Delivering remarks on the House floor in opposition to H.R. 1737 today, Congresswoman Maxine Waters (D-CA), Ranking Member of Committee on Financial Services, denounced efforts to undermine policies to root out longstanding discriminatory lending practices in auto financing.
Waters specifically pointed to the consequences of the bill, which would nullify critical guidance to prevent auto-lending discrimination and leave minority buyers exposed to undisclosed mark-ups and higher interest rates. She also noted that the measure would hamper the Consumer Financial Protection Bureau’s efforts to provide critically needed counsel to auto-lending companies by adding new burdensome requirements that have the potential to delay or prevent the consumer watchdog from issuing guidance long term.
Waters concluded by highlighting opposition to the measure by a broad coalition of civil rights organizations and consumer advocacy groups, and condemned this attempt to hamstring the Bureau’s vital work of protecting American consumers from bad actors in the financial system.
Full text of the remarks, as prepared for delivery, is below.
"Thank you Mr. Chairman.
I rise today in opposition to H.R. 1737, the latest attempt to micromanage the Consumer Financial Protection Bureau and to divert the Bureau’s attention and resources away from the important work of regulating discriminatory auto lending practices and protecting minority borrowers.
H.R. 1737 nullifies important policy guidance to lenders designed to help them comply with federal fair lending laws. The bill also imposes burdensome restrictions on the issuance of any future auto lending guidance by requiring that the CFPB undergo a public notice and comment period and conduct cost-benefit studies before issuing guidance – requirements that have historically only been applied to agency rulemakings. These restrictions are clearly designed to substantially delay or effectively prevent the Bureau from issuing future guidance to auto lenders – action that would undermine lenders’ ability to comply with the law at the expense of minority borrowers.
No other agency is asked to subject their policy guidance to procedures more commonly required for agency rulemakings, and supporters of H.R. 1737 have failed to provide a compelling policy rationale for why auto lending guidance – and no other form of guidance from the CFPB – should somehow be subject to heightened standards.
Perhaps most importantly, H.R. 1737 sets a dangerous precedent for other regulators, as Congress should not micromanage basic agency functions like issuing policy guidance to regulated entities simply because the guidance makes reasonable suggestions that regulated entities disagree with.
H.R. 1737 denies lenders important information that they need to protect consumers, and nullifying guidance that lenders have relied upon for nearly three years introduces unnecessary uncertainty to lenders’ fair lending compliance policies at a time when scrutiny from the CFPB and the DOJ is intensifying.
The long shadow of discriminatory is still alive and well in some corners of the auto lending marketplace. The CFPB has secured nearly $140 million in relief to minority borrowers since December 2013 in landmark settlements against Ally Financial, Fifth Third Bank and American Honda Finance Corporation finding in each case that undisclosed dealer markups caused minority borrowers to overpay for their auto loans by an average of $200 over the life of the loan compared to similarly-situated white borrowers, even when controlling for the borrowers’ creditworthiness.
Mr. Chairman, without objection, I would like to enter the CFPB’s consent orders against Ally Financial, Fifth Third Bank and American Honda Finance Corporation into the record.
Mike Jackson, the CEO of the nation’s largest auto retailer, AutoNation, commended the CFPB’s approach in its settlement with Honda noting that: “[AutoNation] urge[s] other lenders to take a close look at [the Honda settlement] as a template for a solution.” Much like Mr. Jackson, I believe that the CFPB is doing a commendable job of tackling a decades-old problem of minority borrowers not getting a fair deal when they obtain financing from dealerships.
The Bureau’s work in this regard should be supported, but instead, we’re faced with H.R. 1737 -- yet another legislative proposal that would attempt to tie the Bureau’s hands as it attempts to inform lenders of the steps that they can take to comply with federal fair lending laws and to protect minority borrowers.
H.R. 1737 follows a familiar script of industry-driven attempts to undermine the CFPB. Cost-benefit analyses, public notice and comment period outside of rulemakings, unnecessary interagency consultation requirements, much like other proposals requiring additional studies and formal delays and statutory hold harmless periods, are all designed to do the same thing: to delay or undermine the important work of the CFPB.
Instead of addressing the underlying discrimination in indirect auto lending that the CFPB is seeking to address, H.R. 1737 takes away an important tool for lenders seeking to follow the law who have been relying on the guidance for almost three years to develop their compliance policies.
This is not a modest proposal designed to bring about transparency in the CFPB’s oversight of auto lenders. Since issuing its guidance in March 2013, the CFPB has provided the models they use to identify potential fair lending violations, a supervisory manual that describes exactly what the Bureau is seeking when conducting fair lending exams, supervisory highlights that clearly set forth the kinds of business practices that the Bureau will focus on when it examines an indirect auto lenders, and its settlement agreements all follow a similar template that give lenders a glimpse into the kind of remediation that the Bureau will pursue should there be potential fair lending violations within a lender’s portfolio. H.R. 1737’s supporters have yet to identify what information any additional transparency would yield or what additional information lenders need to comply with federal fair lending laws.
If enacted, H.R. 1737 would actually place lenders at a disadvantage just as scrutiny for fair lending violations from the CFPB and the DOJ intensifies. We should be working to support efforts to give industry as much information as possible so that they can comply with the law, and H.R. 1737 does just the opposite creating unnecessary uncertainty for lenders.
A broad coalition of civil rights organizations oppose H.R. 1737 for the same reasons that I stand in opposition: the proposal would ultimate leave minority borrowers exposed to potentially discriminatory lending practices, it is unnecessary, counterproductive, undermines lenders’ existing compliance efforts, and seeks to unreasonably micromanage the CFPB’s work in regulating auto lenders.
I would urge my colleagues to oppose this legislation, and I yield back the balance of my time."