And fight it must, if it is to survive in the long run in its current form, as litigation challenging the Rule is pending in the United States District Court for the Western District of Texas, and, more strikingly, the CFPB itself has announced plans to revisit the Rule. The disapproval of the Indirect Auto Lending Guidance and passing of the CRA deadline for the Payday Lending Rule comes in the wake of a successful attempt to disapprove the CFPB’s Arbitration Agreements Rule in November 2017, which we discussed here.
The text of the Indirect Auto Lending Guidance can be accessed here.