House Committee Passes Bipartisan Bill to Repeal CFPB's Flawed Guidance on Auto Lending

Published July 29, 2015


WASHINGTON (July 29, 2015) -Today, a U.S. House committee passed H.R. 1737, a bipartisan bill to repeal the Consumer Financial Protection Bureau's (CFPB) flawed 2013 guidance designed to pressure lending institutions into eliminating auto financing discounts for car buyers.

The bill, introduced by Reps. Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.) and passed in committee by a vote of 47 to 10, which included 13 Democrats. It currently has 126 co-sponsors in the full House, which includes 70 Republicans and 56 Democrats.

“Discrimination in any form cannot be tolerated, and new-car dealers fully support the nation's fair lending laws and the commitment of federal agencies to ensure fairness,” said Peter Welch, president of NADA. “But the CFPB's policy of eliminating the ability of a consumer to get a discounted auto loan will restrict access to credit and hurt all consumers.”

“Congressmen Guinta and Perlmutter have shown great bipartisan leadership to repeal the CFPB's flawed guidance on indirect auto financing and protect the right of consumers to find the best credit possible when purchasing their vehicles,” added Welch. “Consumers have the right to find the best loan possible when purchasing a vehicle, the right to negotiate and the right to seek a better deal - and Washington shouldn't try to deny that right,” Welch added.

Rather than create new regulations, NADA, the National Association of Minority Auto Dealers and the American International Automobile Dealers Association have issued a compliance program for dealers that would address fair credit risks in the automotive marketplace. The program, which is based on an existing U.S. Department of Justice model, is superior to the CFPB's approach, as it addresses fair credit risk without decreasing competition and harming consumers.

A study by Charles River Associates, commissioned by the American Financial Services Association, found that the CFPB's proxy methodology to determine alleged unintentional discrimination overestimates the African-American population by 41 percent. The CFPB's own “white paper” on this subject also revealed errors as high as 20 percent in estimating an individual's ethnicity.

H.R. 1737 would produce a more informed process by requiring the CFPB to study the consumer impact of its policy to eliminate consumer discounts in dealer showrooms, mandating public input and transparency, as well as ensuring the bureau works in consultation with other government agencies that Congress vested with regulatory authority.

The CFPB's guidance is urging auto lenders to move away from discountable compensation for auto dealers who arrange credit for their customers, and instead compensate dealers with non-negotiable payments like flat fees. If adopted by lenders, the policy would mean that consumers would no longer be able to negotiate a lower rate on credit with their dealer for their purchase. For millions of consumers, this would reduce access to lower interest rates on their auto loans.

Click here for NADA's letter to House members to support H.R. 1737. For more information, visit

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