Press Releases

Internal Documents Reveal Weakness of CFPB’s ‘Disparate Impact’ Claims Against Vehicle Financing Businesses


Washington, November 24, 2015 -

WASHINGTON -- The statistical method the Consumer Financial Protection Bureau (CFPB) is using to allege racial discrimination in auto lending is “prone to significant error,” according to internal Bureau documents obtained by the House Financial Services Committee.  In addition, internal memoranda reveal that senior Bureau officials warned CFPB Director Richard Cordray of the “weakness” of the controversial legal theory upon which the Bureau has built discrimination cases against auto lenders.

“Notwithstanding the weakness of its case, the Bureau pursued its radical enforcement strategy using ‘unfair, abusive and deceptive’ tactics of its own, including by making an example of a company over which it had significant political leverage and concealing other aspects of its efforts from public scrutiny,” according to Financial Services Committee staff report released today.

The report, “Unsafe at Any Bureaucracy:  CFPB Junk Science and Indirect Auto Lending,” includes the internal CFPB documents the committee obtained during its investigation of the CFPB’s pressure campaign against vehicle finance companies.  The Bureau is using a controversial legal theory known as disparate impact to go after companies that help arrange auto financing for car buyers.

“The CFPB is a dangerously out-of-control agency,” said Chairman Jeb Hensarling (R-TX).  “It is irresponsibly branding companies with the stigma of racial discrimination based on nothing more than junk science that even CFPB senior officials acknowledge is gravely flawed.  Why? To cudgel those companies into enormous monetary settlements without ever having to go to court.  If it sounds like a shake down, that’s because it is. 

“Racial discrimination is morally repugnant and against the law.  Our government must continue to combat discrimination and punish those responsible.  But inventing discrimination through a disparate impact theory is not a helpful tool in fighting actual discrimination.  And increasing the cost of auto loans for consumers – especially those with low and moderate incomes – through meritless discrimination cases and government-imposed pricing schemes is the exact opposite of what a consumer protection bureau is supposed to do,” Chairman Hensarling added.

To read the committee staff report, click here.

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