MCCLEAN, Va. — The National Automobile Dealers Association (NADA) sent a letter on Wednesday, Feb. 26, to House Members in support of H.R. 3193, a bill introduced in February that would bring greater accountability to the Consumer Financial Protection Bureau (CFPB).
“If the CFPB, like other agencies, were subject to customary congressional oversight, it is doubtful it would have attempted to fundamentally change and regulate the $783 billion auto loan market via guidance without prior public comment or hearing; answering direct and specific questions by Congress for nearly a year, and first assessing the impact of its guidance on consumers," read the letter.
The CFPB has received nine letters since May 28, 2013, from both Republican and Democratic lawmakers critical of its enforcement activities. The bureau has responded to all but three. On June 19, the U.S. Chamber of Commerce sent a letter to the bureau that claimed the bureau’s data collection efforts do not comply with the Dodd-Frank Act, among other charges.
The 16-page letter outlined a list of concerns, including its push to regulate dealer practices it has no jurisdiction over. “The bureau claims that the industry’s long-established method of compensating dealers for their role in bringing together lenders and auto purchasers … can be used to prove disparate-impact discrimination by banks and financial institutions,” the letter stated, in part. “By taking this position, the bureau has created enormous uncertainty in the auto finance market, threatening to raise the cost of credit and drive the industry to untested business models that could be harmful to consumers.”
The chamber also took issue with the CFPB’s guidance on abusive acts and practices. Under the Dodd-Frank Act, the bureau was empowered to prevent organization from committing or engaging in an unfair, deceptive, or abusive act or practice, but the chamber said the bureau has only issued statutory language in defining what “abusive” means.
“It does not provide regulated businesses with the clarity available from the [Federal Trade Commission] policy statements and prior decisions interpreting ‘unfair’ and ‘deceptive,’” the letter stated, in part. “We respectfully request that the CFPB issue formal guidance in this area, including examples of the types of practices that would be considered abusive but are not otherwise unfair or deceptive.”
The chamber also took issue with the CFPB’s statement regarding the liability of finance sources for the acts of service providers. “The bureau has created unnecessary ambiguity regarding the scope of a financial service company’s liability for the actions of a service provider,” the letter stated. “That leaves companies without any certainty regarding the legal test and, importantly, enables the bureau merely to imply this broad liability standard and therefore avoid responsibility for the adverse consequences that would flow from such a standard, such as the significant reduction in the availability of consumer credit if companies had to shoulder the expense of analyzing each consumer’s suitability for every consumer financial product or service before offering the product or service to the consumer.”
The House Bill the NADA has thrown its support behind was introduced on Feb. 11. It would authorize the chairperson of the Financial Stability Oversight Council to issue a stay of any regulation written by the CFPB until approved by the council by a two-thirds vote, among other provisions.
The bill, which was introduced by Rep. Sean Duffy (R-Wis.), would also require the council to set aside a final regulation prescribed by the CFPB if the council decides it is inconsistent with the safe and sound operations of financial institutions. The council currently has that ability if a regulation puts the safety and soundness of the U.S. banking system or the stability of the U.S. financial system at risk.
“Oversight by Congress of the executive branch is an integral part of the checks and balances of our democratic system,” the NADA’s letter stated. “On behalf of America’s franchised auto dealers, we urge Congress to pass H.R. 3193 to provide that needed oversight and accountability.”