WASHINGTON — The Consumer Financial Protection Bureau’s indirect auto lending guidance was officially repealed Monday at a White House signing ceremony.

A Congressional Review Act resolution to block the 2013 guidance passed the Senate last month 51 to 47, with the support of one Democrat, Sen. Joe Manchin of West Virginia. It passed the House earlier this month 234 to 175.

The guidance was aimed at preventing discriminatory markups on indirect loans made by car dealers.

Car dealer
The CFPB's former leadership in the Obama administration had been concerned that indirect auto lenders enjoyed too much discretion to discriminate against borrowers in pricing. Bloomberg News

Congress typically has only 60 legislative days to invoke the Congressional Review Act to block agency rules, but lawmakers were able to reverse the five-year-old policy after the Government Accountability Office had determined that the guidance was actually a rule that should have been under congressional review. The GAO decision effectively restarted the clock.

The bureau's former leadership in the Obama administration had been concerned that indirect auto lenders enjoyed too much discretion to discriminate against borrowers in pricing. But current acting CFPB Director Mick Mulvaney, who was appointed by President Trump, said Monday the guidance "seemed like a solution in search of a problem."

“I thank the President and the Congress for reaffirming that the Bureau lacks the power to act outside of federal statutes," Mulvaney said in a statement. "As an executive agency, we are bound to enforce the law as written, not as we may wish it to be."

The statement released by the bureau indicated that the agency will explore submitting additional CFPB policies for congressional review.

"Today’s action ... clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress," the statement said. "The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission."

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, a staunch critic of the CFPB, lauded President Trump and congressional Republicans for enacting the resolution.

"Thanks to the hard work of Republicans in Congress, today is a good day for American consumers, who would have had to pay more for their auto loans under the Bureau's flawed guidance, and the rule of law,” Hensarling said. "I look forward to continuing to work with President Trump, Acting Director Mulvaney, and my colleagues in Congress to ensure the Bureau, as well as all other federal regulatory agencies, are held accountable for their actions and act in a transparent manner."

Critics of the CFPB’s guidance said that by focusing on dealers, the policy was a roundabout way of trying to avoid a Dodd-Frank prohibition on the bureau's targeting of auto lenders. The guidance essentially said indirect auto lenders would be cited for unintentional discrimination for loans that were "marked up" at partnering dealerships.

“The CFPB’s 2013 Auto Bulletin was a backdoor attempt at rulemaking without notice or comment and lacked the clarity needed by lenders,” Richard Hunt, president and CEO of the Consumer Bankers Association, said when the resolution passed the Senate.

Sen. Pat Toomey, R-Pa., kick-started the effort to use the Congressional Review Act to kill the guidance and Rep. Lee Zeldin, R-N.Y., led the same effort in the House.

But consumer groups such as Allied Progress have criticized the repeal of the rule, claiming it was an endorsement of discrimination.

Neil Haggerty

Neil Haggerty is the Congress reporter for American Banker. He previously was a financial regulation reporter at MLex Market Insight.