President is expected to sign measure, passed 234-175; action marks first time CRA has been used to target regulations beyond 60-day window

The House on May 8, 2018, passed a joint resolution that used the Congressional Review Act to disapprove of a 2013 guidance document on indirect auto loans issued by the Consumer Financial Protection Bureau (CFPB). The vote was 234-175. The Senate passed the same resolution, S.J. Res. 57, by a vote of 51-47 on April 18, so the House's action clears the bill for the President's signature, and President Trump is expected to sign it.

Eleven Democrats supported the resolution and one Republican, Ileana Ros-Lehtinen (R-FL), voted against it. The Democrats were Jim Cooper (TN), Lou Correa (CA), Jim Costa (CA), Henry Cuellar (TX), Vicente Gonzalez (TX), Gene Green (TX), Stephanie Murphy (FL), Collin Peterson (MN), Kurt Schrader (OR), David Scott (GA) and Filemon Vela (TX).

Attached with this Alert please find PDFs with the text of S.J. Res. 57 and a Statement of Administration Policy from the White House from April 17, expressing support for the measure.

The 1996 Congressional Review Act (CRA) provides a mechanism for expedited consideration of measures repealing regulations recently issued by federal agencies. Notably, the CRA allows for bills to pass the Senate with a simple 51-vote majority, whereas most other Senate measures not protected by budget reconciliation can be filibustered by opponents to require a 60-vote threshold. Under the CRA statute, if a rule is disapproved under the CRA, an agency also may not reissue the regulation in "substantially the same form," unless the new rule is specifically authorized by a law enacted after the disapproval resolution is passed. So far in the 115th Congress, the Republican majority has used the CRA regime — which had been used successfully to overturn a rule only once before 2017 — to repeal 15 rules that were issued under the Obama administration; President Trump has signed all of them into law.

On the floor, Financial Services Committee Chairman Jeb Hensarling (R-TX) said that in issuing the guidance, the CFPB "didn't engage in rulemaking. They violated the Administrative Procedures Act, which is there to assure that market participants get due process … as rules are promulgated." He said the Bureau found lenders had committed "somehow unconscious discrimination" without offering real data for this conclusion: "they made it up." Hensarling said, "Many creditworthy borrowers will have to pay up to $586 more for their auto loans because of the Bureau's action."

Rep. Maxine Waters (D-CA), the ranking member on the Financial Services Committee, said on the floor that the resolution amounted to "an inappropriate and misguided use" of the CRA that "sets a dangerous precedent … "This is a clear overreach that goes well beyond how the CRA was intended to be used … This is a market where discriminatory practices have been well documented." Waters cited an investigation by the National Fair Housing Alliance that found that 62% of qualified minority borrowers were given more costly financing options than less-qualified white borrowers.

CFPB's 2013 guidance

The 2010 Dodd-Frank Act included language barring the CFPB from overseeing auto dealers. The Bureau nonetheless issued a bulletin in March 2013 outlining potential enforcement actions against third-party lenders for violations of the Equal Credit Opportunity Act (ECOA). Many lenders allow auto dealers to charge a "dealer markup" for loans extended within the dealership — an interest rate higher than the lender's base rate, where the difference in rates is paid to the dealer. The CFPB concluded that such markups increase the risk of racial discrimination, with higher rates charged to African-American and Latino borrowers. The CFPB's guidance recommended that lenders offering such loans should eliminate or control such markup policies. Later, in December 2013, the CFPB and the Justice Department under President Obama ordered Ally Financial (formerly GMAC) to pay $98 million in damages and penalties for discriminatory auto loan pricing. The CFPB's Bulletin 2013-02 guidance on indirect auto lending is posted here, and its "Supervisory Highlights" document outlining compliance procedures is here.

In December 2017, after studying the question at the request of Sen. Pat Toomey (R-PA), the Government Accountability Office (GAO) released an opinion finding that the CFPB's 2013 guidance constituted a rule and as such was subject to the Congressional Review Act. In the following weeks, Senate Republicans moved a CRA resolution sponsored by Sen. Jerry Moran (R-KS) targeting the CFPB guidance, with 15 cosponsors.

Congressional Review Act and GAO ruling

The CRA statute normally gives Congress 60 legislative session days from a rule's issuance to consider its repeal, and the measures that Congress passed early in 2017 under the CRA were within this timeline. The action that triggers the 60-day "clock," however, is the filing of a required report by the agency to Congress and the GAO with the text of the rule. Because agencies typically have not considered guidance documents to be "rules," they generally have not filed such reports. In those situations, the 60-day clock is considered to start with the publication of a GAO opinion on the regulations in the Federal Register finding that a specific guidance bulletin from an agency is effectively equivalent to a rule.

"The applicability of the Congressional Review Act to a guidance, in my view, is very obvious and very well-established and should not be controversial," Sen. Toomey said on April 18. "I understand people might like the CFPB's rule, which I don't. But to suggest that somehow because they issued it through a guidance rather than through the appropriate rulemaking process that we somehow shouldn't be using the Congressional Review Act, I think is completely mistaken."

As the Senate considered the CRA measure disapproving of the CFPB auto lending guidance on April 17, Senate Banking Committee Ranking Member Sherrod Brown (D-OH) said the measure could "permanently weaken federal anti-discrimination laws, by preventing the Consumer Bureau from providing guidance on how fair lending laws should be applied in the future in this area." Brown added that because the measure targeted a guidance issued well before the CRA's usual 60-day time horizon, it could set a precedent for Congress "to interfere with thousands more federal decisions, potentially going back more than two decades."

In October 2017, also after studying the issue at the request of Sen. Toomey, the GAO found that the 2013 interagency guidance on leveraged lending issued jointly by the Federal Reserve, FDIC and the Office of the Comptroller of the Currency (OCC) constituted a "rule" for purposes of the Congressional Review Act.

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ATTACHMENTS

SJ Res 57 Text

White House SAP