GOP undoes rule to stop discrimination

WASHINGTON -- The GOP-led Senate voted Wednesday to block Obama-era guidance a consumer protection agency issued five years ago to help ensure lenders don't charge blacks and Hispanics higher interest rates on car loans.

The vote was 51-47. Sen. Joe Manchin of West Virginia was the only Democratic lawmaker to side with Republicans in voting for the measure, which now must pass the House before it goes to President Donald Trump for his signature.

Republicans said rescinding the guidance is necessary because it amounted to a backdoor attempt to regulate auto dealers. Congress expressly prohibited such regulation when establishing the consumer protection agency through passage of the Dodd-Frank Act in 2010.

The legislative battle extends beyond the terms of car loans, however. Opponents warned the GOP's fight against government regulations entered a new phase and the Senate vote could be the first of many efforts to nullify agency bulletins and guidance letters issued over the years.

Republicans framed the issue as Congress coming to the rescue of businesses.

A range of trade groups representing bankers, car dealers and other businesses backed the GOP's efforts.

Auto dealers often facilitate financing through a third-party lender. In some cases, the dealer will charge the customer an interest rate higher than what the third party agreed to charge. The lender then shares part or all of the extra profit with the dealer.

The CFPB said the practice led to some minority customers paying higher interest rates than similar white borrowers. In its guidance, it highlighted the potential liability auto lenders face from discriminatory "dealer mark-ups" and how to avoid it.

The agency followed up with enforcement actions against Ally Bank, American Honda Finance Co., Fifth Third Bank, and Toyota Motor Credit, which resulted in millions of dollars being set aside to compensate minority borrowers.

The guidance has rankled lawmakers who considered it regulatory overreach and an attempt to go around the requirements agencies must follow for enacting regulations. The House passed bipartisan legislation to nullify the guidance in 2015, but the Senate didn't take up the bill.

But critics didn't give up. Sen. Pat Toomey, R-Pa., asked government auditors to review the matter. The Government Accountability Office determined even general statements of policy qualify as a rule under the Congressional Review Act. That finding gave Congress a short window into early May to overturn the rule with simple majorities in both chambers.

Sen. Mike Crapo, the Idaho Republican who chairs the Committee on Banking, Housing and Urban Affairs, said the consumer protection bureau made significant changes to an important sector of the economy without allowing for public input. He said disapproving the agency's guidance will give consumers more options for financing autos while ensuring the CFPB abides by the congressional limits on its jurisdiction.

Sen. Sherrod Brown, D-Ohio, said in repealing guidance issued five years ago Republicans were signaling they want to interfere with potentially thousands of other federal agency decisions going back two decades.