Transition Tracker | HFSC Staff Releases 3rd Report Critical of CFPB Auto Finance Actions

WHAT HAPPENED

This morning, House Financial Services Committee Republicans released a report entitled "Unsafe at Any Bureaucracy: The CFPB's Vitiated Legal Case Against Auto-Lenders." The report is the third installment of its series examining the Consumer Financial Protection Bureau's (CFPB) enforcement actions against vehicle finance companies.

The bureau has collected at least $200 million in penalties from companies in disparate impact enforcement actions related to the Equal Credit Opportunity Act (ECOA). The report contends that the CFPB's use of the disparate impact theory in enforcement actions against vehicle finance companies would not survive judicial scrutiny due to recent Supreme Court precedent. In particular, the report discusses how the text of the ECOA does not give rise to disparate impact liability and how the CFPB's theory that dealers' ability to set discretionary dealer participation constitutes a policy on the part of the vehicle financer fails to meet the rigorous causation standard set by the Supreme Court in Inclusive Communities.

The report also contends that the Bureau potentially violated federal law with its issuance of the nonbank auto finance larger participant rule in 2015. Using internal CFPB communications, the report shows how the Bureau failed to take attorney-advised steps to comply with the Administrative Procedures Act when it chose not to re-open the comment period in order to publish a list of institutions it believed would be subject to the proposed rule and their relevant market share and provide public comment on the data.

"Fuzzy logic and false comparisons are unfortunately prevalent in the CFPB's auto-lending actions," the report states. "In every aspect of the CFPB's auto-lending actions, the CFPB's lack of rigor leads to unsupported and unreliable conclusions." 

WHAT IT MEANS FOR AFSA MEMBERS

The release of this report comes as the Trump Administration is considering Richard Cordray's future as CFPB director. The substance of this report could give the new administration additional cause for his removal. 

WHAT AFSA IS DOING

AFSA continues to emphasize the CFPB's deeply flawed disparate impact methodology before Congress and the Trump Administration. AFSA is hopeful that the information contained in this report, in addition to others in the series, will help bring a resolution to this issue.