The U.S. House of Representatives voted last Tuesday to reject a 2013 Consumer Financial Protection Bureau (CFPB) bulletin that provided guidance regarding liability for discrimination in indirect auto lending. The same measure passed the Senate three weeks earlier and is now expected to be signed by the president.
The 2013 guidance was aimed at indirect auto lenders – lenders that work with auto dealers to provide loans for consumers seeking financing through the dealership where the car is purchased. Some indirect lending arrangements permit the dealer to charge the consumer an interest rate higher than that which the lender would accept, and provide compensation to the dealer tied to the amount of the markup achieved. According to the CFPB guidance, under some indirect lending arrangements, there is a “significant risk” that the incentive and discretion afforded to dealers will lead to pricing disparities based on race or other prohibited factors.