Senate votes to invalidate protections for auto financing customers

Senate votes to invalidate protections for auto financing customers

April 18 (UPI) — The Senate voted on Wednesday to invalidate government guidance that was enacted to prevent lenders from offering less favorable terms to non-white borrowers.

A resolution to repeal the Consumer Financial Protection Bureau guidelines, sponsored by Sen. Jerry Moran, R-Kan., was approved by 51 votes to 47 votes. It now goes to the House. A simple majority in both houses of Congress would invalidate the agency guidelines. The president’s signature on the bill is not required.

The guidance was issued in 2013, when the bureau cited “potentially discriminatory markups” in auto financing. Third-party lenders offer financing to car dealers at a varying rate, and when dealers can increase the rate customers pay, the difference is considered a “mark-up” shared by the lender and the dealer. The bureau said the markups return additional money to the dealers, who can change lenders’ rates regardless of a customers’ credit-worthiness.

The dealer’s latitude in the transaction increases “the risk of pricing disparities among consumers based on race, national origin, and potentially other prohibited bases,” the bureau said. It also fined lenders millions of dollars between 2013 and 2016 for the practice.

The American Bankers Association, a trade organization, has said that the guidelines caused many lenders to leave the field of financing, increasing costs and reducing choices for customers.

The proposal in the House on Wednesday has the approval of Sen. Mitch McConnell, R-Ky. In a Twitter message he referred to the bureau guidelines as an Obama-era overreach.