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Industry groups rally for Senate bill to preserve auto loan discounts

July 29, 2016
Congress is in the midst of its longest summer recess in at least three decades — both chambers adjourned in the first half of July and do not reconvene until after Labor Day. But don’t wait till then to appeal to your U.S. senators on behalf of Senate Bill 2663.
That is the companion legislation to a House bill passed last year that would nullify the Consumer Financial Protection Bureau’s directive on consumer lending arranged by dealerships.
The Senate bill, named the Reforming CFPB Indirect Auto Financing Guidance Act, would suspend the CFPB powers enumerated in an infamous 2013 Bulletin which provided auto finance guidance that could lead to limits on a consumer’s ability to receive a discounted auto loan from a dealer. A broad coalition of business groups involved in the making, selling, servicing, financing and auctioning of vehicles has urged support of the legislation to preserve a consumer’s ability to get discounted auto loans at the dealership.
The Senate last acted on the bill April 7. In a letter to U.S. senators, the group of nine trade associations asked for help in passing S. 2663, which was introduced by Sen. Jerry Moran, R-Kan.
"Access to affordable credit is essential to the vehicle industry and its customers, and the ability of a dealer to discount credit is often necessary to sell the vehicle," the group wrote. "Since 2013, the CFPB has pressured finance sources to limit a dealer’s ability to discount credit based on a deeply flawed method for measuring lender compliance with the Equal Credit Opportunity Act.  
"Industry stakeholders have tried, unsuccessfully, to work with the CFPB to preserve discounted auto loans by proposing a Department of Justice model that effectively manages fair credit risk while allowing discounts for legitimate business reasons."
its House counterpart — H.R. 1737, which passed on a bipartisan vote of 332-96, including 88 Democrats, on Nov. 18, 2015 — S. 2663 would require the CFPB to engage in an open and transparent process when issuing future auto finance guidance.
"The CFPB’s attempt to eliminate the consumer-friendly practice of a dealer discounting credit has been sought not by rule, but by guidance and non-public enforcement actions," the letter read. "This guidance was issued without any public comment, consultation with CFPB’s sister agencies (including those that Congress authorized to regulate auto dealers), or transparency.  Indeed, by the CFPB’s own admission, the agency did not study the impact of its guidance on consumers."  
The letter also noted that S. 2663 would require the CFPB to follow an open process prior to issuing any new guidance related to indirect auto financing; and is purely a process bill, and therefore does not intrude on the CFPB’s structure, jurisdiction, or authority, nor does it direct a result.
Additionally, the open and transparent process required by S. 2663 would provide a framework for the industry to adopt a DOJ fair credit model, which effectively meets the CFPB’s stated objective of addressing fair lending risks without preventing consumer discounts for legitimate business reasons, the letter explained.
"When Congress created the CFPB, surely it did not intend the agency to use its power to stop vehicle retailers from offering consumers discounts," the letter continued. "Keeping auto financing competitive is not only warranted, it is essential for the vehicle industry and its customers. That is why this legislation easily passed the House, and why the Senate should pass S. 2663."
The letter was signed by Peter Welch, president of the National Automobile Dealers Association, among others.