Bad day for consumers. The U.S. Senate voted to repeal Guidance issued in 2013 by the Consumer Financial Protection Bureau (“CFB”) to help consumers and to curtail auto finance companies from racially and ethnically discriminating, by holding them accountable to fair lending laws. The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age. The 2013 guidance was necessitated by the fact that the CFB and the U.S. Department of Justice had found that several auto financers’ policy of giving dealers discretion to mark up the interest rate of auto financing resulted in discrimination against borrowers of color and nothing to do with creditworthiness. Enforcement actions were taken against Ally Bank, American Honda Finance Co., Fifth Third Bank, and Toyota Motor Credit, by these federal agencies because it was found that borrowers of color paid higher interest rates than white borrowers with comparable credit ratings.
The 5-years old Guidance was repealed using the fast-track Congressional Review Act (CRA), which allows a simple majority vote with limited debate to override public protections. While the CRA gives Congress a narrow window of 60 legislative days to veto new regulations, the Senate used a loophole to target the 5-years old guidance.