H.R. 1737 (The Reforming CFPB Indirect Auto Financing Guidance Act), which was passed by the U.S. House of Representatives on November 18, 2015, has been referred to the Senate Committee on Banking, Housing and Urban Affairs.
The legislation would revoke the U.S. Consumer Financial Protection Bureau’s (CFPB) 2013 auto lending guidance that suggests lenders should either impose limits on or eliminate dealerships’ ability to adjust the amount of compensation they keep for arranging consumers’ auto loans. The CFPB claims the practice can lead to discriminatory loan pricing.
The bill still faces several hurdles before it could become law. The bill faces an uphill climb in the U.S. Senate and, if passed, would likely face a veto from President Obama. In that case, a two-thirds majority in both houses would be required to override the President’s veto.
The auto retailing industry has been vocal in its opposition to the CFPB’s guidance, stating that the guidance would harm consumers because it would impede dealers’ ability to cut their own compensation to reduce a customer’s interest rate in order to meet or beat a competing offer.
The legislation, passed by the House and being considered by the Senate Committee would increase transparency and would NOT impede the CFPB’s ability to enforce fair credit laws. It would also require the Bureau to give notice and open a public comment period before issuing guidance and to make public the data, methodologies and other information the Bureau leans on, among other measures.