Repealing the Consumer Financial Protection Bureau’s Car Dealer Markup Rule (S. Joint Res. 57)

What is S. Joint Res. 57?

(Updated November 15, 2018)

This bill was enacted on May 21, 2018

This resolution would reject a regulation finalized by the Consumer Financial Protection Bureau on December 6, 2017 targeting indirect loans offered by car dealerships. The rule was proposed in the form of a guidance by the CFPB in 2013, but in December 2017 the Government Accountability Office found that it qualified as a regulation and had to be submitted formally as a regulation, thus giving Congress the opportunity to review. The rule allowed regulators to impose controls on auto lenders related to dealer markups (ie additional interest on the car loan as compensation to the seller) to prevent discrimination in pricing for prohibited reasons, such as race.

Under the Congressional Review Act, Congress is able to overturn regulations finalized within the last 60 legislative days with simple majority votes on a joint resolution of disapproval in both chambers and the president’s signature. CRA resolutions also prevent the federal agency that created the regulation from issuing a similar rule without being directed to do so by Congress.

Argument in favor

The CFPB went too far by pretending its guidance regulating car loans and markups was a regulation, and the rule itself undermined the ability of dealerships to negotiate loan terms. This backdoor regulation should be repealed.

Argument opposed

While the CFPB was wrong to try to pass off its guidance regulating car loans and markups at dealerships as a full-fledged regulation, the rule should take effect to prevent racial discrimination in dealer markups.

Impact

Car buyers; auto lenders; and the CFPB.

Cost of S. Joint Res. 57

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Jerry Moran (R-KS) introduced this bill to repeal the CFPB’s Obama era rule regarding car loans at auto dealerships:

“An ill-advised Obama-era auto-lending rule issued by the CFPB missed the mark on both process and substance. This resolution of disapproval provides Congress the opportunity to reverse this overreaching rule to return a sense of stability to the auto marketplace, ultimately providing a path to lower costs for all car purchasers.”

Several consumer protection, civil rights, and progressive watchdog groups released a statement opposing this bill:

“Discrimination in auto lending contributes to credit access disparities and to the racial and ethnic wealth gap. We urge you to oppose [repeal] and keep the federal government’s commitment to rooting out racial discrimination clear.”

This legislation has the support of 22 cosponsors, all of whom are Republicans.

Media:

• Cosponsoring Sen. Pat Toomey (R-PA) Press Release
  
• The Hill
  
• Wall Street Journal