S.J.Res. 57



In 2013, the Consumer Financial Protection Bureau (CFPB) issued guidance which threatened to eliminate a dealer’s flexibility to offer consumers discounted auto loans. The CFPB was attempting to change the $1.1 trillion auto loan market and limit market competition without prior public comment, using flawed statistics and without analyzing the impact of its guidance on consumers, despite the likelihood it would raise credit costs for car buyers. The Senate recently passed S.J.Res. 57 to rescind the CFPB’s flawed auto finance guidance. The House is urged to pass S.J.Res. 57 since government agencies must be held accountable to follow due process and the law, especially when dealing with such important issues as fair credit and consumer affordability.


Most car buyers choose to finance their purchases through indirect financing at dealerships. Dealers often discount an interest rate to “meet or beat” a competitor’s rate or meet a consumer’s budget needs. The CFPB’s 2013 guidance pressured auto lenders to eliminate or limit a dealer’s ability to discount credit for consumers. By limiting market competition, the CFPB’s policy would have increased the overall cost of auto loans for consumers.

The CFPB based its 2013 policy on the claim that discounted interest rates create a fair-credit risk, but a nonpartisan study of the agency’s policy found a 41 percent error rate in classifying the background of a significant group of consumers. The CFPB’s own review of this same group revealed a 20 percent error rate. The agency’s method to identify the background of consumers was flawed because it was based solely on a borrower’s zip code and last name. Also, the agency ignored legitimate business factors that can affect finance rates (e.g., helping a customer meet their budget needs). The CFPB knew of these serious flaws with the guidance yet failed to correct them. 

Last Congress, NADA supported H.R. 1737/S. 2663, the “Reforming CFPB Indirect Auto Financing Guidance Act,” which would protect fair-lending laws and rescind the flawed auto finance guidance.  H.R. 1737 overwhelmingly passed the House with bipartisan support by a vote of 332-96 on November 18, 2015.

Key Points

  • The Government Accountability Office determined that CFPB’s guidance, which attempted to make a major policy change to the auto lending market without important basic procedural safeguards, is a rule under the Congressional Review Act. By circumventing the rulemaking process, the agency attempted to avoid transparency, prior notice and public comment, and the provision in the Dodd-Frank Act (Sec. 1029(a)) that explicitly prohibits the CFPB from regulating auto dealers and keeps regulatory oversight of dealers with the Federal Trade Commission and other agencies.
  • The industry strongly supports fair-lending protections and has promoted a fair-credit compliance program based on a Department of Justice model that preserves discounts on credit for legitimate business reasons. S.J.Res. 57 would not affect fair lending statutes or implementing regulations.
  • Preserving discounts for consumers keeps auto loans accessible and affordable. The CFPB admits it never analyzed the impact of its guidance on consumers. Subsequent analysis revealed that the guidance would lessen competition, increase auto credit costs, and potentially push the marginally creditworthy out of the auto market.


On April 18, the Senate passed S.J.Res. 57 a joint resolution introduced by Sen. Jerry Moran (R-Kan.) to disapprove the CFPB’s 2013 auto finance guidance by a bipartisan vote of 51-47. Rep. Lee Zeldin (R-N.Y.) is the lead sponsor in the House. The House is expected to consider the Senate-passed bill S.J.Res. 57 in May.  NADA urges House Members to vote for S.J.Res. 57 to help preserve consumer access to affordable auto credit.

April 24, 2018

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