The U.S. House, in a victory for dealers, passed a measure that would scrap an Obama-era regulation aimed at limiting dealerships' retail margins on auto loans, which the Consumer Financial Protection Bureau said may have led to minority borrowers being charged more on loans.
The House vote comes after the Senate last month narrowly voted to rescind the CFPB's 2013 bulletin crafted to address lending practices at auto dealerships. The measure now goes to the White House, where President Donald Trump is expected to sign it.
The guidance is one of the most controversial policies implemented by the bureau, created under President Barack Obama in the wake of the 2008-09 financial crisis.
The House vote was 234-175 in favor of repeal. The U.S. Senate vote on April 18 was 51-47 to repeal.
National Automobile Dealers Association CEO Peter Welch said the vote preserves "the ability of local dealerships to offer discounted auto loans to their customers."
NADA and other trade associations have said consumers can get a better deal on their auto loans when dealers can rely on dealer reserve, which is the retail margin that dealerships earn for arranging a loan. If dealerships establish a standard dealer reserve rate, as NADA suggests, they can lower, or "discount," that rate for competitive reasons unrelated to the customer's background.
Welch called the joint resolution is "a measured response to the CFPB’s attempt to avoid congressional scrutiny by issuing 'guidance' that imposed a new policy without necessary procedural safeguards."
Welch said NADA will encourage dealerships to take up the trade group’s voluntary fair credit compliance program, which is based on a U.S. Department of Justice model.
The program, Welch said, helps eliminate fair credit risk in auto lending while ensuring a competitive marketplace.
Cody Lusk, CEO of the American International Automobile Dealers Association, said repeal of the lending guideline will allow dealers to return to offering more competitive financing choices.
"Auto dealerships are primarily small family businesses, and never should have been targeted by the CFPB, which has strayed from its mission of regulating massive Wall Street financial institutions," Lusk said in a statement Tuesday.
The American Financial Services Association, which represents lenders, said the guidance would cause "fundamental market changes" for an industry already heavily regulated on state and federal levels.
“This vote indicates that American consumers have spoken to their elected representatives to say they want competitive pricing on vehicle loans,” AFSA CEO Chris Stinebert said in a statement.