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Bill limiting CFPB has long road to becoming law

The U.S. House Financial Services Committee last week moved a bill that would limit the Consumer Financial Protection Bureau’s guidance over auto lending. But dealers and lenders should hold off on the celebrations. The bill has a long way to go before it could become law.

The bipartisan bill would revoke the CFPB’s 2013 auto lending guidance bulletin, which suggests that auto lenders impose controls on dealer interest rate markups or eliminate dealers’ discretion to mark up loans and compensate them using another mechanism, such as a flat fee per transaction. The CFPB, by law, has oversight over lenders, but not dealers.

The bill has 126 cosponsors -- 70 Republicans and 56 Democrats.

The House Financial Services Committee approved the bill after a heated discussion around dealer competition, the CFPB’s methodology to determine a borrower’s race, and discrimination overall.

But it still has to move through the House of Representatives and Senate, not to mention the president, before it becomes law.

Auto finance insiders say the conservative-leaning House, which is made up of 246 Republicans and 188 Democrats, will likely pass the bill, but that the Senate, with 44 Democrats, 54 Republicans and two independents, may not.

After all, Sen. Elizabeth Warren, D-Mass., a vehement critic of the auto finance industry, helped create the CFPB before she was elected senator.

The Senate has CFPB supporters besides Warren, such as Jeff Merkley, D-Ore., and Gary Peters, D-Mich. But it also has CFPB opponents, such as David Perdue, R-Ga., and presidential hopeful Ted Cruz, R-Texas, who introduced legislation to abolish the bureau last month.

Whether the bill becomes a law or not, expect the debate in the House and Senate to be brisk and the decisions difficult.

You can reach Hannah Lutz at hlutz@crain.com

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